Why Im an Online trader with Forex?

Many people ask me why I am an online trader and trade Forex, Well I think like most people when I was introduced to Trading I didn’t know about the Forex market. It was just natural to go looking in the stock exchange for trades. However, I found my trading was very limited, by the time I got home from work in the evening all the action was over. I moved to Forex mainly to take advantage of the 24-hour opening hours, I would often be found at my computer in the middle of the night waiting for the next bar to appear.

Unlike Futures, there are no trading exchanges as such. Trading is being done from major banking establishments around the world, With futures you are generally limited to trading only for a few hours that they are open, if major news breaks and the price starts going against you when the market is closed, you could end up losing big time while you are forced to wait for the market to open. With Forex you will always have an opportunity to be an online trader 24 hours per day 5 days a week. As the sun wakes up each country on its journey it also wakes up the markets in New York, London, Europe, Asia, Australia to name a few.

The Currencies of the world are traded against each other, the most popular being the Euro the US and Australian dollar, British Pound, Swiss Franc and the Japanese Yen.

Because of 24 hour trading, it is rare to see large gaps in price like stocks have on the opening and you often see prices in currencies trending more than stocks. 

There are many advantages in trading Forex rather than Stocks, expensive Data providers that you need with Stocks is exchanged for free charting software offered by many Forex brokers. With over $1.5trillion (that’s 46 times bigger than all the future markets put together!) being traded in a single day you are always sure of a trade, With Low transaction costs, no commissions or exchange fees is it no wonder more and more traders are turning to Forex.

Beware though, even with all these advantages trading is a high risk game and should only ever be trading with money you can afford to lose. With a good Trading Strategy and Money Management in place there is no reason not to join many online Trader profiting from trading the Forex markets!

Why Technical Analysis Works Great in Forex Industry?

If you are considering currency trading in the Forex industry, or you are already involved in Forex currency trading, here's a money-making lesson that we can borrow from investors who use technical analysis to help them make investment decisions in the stock market.

The goal of performing technical analysis when currency trading is to predict profitable currency pair movements by analyzing price trends. The principles of technical analysis in the equity markets are the same as those in the Forex currency trading markets. In fact, the only real difference between the two is that the Forex market is open 24 hours a day while the equity markets are not.

This means that certain analytics that take time periods in consideration will need to be adjusted for Forex industry currency trading. Other than that, any of these common forms of equity technical analysis methodologies can be used when currency trading:

Elliott Waves -- Developed by Ralph Nelson Elliott, this methodology is based upon the theory that market performance can be predicted by studying wave patterns that develop over a period of time.

Fibonacci Studies -- Developed by 12th century mathematician Leonardo Fibonacci, this methodology is based upon the theory that changes in trends can be predicted based upon prices interacting with lines based upon certain sequences of numbers.

Parabolic SAR -- Developed by J. Wells Wilder, this methodology is based upon the examination of prices in comparison to "stop and reversal" (SAR) numbers that indicate entry and exit points for a trade.

Pivot Points -- A mathematical formula used to determine when to exit a trade based upon the numerical average of the high, low and closing prices.

As I mentioned earlier in this article, the key difference between technical analysis in the equities market, and technical analysis in the Forex currency trading market, is the fact that it is possible to participate in Forex trading 24 hours a day, seven days a week. That key difference is also the primary reason that technical analysis works so well in currency trading.

In order for technical analysis techniques to deliver maximum results, there needs to be extended periods of time available for patterns to develop and repeat. Because the Forex market never closes, and currency pairs are traded around the clock, definable patterns develop more quickly and the technical analyst has a plethora of Forex currency trading data available to work with.

Because more data means more accurate forecasting results, technical analysts can see better results, in quicker time, when combining technical analysis and Forex industry currency trading.

Your Forex Trading Philosophy

"Easy money" and “finding investment online” is the allure that captivates many beginning FOREX trader. FOREX websites offer "risk-free" trading, "high returns", "low investment." These claims have a grain of truth in them, but the reality of FOREX is a bit more complex.

Mistakes Of The Beginning Trader

There are 2 common mistakes that many beginner traders make when finding investment online: trading without a strategy and letting emotions rule their decisions. After opening a FOREX account it may be tempting to dive right in and start trading. Watching the movements of EUR/USD for example, you may feel that you are letting an opportunity pass you by if you don't enter the market immediately. You buy and watch the market move against you. You panic and sell, only to see the market recover.

This kind of undisciplined approach to FOREX is guaranteed to lose money. FOREX traders must have a rational trading strategy and not make trading decisions in the heat of the moment.

Understanding Market Movements

To make rational trading decisions, the FOREX trader must be well educated in market movements. He must be able to apply technical studies to charts and plot out entry and exit points. He must take advantage of the various types of orders to minimize his risk and maximize his profit.

The first step in becoming a successful FOREX trader is to understand the market and the forces behind it. Who trades FOREX and why? This will allow you to identify successful trading strategies and use them.

Accountability

There are 5 major groups of investors who participate in FOREX: governments, banks, corporations, investment funds, and traders. Each group has its own objectives, but 1 thing all groups except traders have in common is external control. Every organization has rules and guidelines for trading currencies and can be held accountable for their trading decisions. Individual traders, on the other hand, are accountable only to themselves.

Large organizations and educated traders approach the FOREX with strategies, and if you hope to succeed as a FOREX trader you must follow suit.

Money Management

Money management is an integral part of any trading strategy. Besides knowing which currencies to trade and how to recognize entry and exit signals, the successful trader has to manage his resources and integrate money management into his trading plan. There are various strategies for money management. Many rely on the calculation of core equity -- your starting balance minus the money used in open positions.

Core Equity And Limited Risk

When entering a position try to limit your risk to 1% to 3% of each trade. This means that if you are trading a standard FOREX lot of $100,000 you should limit your risk to $1,000 to $3,000. You do this with a stop loss order 100 pips (1 pip = $10) above or below your entry position.

As your core equity rises or falls, adjust the dollar amount of your risk. With a starting balance of $10,000 and 1 open position, your core equity is $9000. If you wish to add a second open position, your core equity would fall to $8000 and you should limit your risk to $900. Risk in a third position should be limited to $800.

Greater Profit, Greater Risk

You should also raise your risk level as your core equity rises. After $5,000 profit, your core equity is now $15,000. You could raise your risk to $1,500 per transaction. Alternatively, you could risk more from the profit than from the original starting balance. Some traders may risk up to 5% against their realized profits ($5,000 on a $100,000 lot) for greater profit potential. These are the kinds of strategic tactics that allow a beginner to get a foothold on finding investment online and trading in FOREX.