The foreign exchange market (or forex market) is the largest financial market in the world. In fact, the market for currencies is several times larger than the stock market. This is the place where one currency is exchanged for another, and it has a lot of unique attributes that may come as a surprise for new traders. Here we take an introductory look at the forex market and how and why traders are increasingly flocking toward this type of trading.
What Is Forex?
Forex or foreign exchange market is the "place" where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business. If you are living in the U.S. and want to buy cheese from France, either you or the company that you buy the cheese from has to pay the French for the cheese in euros (EUR).
Is there anything more annoying than getting stopped out of a short trade on the absolute top tick of the move or being taken out of a long trade on the lowest possible bottom tick, only to have prices reverse and then ultimately move in your direction for profit? Anyone who has ever traded currencies has experienced that unpleasant reality more than once. The memory of price setup is specifically designed to take advantage of these spike moves in currencies by carefully scaling into the trade in anticipation of a reversal. Read on to find out how to use it in your next trade.
You don't have to be a daily trader to take advantage of the forex market - every time you travel overseas and exchange your money into a foreign currency, you are participating in the foreign exchange (forex) market. In fact, the forex market is the quiet giant of finance, dwarfing all other capital markets in its world. Despite this market's overwhelming size, when it comes to trading currencies, the concepts are simple. Let's take a look at some of the basic concepts that all forex investors need to understand.
Being one of the largest and most liquid financial markets in the world, Forex has very attractive potential for deriving profit. No wonder that thousands of individual traders are eager to apply their trading skills in Forex and make money. But there have always been two very special categories of clients: People who would like to diversify their investments and benefit from the Forex trading but have no time or skills to do in-depth market research, trade and monitor positions themselves; Professional Traders or Money Managers who would like to manage funds many times exceeding their own capital receive a guaranteed fee for that. Forex PAMM System is a technical solution for two categories of clients above. It is provided by brokers that allows the Professional Trader or Money Managers to manage simultaneously multiple Investors accounts or managed accounts via one trading platform or one centralized MT4 interface.
1) Knowledge Deficiency – Most new FOREX traders don’t take the time to learn what drives currency rates (primarily fundamentals).
2) Overtrading - Trading often with tight stops and tiny profit targets will only make the broker rich. The desire to “just” make a few hundred dollars a day by locking in tiny profits whenever possible is a losing strategy.
3) Over leveraged - Leverage is a two way street. The brokers want you to use high leverage because that means more spread income because your position size determines the amount of spread income; the bigger the position the more spread income the broker earns.
4) Relying on Others – Real traders play a lone hand; they make their own decisions and don’t rely on others to make their trading decisions for them; there is no halfway; either trade for yourself or have someone else trade for you.
Chief Technical Analyst, John Murphy, is a very popular author, columnist, and speaker on the subject of Technical Analysis. John’s “Ten Laws of Technical Trading” is the best guide available anywhere for people who are new to the field of charting. I urge you to print out this page and refer to it often. If you find this information useful, consider subscribing to John’s Market Message Service.
Which way is the market moving? How far up or down will it go? And when will it go the other way? These are the basic concerns of the technical analyst. Behind the charts and graphs and mathematical formulas used to analyze market trends are some basic concepts that apply to most of the theories employed by today’s technical analysts.
Risk management is the single most important concept to learn when trading the forex markets.
Without good money management an exceptionally gifted trader will lose just as much as a bad trader. So, while a good risk management system may not fully rescue a losing strategy, a winning strategy cannot possibly succeed without good risk management.