MonitorFX | Forex Trading

What is foreign exchange? Introduction

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What is Forex?

Forex trading involves transactions in which one party purchases a quantity of one currency by paying in a quantity of another currency. The Forex market (also called foreign exchange market) is a global decentralized financial market for the exchange of currencies. Around the world various financial centers act as hubs for trading between a wide range of different types of buyers and sellers 24 hours a day, except weekends.

It is the foreign exchange market that determines the value of one country’s currency relative to another. The Forex market is useful because it helps enable trade and transactions between countries, and it also allows an investment opportunity for risk seeking investors who don’t mind engaging in speculation.

Individuals who trade in the Forex market typically look carefully at a country’s economic and political situation, as these factors can influence the direction of its currency. One of the unique aspects of the Forex market is that the volume of trading is so high, partially because the units exchanged are so small. It is estimated that around 4 trillion USD goes through the Forex market each day.

Why choose/trade Forex?

Forex is the world’s biggest unint—upted market, and due to the high number of participants, the great volume and the diverse factors affecting prices, from many aspects it stands the closest to perfect competition. Due to the info-technological development of the last few years it has become available for everyone, only internet access and a computer is needed regardless of which part of the world you are. Forex is the most popular market of our times.

Some of its advantages:

• It is the biggest market of the world
• Liquidity
• Numerous trading possibilities
• 24/5 opening
• Long / Short
• Low costs
• Leverage from 500:1
• Trading possibilities from 100 USD
• Free Demo account

Forex Trading

The individual forex traders may choose a lot of possibilities in the foreign exchange market, now there is bigger trading freedom than ever was before. The most attractive benefit is that with relevant knowledge you can reach high profit in a short time thanks to the number of potentials which help the traders. The term of high leverage and low costs make the Forex more widely available. Start of the trading does not require a high capital.
Besides the individual traders there are account managers and trustees, so you may also benefit from the advantages of the forex trading, either if you do not have time to trade.

Forex

The Foreign Exchange market is a global decentralized market for the trading opportunities. This includes all aspects of buying, selling and exchanging derivatives at current or determined prices.

In terms of volume trading, it is by far the largest market in the world.

Thanks to the powerful leverage that everyone is entitled to now, you can conduct your trades and earn the same way as major Investment Banks do!

Forex Platform

The MetaTrader 4 platform is a powerful tool for processing dozens of different financial instruments and is used by retail investors to buy and sell currencies.

In addition to allowing users to trade in Forex, the MT4 platform supports Future, Indices, Equities and other CFD transactions.

Its distributed architecture, robust security system and convenient mobile trading are some of the core competences that give MetaTrader 4 its compelling competitive advantages. Offering the perfect solution to even the most demanding trading needs.

Forex Basics

Due to spread of the online trading there are lots of traders, nowadays not only the institutional investors or the very wealthy person can trade, but the ordinary investors as well. Wide range of Forex strategies can be used in the market depending on the purpose of trading. In additional to the large financial institutions there are many other asset managers, multinational corporations and other organizations who use the Forex market on a daily basis, as well as plenty of personal traders are presented.

A spot foreign exchange transaction involves the buy of one currency against the sale of another at the same price. In the Forex currency pairs can be traded . The major pair is EUR/USD. If the current rate of the EUR/USD is 1,2542 that means 1 EUR costs (1,2542) USD.

Certain currency pairs exchange rate have only two decimals, for example USD/JPY exchange rate is 85,36. In the exchange rate of the currency pair the number of decimals is always fixed.
In the Goldstein Brokers Meta Trader 4 Client Terminal currency pairs exchange rate are quoted to five decimal places, so tenth-pips price movements can be followed by our clients.

What is the Pip?
Pip is the smallest price change in the current rate. Most major currency pairs are priced to four decimal places but others are priced only two decimal places. For example 1 pip = 0.0001 for EUR/USD, or 0.01 for USD/JPY.
Pip Value
The value of a pip. Pip value can be either fixed or variable depending on the currency pair. The pip value for EUR/USD is always $10 for standard lots, $1 for mini-lots and $0.10 for micro lots.

Leverage
In the foreign exchange market you can easily demand high leverage level to your trading account. Depends on the account type the Goldstein Brokers provides even 1:500 leverage to their clients. This means that high profit can be achieved by much smaller amount of investment.
Margin is the amount of money needed as a deposit to open a position and usually expressed as a percentage of the full amount of the position. For example if the account’s margin setting is 1:100, 1 lot position can be opened only with a 1000 USD amount. Margin can be either „free” or „used”. If a trader’s Equity goes under the minimum amount required to maintain an open position, he will receive a „margin call” requiring him to either add more money into his or her account or to close the open position.
In order for the protection of the accounts of the customers the brokerage firm can automatically close the open positions before they turn to negative balance.

Long/Short
In the foreign exchange market there is a possibility to make money even when the current rate of the instrument is going down, this is called short selling. With this option there is so much bigger chance of making the trading more profitable because trading can be carried out in both directions. When using short positions you will realize profit if your EUR/USD positions starting price of 1,2542 drops in a negativ way. If the price increases to lets say 1,2580 you will will be in a loosing position. Technically this is a very simple process, in the Goldstein Brokers MetaTrader 4 platform it can be done with a simple click.

Expert Advisors (EAs)
In the foreign exchange market you may use automatic trading sofwares which can help or even fully replace the manual trading. There are lots of types of robots, every trader can find the most appropriate algorithm. Goldstein Brokers supports the automatic trading, the MetaTrader 4 trading platform is the most suitable software in the world for automatic trading. You can find more information about the robots at the following link: http://www.mql4.com/

Technical Analysis

The most useable method for making trading decisions is the technical analysis. Today most of the trading decisions are based on technical signals. The technical analysis means how to interpret the chart of the exchange rate. The basics can be easily learnt, that is why so many traders use it with confidence. It is proposed to acquire adequate knowledge in this field in order to gain more success when making a trading decision. Regarding technical analysis you can find number of webpages by surfing the net. In the following you will find the basic functions of the Mt4 which meet the technical analysis. Due to the handy platform and for the lot of features the MT4 became the most popular trading software among the forex traders.

Indicators

Here you can read about the main indicators which are used in technical analysis.

Moving Average
MACD
RSI
Stochastic
Fibonacci lines

Moving Average
Moving averages are used by technical analysts to discover trends in stock prices.
If the stock price crosses the moving average on the upside (that is, crosses going from below to above) after a downward trend, this is considered a signal to buy. But if the stock price crosses the moving average from above to below, following an upward trend, the penetration is a bearish sign.

MACD
MACD stands for Moving Average Convergence Divergence. The MACD Histogram is useful for discover changes in the trend. It makes use of moving averages of different time frames to indicate momentum changes and swings in the mood of the crowd, to give buying and selling signals that catches the big moves. MACD lines follow trends, it is especially good for determining when to enter a market.

RSI
The Relative Strength Index (RSI) indicator is a popular oscillator technical indicator. It was created in order to measure the relative changes that occur between higher and lower closing prices. Traders use the RSI to determine overbought and oversold conditions, valuable information when setting entry and exit levels in the forex market.
The indicator typically has lines drawn at both the 30 and 70 values (it can be adjusted) as warning signals. Values exceeding 85 are interpreted as a strong overbought condition or sell signal, and if the curve goes below 15, a strong oversold condition or buy signal is generated.

Stochastic
The The Stochastic indicator is an oscillator-type that follows the momentum of the market. This is one of the oldest technical indicator, it was created in the 1950s. The idea behind the Stochastic indicator is that it compares a given currency’s price to the its price over a given time period. Traders can use it different ways to decide about position openings. One way is to use the below 20 and above 80 zones, if the price is in one of these zones, then the currency is either overbought or oversold. However keep in mind that if the price has a strong trend, then the Stochastic may remain in the overbought/oversold zones for quite some time.

Fibonacci
Fibonacci was an italian mathematician in the thirteenth century. Fibonacci series of numbers is a series where each number is the sum of the previous two numbers. The initial numbers of the series are as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233 …

The important thing to consider is that it’s not the numbers which are important in the series but the ratio of the numbers.:

21/34 = 0.618
13/34 = 0.382
8/34 = 0.236

During Forex (or any other type of market) trading Fibonacci Retracement Levels are used as support and resistance levels: 0.236 or 23.6%, 0.382 or 38.2%, 0.500 or 50.0%, 0.618 or 61.8% and so on. The most important retracement levels out of these are 38.2%, 50.0% and 61.8%.
Fibonacci numbers are used in many technical indicators, for example, Fibonacci numbers and ratios are found throughout Elliott Wave patterns.
Fibonacci retracement lines are displayed by drawing a trend line between two extreme points, for example, a trough and opposing peak.

Risk Management

The forex-market is the largest and most liquid market of the world, and because the possibility for leveraged trading exists the opportunity to achieve great profit with small investment. News, events and expectations coming from the political and economical sectors continuously form the levels of demand and supply for all currencies and instruments which are available on the forex market. Moreover these factors define the general market mood either.

While trading in the forex exchange market it’s advised to prepare for unexpected events which may cause the exchange rate to budge in a negative or positive way in seconds resulting that the price may be a couple of hundred points above or bellow the earlier one. In order to carry out successful trading it’s expected from the trader to be able to calculate and control the accidental losses during the whole process.

The most effective way to keep risk management is to shape and consistently meet the requirements set in the risk management strategy. But it’s not necessary to think on overly complicated, complex solutions. To set up and follow the well-known risk control measures in accordance with the rules will lead to much more success. An effective risk management strategy for the individual trader’s willingness to risk attention should be designed. The majority of the options elements of risk management are well known, but the novice forex trader who is not sufficiently prepared for these solutions usually tends to overlook them. The market usually avenges these excessive risk-taking measures which can be traced back to the the traders lack of seriousness and lack of concept. In short forex traders are forced to suffer significant losses if they haven’t acquired a functional risk-management concept or strategy.

What are the tools, the key elements of the risk management strategies?

1. For every position a STOP/LOSS must be placed. With the help of a fairly calculated STOP/LOSS level you can accurately define and limit the rate of loss to be suffered. You can mitigate the losses arising due to extreme exchange rate movements and it can also prevents the dealer from opening a position in a very unfavorable price level.

2. Based upon the experiences of professional traders the fairly chosen volume of the positions can lower the probability of losses. Maintaining low levels of total exposure also help to keep the balance of the account.

3. By committing to a pre-formulated and disciplined trading strategy it’s easier to maintain a confident trading.

4. With the lack of proper mental preparedness, self-knowledge and self-discipline it’s not recommended to start trading in LIVE conditions. Defining element of risk in forex trading is the traders lack of discipline and the following of an inconsistent business strategy. The basic tools for successful trading are professionalism and the knowledge of trading technics and furthermore the consistent gains are very well linked to the traders mental status. Novice forex traders usually find it difficult to pounder their own stress-toleration abaility moreover they frequently forget to keep an eye on their personal traints because they effect their decisions more than they can imagine. Forex trading is typical performance oriented section of the market as all foreing exchange traders strive to achieve the highest possible profits. In other areas of life the performance orientation is also associated with stress and serious intellectual effort. Therefore if the processing and management of these factors is inadequate then they will have a negative impact on trading itself as well.

What is Forex?

Why choose/trade Forex?

Forex Trading

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