Forex Trading Strategies

If you have never traded the forex markets before but would like to get started, as a novice trader you might be confused by all the different forex trading strategies people seem to use. Don't worry! Some strategies are simple and some are more complex, but whatever your outlook is regarding risk and trading frequency, there is a strategy to suit every type of trader.

So where do you start? First of all, think about how often you want to trade. Are you looking to take out a position, hold it for a relatively long period of time and close it when you have realised the necessary profit? Or are you someone who prefers to have your position squared off at the end of the day, so that you are not carrying any risk overnight? Or maybe you want to just jump in and out of the market and only hold positions for a matter of minutes, taking small profits wherever you can?

If you are a long-term trader, then you would typically follow some kind of trending strategy, maybe using indicators such as weighted moving averages. This type of strategy involves opening a trade when you believe the market is going to move in one direction for a certain time period, holding that position while the market trends and closing it out when you believe the trend has ended (or is about to end), when the market has reached a turning point. Obviously, even when a market is trending strongly, prices will oscillate up and down along that trend, so you will need strong nerves to hold your position when prices are temporarily moving against the trend.

Shorter-term or "intra-day" trading can be viewed in some ways as less risky, because you are not holding a position overnight. There are generally two types of intra-day trader: "breakout traders" who buy (or sell) a currency when it breaks out of a particular trading range; and "swing traders" who try to trade within a specific trading range, buying at the bottom of that range (the "support" level) and selling at the top (the "resistance" level).

Whichever type of trader you are (or want to be), always remember that prices can move in two directions - the direction you want and the direction you don't want! So never risk more money than you can afford to lose, whichever forex trading strategy you decide to use.

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An Introduction to Forex Managed Trading

Trading systems pertains to specific rules or parameters that determines points of entry and exit, called signals, for a given equity. In the construction of trading system parameters, the most common technical analysis tools consists of moving averages, Bollinger bands, stochastic, relative strength, and oscillators. Most of the time, a combination of these tools determines a rule. However, there are also instances wherein only one indicator is used in rule creation.
Benefits of an International Forex Trading System
Utilizing a managed trading system provides several benefits to a forex or stock market trader.
Can Increase Profit
Coping with losses is one of the most difficult aspects of being a forex or stock exchange market. In an effort to recover the money they loss from trading, investors usually make hasty decisions and consequently loss more money in the process.
Since most of these systems are automated, there is no need for the investor to make a decision, as it is the software that determines when to enter and exit trading. Not Time Consuming
Again since most systems are optimized and automated, the trader need not exert a lot of time analyzing and initiating trades. The system is designed to both generate the signals and perform actual trade.
There are a lot of systems that have been developed and currently being marketed. However, availing of the work of other people entails payment of a certain fee. Pitfalls of Trading Systems
While they may have their advantages, trading systems are not perfect and present their own disadvantages.
Complicated
This is the biggest disadvantage of a trading system. Creating a trading system may require a solid knowledge of technical analysis, ability to decide empirically, or a comprehensive understanding of the functions of parameters.
Requires Realistic Assumptions
In order for a system to become effective, you need to have knowledge of how to differentiate simulated from actual results. Development Takes Time
The task of developing your own system is time consuming. Getting it to run and work effectively as well as testing it may take some time. Not to mention the fact that you have to do a paper trade in real time to make sure that your system is reliable. The factor of slippage may also come into play, which will require you to completely revise your system.
As mentioned above, you need to be careful when choosing a system. There are firms that are out to get your money and offer a system that does not work. A trading system can be a helpful tool to novice traders who wants to succeed and make a living out of this endeavor.

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An Introduction to Forex Trading Systems

Anyone who has ever looked into the possibility of trading the forex markets, will no doubt have come across the term "forex trading system". But what exactly is a forex trading system? Who actually uses these systems and why? How do they work? Are specific systems used by different types of traders?
A forex trading system is basically some kind of automated system that generates buy and sell signals for trading the forex markets. Some of these systems will actually place your orders into the market and execute them on your behalf, whereas others will just generate the trading signals and leave the execution side of things up to you.
Forex trading systems can be found in various places, but generally there are two alternative routes you can follow. Both options have their advantages and disadvantages. Going down the first route will give you free software and electronic access direct to the market, whereas the second route will generally give you more flexibility in how and where you trade.
Generally, you will configure your own trading outlook and risk profile and then choose from a range of technical and statistical indicators (e.g. weighted moving averages etc) to determine how you wish to trade. For example, if you are more interested in forex day trading, you would set a short-term outlook and define your risk profile by where you place your stop-loss orders.
Is it possible to make substantial profits using a forex trading system? Absolutely! If you plan to use one, do your research first, back-test the system and "paper-trade" with dummy positions before you start using it for real. And our number one piece of advice? NEVER risk more money than you can comfortably afford to lose. Any forex trading system is only as good as the trader using it!

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The Main "Players" in The Forex Market

There are many markets: markets for stocks, futures, options and currencies. People easily understand the basics of trading shares, so I will occasionally use examples from that market.
I began trading shares first and then I moved on to trading currencies; therefore, most of the examples I will be using in this book are derived from trading currencies.
If you do not know a lot about currency trading, allow me to introduce it to you. It is what I trade and I believe that it is one of the best markets to trade because of its efficiency. The transaction costs to execute a trade are minimal and most brokers provide you with the tools and data you need to make your trading decisions, they usually provide them for free. The foreign exchange market is the market in which currencies are bought and sold against one another. People may loosely refer to this market under different labels, including foreign exchange market, forex market, fx market or the currency market.
The foreign exchange market is the largest market in the world, with daily trading volumes in excess of $1.5 trillion US dollars. All transactions involving international trade and investment must go through this market because these transactions involve the exchange of currencies.
The currency exchange market is an over-the-counter (OTC) market which means that there is not one specific location where buyers and sellers can actually meet to exchange currencies. Instead, transactions are conducted by phone, fax, e-mail or through the websites of brokers who specialize in currency trading.
The market only closes on the weekends.

THE MAIN ‘PLAYERS' IN THE FOREX MARKET
The five broad categories of participants are: consumers, businesses, investors, speculators, commercial banks, investment banks and central banks.
Consumers, including visitors of countries, tourists and immigrants, do need to exchange currencies when they travel so that they can buy local goods and services. Investors and speculators require currencies to buy and sell investment instruments such as shares, bonds, bank deposits or real estate.
Large commercial and investment banks are the ‘price makers'. They are the ones who buy and sell currencies at the bid-and-offer exchange rates that they declare through their foreign exchange dealers.
The bid price is the exchange rate that the buyer is willing to buy and the offer price is the exchange rate at which the seller is willing to sell. The difference is called the bid-offer spread. They also make profits from speculating about whether the exchange rate will rise or fall.
Central banks participate in the foreign exchange market in their effective duty as banks for their particular government. They trade currencies not for the intention of making profits but rather to facilitate government monetary policies and to help smoothen out the fluctuation of the value of their economy's currency.

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Introduction To FOREX

FOREX or Valas in Indonesia (stand for Valuta Asing) is the world’s largest and most liquid trading market. Many consider FOREX as the best home business you can ever venture in. Even though it has been somewhat of a loosely guarded secret, every day more and more investors are turning to the all-electronic world of FOREX trading for income and profit because of its numerous benefits & advantages over traditional trading vehicles, like stocks, bonds and commodities.
As a successful trader said, Trading FOREX is like picking money up off the floor. Not trading FOREX is like leaving it there for someone else to pick up." The Foreign Exchange Market, also referred to the "FOREX" or "FX" market, is the spot (cash) market for currency.
But, don't mistake FX as trading the futures market, where you buy a contract to purchase a particular currency at a future price in time.
What FX traders do is much less risky than trading currencies on the futures market, much more profitable, and a lot easier, than trading stocks.
The answer is: FX Trading is not bound to any one trading floor and is not centralized on an exchange, as with the stock and futures markets. The FX market is considered an Over-the-Counter (OTC) or 'Interbank' market, due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period.
Here's what you are actually trading when you participate in the Foreign Exchange (FOREX) market:
Essentially, like the large banks who use the FX market to protect themselves from the fluctuating exchange rate of different currencies, as an investor, what a FX trader is doing is simultaneously exchanging one countries currency for another. So, in actuality, they're electronically trading a currency-pair and the price that is quoted to us is the exchange rate between the two currencies.
EUR/USD last trade 1.2850 - One Euro is worth $1.2850 US dollars.The first currency (in this example, the EURO) is referred to as the base currency and the second (/USD) as the counter or quote currency.
The FOREX has a DAILY trading volume of around $1.5 trillion dollars - 30 times larger than the combined volume of all U.S. equity markets. This means that 1,498,574 skilled traders could each take 1 million dollars out of the FOREX market every day and the FOREX would still have more money left than the New York Stock exchange every day!
The FOREX plays a vital role in the world economy and there will always be a tremendous need for the FOREX. International trade increases as technology and communication increases.

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