Forex Trading: The Fear Factor

By Michael J Campbell

Market knowledge and ability to understand analysis will only get you so far in forex trading, but without the nerve to actively compete risking your own money in the process you can never become a successful trader.

Wagering huge volumes of money in a market as susceptible to change is liable to cause a whole range of opposing emotions; fear, excitement and anxiety just to name a few. Battling against your emotions in order to complete a successful deal is one of the major hurdles, which must be overcome if you are to become a trader able to close huge deals and earn vast sums of money. If you can overcome or even use these emotions to make trades on the Forex then a successful career may be beckoning, but failure to do so will almost certainly cost you a substantial amount of money and end any lingering desires to progress in the busy world of exchange rate trading.

Initiating and closing a trade at the right times are the backbone of becoming a successful Forex trader. If a person cannot execute these deals at the right times, the psychological and financial damage can be crippling. Missing a huge trend or sitting too long on a good price, can be a demoralising experience, but one that many will encounter during a career in Forex trading.

Entering at the right time is just one thing that must be done correctly, but if you are unable to leave at the right time or hold your nerve during the course of the trade, the implications are potentially severe. For example accepting a small loss just before the market rises can lead to a horrendous huge profit/loss ratio margin. Similarly sitting on a currency price that is plummeting for too long could be financially crippling. Understanding the Forex market and having faith in your ability to judge a trend will pay dividends if you hold your nerve, backing out at the wrong time can prove to be a catastrophic misnomer.


The fear generated by investing your own personal money is the main thing that must be overcome. It is the culprit in so many failure stories, people who just couldn't overcome their anxiety investing unwisely, pulling out at the wrong time, missing a rise completely, all result in failure and are caused by fear. Accepting this fear, and using it to your potential will make you a stronger trader, able to trade freely and enjoy the thrill of the exchange. Fighting it will get you nowhere, understanding and overcoming it are the best remedies to this baseless emotion.

Trading strategies will help you ride out the rough times and capitalize on the good ones. Sometimes just taking a step back and accepting a few losses will give you the energy and the knowledge to attack the Forex with renewed vigour, and make some serious profits. Accepting that sometimes you will lose out, you need to be able to take the hits and roll with a punch, there are no guarantees in the trading market, so being able to move on and start again is a skill that is paramount to generating success.

Analysis and charts can only get you so far. You must first master these things, and be able to correctly interpret the figures that are represented in order to spot the trends and make your move. But this all means nothing if you don't have the courage of your convictions. If you are too afraid to buy and not sure when to sell then a glittering career in market trading is likely to elude you. 'The trend is your friend' but it means nothing if you firstly can't spot it and secondly don't have the courage to back it. Knowledge, strategies and overcoming fear may well be the 3 best ways to become to unlock the door to becoming a successful trader. Without all 3 you will more often than not become unstuck, so prepare, practice and evaluate everything before taking the plunge in the complicated world of Forex trading.

About the Author:

Michael J Campbell is an author and webmaster for Forex Fusion, a Free Online Forex Trading Information & Resource website. Featuring Education, Live Real-Time Quotes, Tools and More.

Accounts In Forex

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Accounts In Forex

Although the movement today is towards all transaction eventually finishing in a profit and loss in US Dollars it is important to realize that your profit or loss may not actually be in US Dollars.

From my observation the trend is more pronounced in the US as you would expect. Most US based traders assume they will see their balance at the end of each day in US Dollars. I have even spoken with some traders who are oblivious to the fact the their profit might have actually been in Japanese Yen.

Let me explain a little more. You sell (go short) USD/JPY and as such are short USD and Long (bought) JPY. You enter the trade at 116.10 and exit 116.90. You in fact made 80,000 Japanese Yen (1 lot traded) not US Dollars.

If you traded all four major currencies against the US Dollar you would in fact have made or lose in EUR, GPY, JPY and CHF. This might give you a ledger balance at the end of the day or month with four different currencies.

This is common in London. They will stay in that currency until you instruct the broker to exchange the currencies into your own base currency.

This actually happened to me. After dealing with mainly US based brokers it had never occurred to me that my statement would be in anything other than US Dollars.

This can work for you or against you depending on the rate of exchange when you change back into your home currency. Once I knew the convention I simply instructed the broker to change my profit or loss into US Dollars when I closed my position. It is worth checking how your broker approaches this and simply ask them how they handle it. A small point, but worth noting.

Nowadays most countries have regulated forex, but it is still worth checking that the broker who you are dealing with is regulated in the country that it operates, insured or bonded and has some kind of track recorded.

I cannot advise you on which broker you should use as there are just to many variables to each person, but as a rule of thumb, nearly all countries have some kind of regulatory authority who will be able to advise you. Most of the regulatory authorities will have a list of brokers that fall within their jurisdiction and will give you that list. They probably wont tell whom to use but at least if the list came from them you can have some confidence in those companies.

Once you have a list, give a few of them a call, see who you feel comfortable with, ask for them to send you their polices and procedures. If you live near where your broker is based, go spend the day with him. I have been to many brokerages just to check them out. It will give you a chance to see their operation and meet their team.

This brings up another interesting point. When you open an account with a broker you will have to fill in some forms basically stating your acceptance of their polices. This can range from a 1 page document to something resembling a book. Take the time to read through these documents and make a list of things you don't understand or want explained.

Most reputable companies will be happy to spend some time with you on this. Your involvement with your broker is largely up to you. As a forex trader you will probably spend long hours staring at the screen without talking to anyone. You may be the sort of person who likes this or you may be the sort of person who likes to chat with the dealer in the trading room. You will normally get a call once a week or once a month from someone in the brokerage asking if everything is OK.

Daytrading the FOREX Market

The foreign exchange market (the forex) can be a treacherous market to trade especially if you are not properly equipped for the job. You will need to give attention to the following: the equipment and type of internet connection you have; the overall amount of capital you can put at risk on this enterprise, as well as the amount of capital you are prepared to risk on any one trade;your broker and the reliability of the trading platform; charts and technical analysis; good entry and exit signals; being aware of news releases affecting this market; the need to use a stop loss on each trade to protect your position; the cutting of losses if a trade goes against you; and the compounding of profits.

You will ideally need a Pentium 4 desktop computer running Windows XP with a processor speed of 2.5GHZ and 512MB of RAM. The monitor needs to be at least 17", but 19" or bigger is better. You could get away with a 56K dial-up connection but broadband is usually far better in terms of stability.Some people have been known to trade this market successfully from a laptop which give them mobility.

YOu will need a minimum of $20,000 risk capital to trade this market. "Risk capital" means that it doesn't include money you require for living from month to month, and therefore you can employ it in the market for speculative purposes. The reason for the entry figure being so high is that it is inadvisable to risk more than 3% of your total risk capital on any one trade. On this basis, the most you should be putting at risk on any one trade is $600 ( that is $20,000 X 3%) using full lots. You could start with a lesser amount of risk capital by using mini lots and still maintain the maximum 3% loss any one trade.

You will need to choose a broker wisely for two reasons: his financial stability; and the stability of the platform he provides. It is best to chose a broker with a proven record in the forex market operating from a well-regulated country such as the USA, UK or Switzerland.This market was only opened up to speculators in 1997, so forex brokers haven't got as long a history as stockbrokers.It is therefore best to chose on the basis of size -you are looking a broker with at least 10,000 clients operating from one of the aforementioned countries. The functionality of the platform the broker provides is important for the execution and tracking of live trades. What you don't want is a platform that always keeps going down at crucial moments in your trading day. In my experience, the platforms belonging the the major brokers are now very reliable although there might be a problem with the continuity of data displayed from time to time.

People who trade the forex market off fundamental analysis have been known to stay in the positions taken for multiple days, weeks, months or even years. If you are daytrading this market, however, you haven't got much choice but to use technical analysis as the basis of your decisions. Therefore charts become vitally important in the decision making process. candlestick charts are the easiest to follow on the screen as it simple to distinguish a bull candle from a bear one just by viewing the different colors. With charts, especially at the start of your trading day, it is best to use the top-down approach. Even though your entry and exits may be made off the 15 minute chart, you should start the day by looking at the daily chart to get the big picture. Then the 4 hour chart, the 1 hour chart and 30 minute can each in turn be consulted prior to your regular chart (the 15 minute) in order to get the top-down perspective on the market.
Breakouts from support or resistance offer good entry points for trades. A support line can be drawn by joining the bottoms of two candles that stand lower than their immediate neighbors remembering that the support line must be tilted upwards therefore the nearest candle the line is connected to must be higher than the further away one. If this line is then extended into the future and is confirmed by a third candle touching the line you have a solid support line. When a candle breaks this support line and a 15 minute candle closes below it and subsequent candles go 5 pips (or points) beyond the bottom of the candle which broke the support line, you have a valid entry point for a short trade (that is selling the currency pair being traded). Resistance lines are done on the same basis except that the initial line drawn must have a downward slope which when broken and the the other criteria for entry is met, gives you a valid long entry (that is buying the currency pair being traded).

Before you start your trading day, it is imperative that the daytrader knows when economic news affecting the currency pairs being traded is scheduled to be released.There are various websites that do this but the best one that I have found is http://www.dailyfx.com/ If you go to their Home Page, and click on the Calendar tab at the top, a page will open with the words "Weekly Economic Calender for ....." on the top left hand side on which you click to take you to the page where all the scheduled news for the world's major currency pairs are listed on a daily basis.

The times of the news releases are given in both GMT and EST so you may have to compensate depending on which time zone you happen to be in the world. Knowing when the news is going to be released is crucial, because depending on its strength is may be sensible if you are in a trade that is making a profit. to take profits before the news hits the wire, or at least tighten up your stop.

It is also sensible never to trade without a stop. For daytrading a stop in the region of 20 - 30 pips is sensible. This is the loss you are prepared to take on the trade if it goes against you. It is also sensible to set your profit objective higher than your loss by 25% -50% dependent upon the quality of the signal generated. Only risk 3% of your risk capital on any one trade. If you start off with $20,000 risk capital and after 4 months or so you have found that it has grown to $40,000, now use 2 lots per trade and thereby employ compounding.When you capital grows to $60,000, you would employ 3 lots and so forth. If your selection criteria is good your capital can build at a surprising rate using this technique.


About the author:
Kieran Waldron is a researcher on many subjects who has recently become an Internet publisher. More articles on forex trading can be viewed at the following website: http://www.forexgoal.com/

Forex Currency Trading - Is It Right For You
By Terry Till

While in some ways currency trading is easy, many people who enter the market do not make money. Online Currency Trading is not a difficult process if you take your time, do your research and understand the market. Over three trillion dollars worth of transactions take place everyday in the currency market and online currency trading is now available to everyone.

Currency trading is a worldwide inter-bank market that allows buyers to find sellers in an instant. Foreign Currency Trading is on the rise. Foreign currency trading is commission-free. You should be aware though that currency trading is not suitable for everyone. However, all these preconceived notions apart, forex or currency trading is not the domain for the super intelligent alone.

These forex currency trading orders are only active for as long as the position remains open and you are able to set a stop loss or limit order. Global forex trading offer you the possibility to deal in real time online currency trading that is making millions of forex brokers rich each day. When you start with forex currency trading then it is important that you set your goals and plan your strategies. When the forex market is bullish, go long, that is to say buy. If you don't take advantage of the Forex market now, you'll hate yourself later because with due care and diligence it gives you a great opportunity to invest and reap large rewards. Currency trading is always considered a bull market as its volatility allows constant buy opportunities. For those who are not familiar with the Forex market, it is extremely fast-paced and volatile.

A forex trading system or strategy is what actually gives you the edge in the forex market. If your forex trading strategy is based on a well thought out business system and strategy, you will make money from currency trading in the long-term. The right knowledge, the right tools and the right system are essential.

You should be aware of your personal investment risk tolerance at all times. Your risk is limited to your deposited funds. Stay away from companies that promise little or no financial risk. It is very important that you actively manage your investment and your potential risk of loss. With such high rewards available though, this will always be reflected by a substantial amount of risk.

Currency trading is quite similar to trading stocks on the market, however unlike the domestic stock markets, the forex currency trading is open for trades 24 hours a day. Online Currency Trading is not a difficult process if you take your time to do your research and understand the market. Electronic currency trading is fuelling the exponential growth of the global foreign-exchange market. I hope that this brief explanation of what the Forex currency trading market is and how it can benefit you will encourage you to look further into this fascinating investment opportunity.


Copyright 2006 Terry Till
Find out how you can start trading in the Forex currency market now:
www.forexminitrader.com
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FOREX 101: Make Money with Currency Trading
By Rich McIver

For those unfamiliar with the term, FOREX (FOReign EXchange market), refers to an international exchange market where currencies are bought and sold. The Foreign Exchange Market that we see today began in the 1970's, when free exchange rates and floating currencies were introduced. In such an environment only participants in the market determine the price of one currency against another, based upon supply and demand for that currency.

FOREX is a somewhat unique market for a number of reasons. Firstly, it is one of the few markets in which it can be said with very few qualifications that it is free of external controls and that it cannot be manipulated. It is also the largest liquid financial market, with trade reaching between 1 and 1.5 trillion US dollars a day. With this much money moving this fast, it is clear why a single investor would find it near impossible to significantly affect the price of a major currency. Furthermore, the liquidity of the market means that unlike some rarely traded stock, traders are able to open and close positions within a few seconds as there are always willing buyers and sellers.

Another somewhat unique characteristic of the FOREX money market is the variance of its participants. Investors find a number of reasons for entering the market, some as longer term hedge investors, while others utilize massive credit lines to seek large short term gains. Interestingly, unlike blue-chip stocks, which are usually most attractive only to the long term investor, the combination of rather constant but small daily fluctuations in currency prices, create an environment which attracts investors with a broad range of strategies.

How FOREX Works

Transactions in foreign currencies are not centralized on an exchange, unlike say the NYSE, and thus take place all over the world via telecommunications. Trade is open 24 hours a day from Sunday afternoon until Friday afternoon (00:00 GMT on Monday to 10:00 pm GMT on Friday). In almost every time zone around the world, there are dealers who will quote all major currencies. After deciding what currency the investor would like to purchase, he or she does so via one of these dealers (some of which can be found online). It is quite common practice for investors to speculate on currency prices by getting a credit line (which are available to those with capital as small as $500), and vastly increase their potential gains and losses. This is called marginal trading.

Marginal Trading

Marginal trading is simply the term used for trading with borrowed capital. It is appealing because of the fact that in FOREX investments can be made without a real money supply. This allows investors to invest much more money with fewer money transfer costs, and open bigger positions with a much smaller amount of actual capital. Thus, one can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital. Marginal trading in an exchange market is quantified in lots. The term "lot" refers to approximately $100,000, an amount which can be obtained by putting up as little as 0.5% or $500.

EXAMPLE: You believe that signals in the market are indicating that the British Pound will go up against the US Dollar. You open 1 lot for buying the Pound with a 1% margin at the price of 1.49889 and wait for the exchange rate to climb. At some point in the future, your predictions come true and you decide to sell. You close the position at 1.5050 and earn 61 pips or about $405. Thus, on an initial capital investment of $1,000, you have made over 40% in profits. (Just as an example of how exchange rates change in the course of a day, an average daily change of the Euro (in Dollars) is about 70 to 100 pips.)

When you decide to close a position, the deposit sum that you originally made is returned to you and a calculation of your profits or losses is done. This profit or loss is then credited to your account.

Investment Strategies: Technical Analysis and Fundamental Analysis

The two fundamental strategies in investing in FOREX are Technical Analysis or Fundamental Analysis. Most small and medium sized investors in financial markets use Technical Analysis. This technique stems from the assumption that all information about the market and a particular currency's future fluctuations is found in the price chain. That is to say, that all factors which have an effect on the price have already been considered by the market and are thus reflected in the price. Essentially then, what this type of investor does is base his/her investments upon three fundamental suppositions. These are: that the movement of the market considers all factors, that the movement of prices is purposeful and directly tied to these events, and that history repeats itself. Someone utilizing technical analysis looks at the highest and lowest prices of a currency, the prices of opening and closing, and the volume of transactions. This investor does not try to outsmart the market, or even predict major long term trends, but simply looks at what has happened to that currency in the recent past, and predicts that the small fluctuations will generally continue just as they have before.

A Fundamental Analysis is one which analyzes the current situations in the country of the currency, including such things as its economy, its political situation, and other related rumors. By the numbers, a country's economy depends on a number of quantifiable measurements such as its Central Bank's interest rate, the national unemployment level, tax policy and the rate of inflation. An investor can also anticipate that less quantifiable occurrences, such as political unrest or transition will also have an effect on the market. Before basing all predictions on the factors alone, however, it is important to remember that investors must also keep in mind the expectations and anticipations of market participants. For just as in any stock market, the value of a currency is also based in large part on perceptions of and anticipations about that currency, not solely on its reality.

Make Money with Currency Trading on FOREX

FOREX investing is one of the most potentially rewarding types of investments available. While certainly the risk is great, the ability to conduct marginal trading on FOREX means that potential profits are enormous relative to initial capital investments. Another benefit of FOREX is that its size prevents almost all attempts by others to influence the market for their own gain. So that when investing in foreign currency markets one can feel quite confident that the investment he or she is making has the same opportunity for profit as other investors throughout the world. While investing in FOREX short term requires a certain degree of diligence, investors who utilize a technical analysis can feel relatively confident that their own ability to read the daily fluctuations of the currency market are sufficiently adequate to give them the knowledge necessary to make informed investments.


Rich McIver is a contributing writer for The Forex Blog: Currency Trading News ( http://www.forexblog.org ).
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Forex Trading - A Brief Introduction
By Tony Hosea

Forex trading refers to the buying and selling of the currencies of different nations, i.e., one currency is bought and another sold at the same time. A Forex deal involves profit when you sell a currency at a price higher than what it cost you to buy. Foreign Exchange market is the largest liquid financial market in the world in terms of the turnover it yields daily. The highest turnover ever recorded estimated at around $2 trillion in a single day. Trading of the major currencies occupy around 85 percent of all daily transactions. The advent of modern technology has made it possible for small traders to avail the benefits of Forex trading by means of various online trading systems.

One of the specialties of Forex trading is that currencies are always traded in pairs like Euro/Dollar, Dollar/Yen, etc. For investment purposes, four major currency pairs are commonly used. They are: US dollar against Japanese yen, Euro against US dollar, US dollar against Swiss franc and British pound against US dollar.

If you feel that the value of one currency will increase against another in future, you may exchange the second currency for the first one so that when things happen as you expect, you can make the opposite deal by exchanging the first currency for that second one and gain profit from the deal. Dealers perform transactions on the Foreign Exchange market at major Forex brokerage companies or banks. Forex is an integral part of the world market and is active 24 hours a day. Even when you are sleeping at midnight, transactions in Foreign Exchange occur in different parts of the globe. Clients may place orders with their brokers to sell equities overnight.

Forex market is the largest financial market in the world. Also known as FX market or Foreign Exchange market, it is the most liquid market on the face of the earth with an average daily turnover of around $1.2 trillion. Compared to the stock market, price movements are very smooth on the FX market. New investors can enter and exit positions efficiently.
In the past, small speculators were unable to enter in to the Foreign Exchange market because of the stringent financial requirements and large minimum transaction sizes. The principal dealers in this field were banks, large speculators, big currency dealers etc. Only they could take benefit of the strong trending nature of currency exchange rates and the currency market’s unmatched liquidity. Today, small traders have the opportunity to buy or sell any number of smaller units because Foreign Exchange brokers are now able to break down the larger sized inter-bank units and offer them to buy or sell. It is at the option of smaller companies and individual speculators to trade at the same rates and price movements as large speculators and currency dealers who once ruled the market.

Being successful in Foreign Exchange trade is daunting and arduous especially if you are new to the field.

Whether you're a beginner or a seasoned pro you'll discover the best Online Forex Broker tips, tricks, and techniques as well as valuable tools, resources, and information at http://www.forex-strategies.com/
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