Stuart - Forex for Beginners: How to Make Money in Forex Trading

Forex for Beginners:
How to Make Money in Forex Trading
(Currency Trading Strategies)

By James Stuart

Copyright 201 4 by Liraz Publishing. All rights reserved.

Table of Contents

. Making Money in Forex Trading

The Forex market has a daily volume of over $4 trillion per day, dwarfing the volume of the equity and futures markets combined. Thousands of people, all over the world, are trading Forex and making tons of money. Why not you?

All you need to start trading Forex is a computer and an Internet connection. You can do it from the comfort of your home, in your spare time without leaving your day job. And you don't need a large sum of money to start, you can trade initially with a minimal sum, or better off, you can start practicing with a demo account without the need to deposit any money.

Once you consider to start Forex trading, one of the first things you need to do is choose a broker, choosing a reliable broker is the single most critical factor to Forex success.

There are dozens of online brokers out there but your best bet is to go with one of the leaders. Here are 2 online brokers that are reputable and are most suitable for beginners and pros alike:

Forex Inc - The best broker for US residents (If the link doesn't work, copy and paste the following URL into a browser: www.liraz.com/forexinc )

eToro - accepts worldwide traders except US residents (If the link doesn't work, copy and paste the following URL into a browser: www.liraz.com/etoro ).

Now I would strongly encourage you to go and visit these broker's sites right now even if you are not yet decided whether you want to go into Forex trading. Why? because each provides tons of free education materials, videos and best of all a demo account that allows you to practice Forex trading for free without the need to deposit any money. Simply go to each of these brokers, register for a free demo account and start "trading" - by actually practicing and experiencing it firsthand you'll be able to decide whether Forex trading is for you.

In any case, before starting to trade for real, it is advisable that you practice with a demo account. Once you build some skill and feel more comfortable with the system you can start trading gradually for real money.

Now which of the two brokers you should choose? while both are reputable and reliable they do have some differences. For starter if you are a US resident you should choose Forex Inc, as eToro does not accept US residents. Here is a summary of the specific advantages of each of them. Choose based on your personal preferences:

Forex Inc (www.liraz.com/forexinc) - is a straightforward website to trade currencies on with good trading platforms, research and educational tools. It has several different account levels that make it easy for anyone to open an account. Forex Inc is an excellent broker suitable for beginners and pros alike.

eToro (www.liraz.com/etoro) - is a "Social Investment network" - this is an interesting and beneficial concept as it allows you to watch other trades as they are being made and to copy the trades of the most successful traders. You can also communicate with other traders including the top traders.

. What is Forex Trading

Foreign exchange, popularly known as ' Forex' or 'FX', is the trade of a single currency for another at a decided trade price on the over-the-counter (OTC) marketplace. Forex is definitely the world's most traded market, having an average turnover of more than US$4 trillion each day.

Compare this to the New York Stock Exchange, that has a daily turnover of about US$ 70 billion and it is very obvious how the Forex market is definitely the largest financial market on the globe.

In essence, Forex currency trading is the act of simultaneously purchasing one foreign currency whilst selling another, mainly for the purpose of speculation. Foreign currency values increase (appreciate) and drop (depreciate) towards one another as a result of variety of factors such as economics and geopolitics. The normal objective of FX traders is to make money from these types of changes in the value of one foreign currency against another by actively speculating on which way foreign exchange rates are likely to turn in the future.

In contrast to the majority of financial markets, the OTC (over-the-counter) currency markets does not have any physical place or main exchange and trades 24-hours every day via a worldwide system of companies, financial institutions and individuals. Because of this , currency rates are continuously rising and falling in value towards one another, providing numerous trading choices.

One of the important elements regarding Forex's popularity is the fact that currency trading markets usually are available 24-hours a day from Sunday evening right through to Friday night. Buying and selling follows the clock, beginning on Monday morning in Wellington, New Zealand, moving on to Asian trade spearheaded from Tokyo and Singapore, ahead of going to London and concluding on Friday evening in New York.

The fact that prices are available to deal 24-hours daily makes certain that price gapping (whenever a price leaps from one level to another with no trading between) is less and makes sure that traders could take a position each time they desire, irrespective of time, even though in reality there are particular 'lull' occasions when volumes tend to be below their daily average which could widen market spreads.

Forex is a leveraged (or margined) item, which means that you are simply required to put in a small percentage of the full value of your position to set a foreign exchange trade. Because of this, the chance of profit, or loss, from your primary money outlay is considerably greater than in conventional trading.

Currencies are designated by three letter symbols. The standard symbols for some of the most

commonly traded currencies are:

EUR Euros

USD United States dollar

CAD Canadian dollar

GBP British pound

JPY Japanese Yen

AUD Australian dollar

CHF Swiss franc

Forex transactions are quoted in pairs because you are buying one currency while selling another. The first currency is the base currency and the second currency is the quote currency.

The price, or rate, that is quoted is the amount of the second currency required to purchase one unit of the first currency. For example, if EUR/USD has an ask price of 1.2327, you can buy one Euro for 1.2327 US dollars.

There are so-called majors, for which around 75% of all market operations on Forex are held: the EUR/USD, GBP/USD, USD/CHF, and USD/JPY. As we see, the US dollar is represented in all currency pairs, thus, if a currency pair contains the US dollar, this pair is considered a major currency pair. Pairs which do not include the US dollar are called cross currency pairs, or cross rates. The following cross rates are the most actively traded:

EUR/CHF = euro-franc

EUR/GBP = euro-sterling

EUR/JPY = euro-Yen

GBP/JPY = sterling-Yen

AUD/JPY = aussie-Yen

NZD/JPY = kiwi-Yen

To give you a taste of what is happening in the Forex arena here are some historical Forex events.

One of the most interesting movements in the Forex market involving the British pound took place in the September 16, 1992. That day is known as Black Wednesday with the British Pound posting its biggest fall. It was mostly seen in the GBP/DEM (British Pound vs. the Deutschemark) and the GBP/USD (British Pound vs. the US dollar) currency pairs.

The fall of the British pound against the US dollar in the period from November to December 1992 constituted 25% (from 2.01 to 1.51 GBP/USD).

The general reasons for this "sterling crisis" are said to be the participation of Great Britain in the European currency system with fixed exchange rate corridors; recently passed parliamentary elections; a reduction in the British industrial output; the Bank of England efforts to hold the parity rate for the Deutschemark, as well as a dramatic outflow of investors. At the same time, due to a profitability slant, the German currency market became more attractive than the British one. All in all, the speculators were rushing to sell pounds for Deutschemarks and for US dollars. The consequences of this currency crisis were as follows: a sharp increase in the British interest rate from 10% to 15%, the British Government had to accept pound devaluation and to secede from the European Monetary System. As a result, the pound returned to a floating exchange rate.