If you are trading on the forex market or are considering doing so, you are already aware of the great profit potential that exists in forex. While the profits can be wonderful, they only exist because of the great risks also involved with forex trades. There are many systems that can be used which have demonstrated good results in back testing or previous live trading, but the reality is that no system is 100% and the market can move in any direction unexpectedly at any time. Therefore, it is essential to use proper money management techniques for long term growth potential to avoid large losses which may cause you to lose all or most of your investment capital.

These tips should help you to minimize losses while maximizing profits. Almost all forex traders will tell you that money management is the primary key to success in forex.

1. Always use a stop loss. Some traders may feel that they are sure of a trade based on several indicators pointing to a trend, and that they don’t want to use a stop loss to allow the trend to develop fully. While it may be true that eventually the price of any currency pair will reach a certain profit target, the fact remains that it may make a major move in the opposite direction first, which may lead to a margin call by your broker or other losses which cannot be sustained.

2. Determine the weekly or monthly profit level goals you would like to achieve based on the projected results for the system you are using. Take into account the success rate (percentage of winning trades) and average number of trading opportunities your system is likely to present. It is recommended to be conservative in your goals to allow some room for weeks or months when the results do not fully meet the projections.

3. Determine the risk you are willing to take or need to take to achieve the profit goals you set. Keep in mind both the percentage amounts of your total balance that you will risk in each trade and also the maximum you are willing to risk at any one time combining all of your open positions. Figure your stop loss according to your system, some systems will recommend a stop equal to or less than your profit target, others may recommend a a larger stop to allow some cushion before the price hits your profit target. Then, determine the number of lots you will trade so that if your trade is a losing trade, the amount of money lost will equal the percentage of your balance you are willing to risk on that trade.

4. Once you have these limits in place, execute your trades with these stops and targets every time. Stick to your plan, don’t get greedy when things are going well and don’t fear when some of the trades don’t go your way. Stick to your resolve and have faith in your system. All traders experience losses, you will be no different, but if you stick to a predetermined risk plan as a percentage for each trade, you will always live to trade another day.

Putting these tips into action will put you on the path to the discipline needed for success in forex. Believe in yourself and the rewards can be great for you, not only financially but personally as well.



By: Joe Phelps

I am nearly 18 and I should have saved up £5,000 by this age. I’m looking to trade currency CFDs (Contracts for Differences) starting with my £5,000 in savings. What I’d like to know is if it would be possible to parley my £5,000 investment into £500,000 within 2 years trading currencies, and if it has been done before by anyone?

I’m interested in trading currencies with a FOREX account, but I’ve also heard plenty of bad things about numerous companies. Does anyone know which company has the best reputation for FOREX trading?

Investors and traders around the world are looking to the Forex market as a new speculation opportunity. But, how are transactions conducted in the Forex market? Or, what are the basics of Forex Trading? Before adventuring in the Forex market we need to make sure we understand the basics, otherwise we will find ourselves lost where we less expected. This is what this article is aimed to, to understand the basics of currency trading.

What is traded in the Forex market?

The instrument traded by Forex traders and investors are currency pairs. A currency pair is the exchange rate of one currency over another. The most traded currency pairs are:

EUR/USD: Euro

GBP/USD: Pound

USD/CAD: Canadian dollar

USD/JPY: Yen

USD/CHF: Swiss franc

AUD/USD: Aussie

These currency pairs generate up to 85% of the overall volume generated in the Forex market.

So, for instance, if a trader goes long or buys the Euro, she or he is simultaneously buying the EUR and selling the USD. If the same trader goes short or sells the Aussie, she or he is simultaneously selling the AUD and buying the USD.

The first currency of each currency pair is referred as the base currency, while second currency is referred as the counter or quote currency.
Each currency pair is expressed in units of the counter currency needed to get one unit of the base currency.
If the price or quote of the EUR/USD is 1.2545, it means that 1.2545 US dollars are needed to get one EUR.

Bid/Ask Spread

All currency pairs are commonly quoted with a bid and ask price. The bid (always lower than the ask) is the price your broker is willing to buy at, thus the trader should sell at this price. The ask is the price your broker is willing to sell at, thus the trader should buy at this price.

EUR/USD 1.2545/48 or 1.2545/8

The bid price is 1.2545

The ask price is 1.2548

A Pip

A pip is the minimum incremental move a currency pair can make. A pip stands for price interest point. A move in the EUR/USD from 1.2545 to 1.2560 equals 15 pips. And a move in the USD/JPY from 112.05 to 113.10 equals 105 pips.

Margin Trading (leverage)

In contrast with other financial markets where you require the full deposit of the amount traded, in the Forex market you require only a margin deposit. The rest will be granted by your broker.

The leverage provided by some brokers goes up to 400:1. This means that you require only 1/400 or .25% in balance to open a position (plus the floating gains/losses.) Most brokers offer 100:1, where every trader requires 1% in balance to open a position.

The standard lot size in the Forex market is $100,000 USD.

For instance, a trader wants to get long one lot in EUR/USD and he or she is using 100:1 leverage.

To open such position, he or she requires 1% in balance or $1,000 USD.

Of course it is not advisable to open a position with such limited funds in our trading balance. If the trade goes against our trader, the position is to be closed by the broker. This takes us to our next important term.

Margin Call

A margin call occurs when the balance of the trading account falls below the maintenance margin (capital required to open one position, 1% when the leverage used is 100:1, 2% when leverage used is 50:1, and so on.) At this moment, the broker sells off (or buys back in the case of short positions) all your trades, leaving the trader “theoretically” with the maintenance margin.

Most of the time margin calls occur when money management is not properly applied.

How are the mechanics of a Forex trade?

The trader, after an extensive analysis, decides there is a higher probability of the British pound to go up. He or she decides to go long risking 30 pips and having a target (reward) of 60 pips. If the market goes against our trader he/she will lose 30 pips, on the other hand, if the market goes in the intended way, he or she will gain 60 pips. The actual quote for the pound is 1.8524/27, 4 pips spread. Our trader gets long at 1.8530 (ask). By the time the market gets to either our target (called take profit order) or our risk point (called stop loss level) we will have to sell it at the bid price (the price our broker is willing to buy our position back.) In order to make 40 pips, our take profit level should be placed at 1.8590 (bid price.) If our target gets hit, the market ran 64 pips (60 pips plus the 4 pip spread.) If our stop loss level is hit, the market ran 30 pips against us.

It’s very important to understand every aspect of trading. Start first from the very basic concepts, then move on to more complex issues such as Forex trading systems, trading psychology, trade and risk management, and so on. And make sure you master every single aspect before adventuring in a live trading account.



By: Raul Lopez

Currency trading and future trading, which usually make more money

Analysis and discussion with Steven Englander of Barclays Capital on his take of the growing popularity of online currency trading. (Bloomberg News)

Looking for a unique (even experimental) system for forex and currency fx trading that works seamlessly with Metatrader 4. Interested in your own recommendations and tools that work at the beginner / intermediate level.

Trading currencies eod using EFT’s

www.smctrader.com – Get you $100000 Virtual trading account. This is how to place a basic Margin FX Trade on the SMC Trader.

Currency trading training is not over when a trader finally sees the equity increasing in their account.

The Forex market is a very demanding environment and for a trader to maintain a success level, constant currency trading training is necessary.

The following 7 favorite tips can be used as timely reminders and need to be read and absorbed on a regular basis:

#1 – Take Responsibility

“The buck stops here.” Don’t blame the markets, or a host of other factors for a losing trade. You entered it for whatever reasons you had at the time. Take responsibility for it.

#2 – Use Each Losing Trade As A Stepping Stone

You lost a trade? Good. It will help you focus on a potential problem in your trading method. If after careful analysis you are satisfied you worked according to your plan, fine. Move on.

#3 – Never Become Impatient With The Market

New traders in the early stages of their currency trading training can be eaten alive by the market. During periods of consolidation with little liquidity the anxious impatient trader will force trading opportunities where there none.

Learn to accept the fact that around 70% of the time price will be in a consolidation channel.

#4 – Focus Daily On Improving Your Trading Skills

Currency trading training is an ongoing process. Day by day, step by step the trader improves. So rather than be preoccupied with profits and losses, concentrate on developing the skills. Your account will start to reflect your focus in time.

#5 – Be Pleased With Well Executed Trades Whatever The Outcome

Is this possible? Yes. You can feel well pleased even with a losing trade if you stuck to your methodology and executed the trade well. It is dangerous to feel good about a winning trade when you went against your trading method to achieve it. Your elation is likely to be short lived. Learn to execute the plan!

#6 – If In Doubt Stay Out

The feeling of regret can drain a person mentally and emotionally from entering a poorly considered trade. Once the trigger has been pulled and the trade starts going wrong, the agony of watching it inch towards your stop should renew in the trader the determination to stay out when in doubt!

#7 – Always Have A Good Reason

Currency trading training involves careful analysis of reasons for entering a trade. Just because price is high is not a reason to go short or long if price is low. Price will do what price wants to do so rather than trading from gut reaction, e.g. “Price can’t go any higher (or lower)” learn to detach emotions and use pure technical analysis to establish a number of reasons why you should take a trade.

As currency trading training is a long term commitment, skills and disciplines learned can sometimes be forgotten as bad habits creep in.

It is necessary to constantly renew the thinking processes by repeating over and over the habits of successful traders.

These 7 favorite tips will keep the newer trader out of a lot of trouble!



By: Michael A Jones