Exchange rate is the ratio between two currencies, usually expressed as a digit value. For example, the exchange rate EUR / USD = 1.4329 means that the value of 1 EUR is equal to 1.4329 USD. If at the same time GBP / USD = 1.6321, is that one British pound can buy a $ 1.6321. In general, assuming that an exchange rate is xxx / yyy = N, then we can say that one unit of XXX units worth N yyy.
Assuming that exchange rates of the above examples are changed as follows EUR / USD = 1.4330, GBP / USD = 1.6322, it means that the prices of euro and sterling has increased by 1 pip against the U.S. dollar.
In most cases, Forex rates are presented as pairs, following EUR / USD 1.4329/32. This kind of representation of the relationship between the two currencies shows the selling rate and buying rate. The first value shows the price at which you can sell 1 EUR, while the second part of the quote inform you that for the purchase of EUR 1 will have to pay USD 1.4332.
Basic mistakes made in Forex trading
Forex trading is a business where everyone makes mistakes, especially if you are a novice Forex trader. It is extremely important to remember that, mistakes that everybody makes when trading on Forex market, leading to loss of money. In this case, learning from mistakes is a NOT good idea, because this would lead to huge losses and sometimes bankruptcy.
In the following lines we present some of the most crucial and most common mistakes made by both the novice and experienced Forex traders:
Mistake № 1: Thinking you're smart enough and do not need to know the status of the Forex market, and it does not require specialized training or examining historical graphs is a huge mistake that can only fail you.
One of the keys to success when trading currency is continuous learning. No matter how smart you are and how much know about Forex market, to succeed you need only continuously educating and reading information related to recent Forex market changes and innovations in the field of online trading platforms.
Mistake № 2: The belief that the creation and use of a complex system can make you rich because your system is impenetrable.
If you think that the use of complex systems for Forex trading will help you reap countless successes you just will be disappointed. The reason for this is that, Forex trading is not a static profession, in which you will be rewarded because you are smart and creative. In the Forex market you will win only when you made the right decision and have carried out the right actions. One of our main advice is to aim for the use of simplified systems that will help you achieve desired success more easier.
Mistake № 3: The thought and belief that only daily trading generates profits.
Forex trading "day by day" can not guarantee you long-term profits, because daily volatility of the market is very complicated event. This creates the fact that prices are also formed on a very complicated basis, which means that you can not predict with high precision the daily quotes.
Mistake № 4: The idea that when you need money you can get rich quickly with Forex trading.
Forex trading can make you rich very quickly, but in most cases this not happening, because the Forex market is not a casino. You can take a risk and trade with large amounts of money at once, but the result may be very bad if the Forex market turn in the opposite direction.
If you want to be a successful Forex trader you should start by trying to avoid the above four basic mistakes. In the case that you fail to deal with their overcoming your career as a Forex trader is doomed to failure.
In the following lines we present some of the most crucial and most common mistakes made by both the novice and experienced Forex traders:
Mistake № 1: Thinking you're smart enough and do not need to know the status of the Forex market, and it does not require specialized training or examining historical graphs is a huge mistake that can only fail you.
One of the keys to success when trading currency is continuous learning. No matter how smart you are and how much know about Forex market, to succeed you need only continuously educating and reading information related to recent Forex market changes and innovations in the field of online trading platforms.
Mistake № 2: The belief that the creation and use of a complex system can make you rich because your system is impenetrable.
If you think that the use of complex systems for Forex trading will help you reap countless successes you just will be disappointed. The reason for this is that, Forex trading is not a static profession, in which you will be rewarded because you are smart and creative. In the Forex market you will win only when you made the right decision and have carried out the right actions. One of our main advice is to aim for the use of simplified systems that will help you achieve desired success more easier.
Mistake № 3: The thought and belief that only daily trading generates profits.
Forex trading "day by day" can not guarantee you long-term profits, because daily volatility of the market is very complicated event. This creates the fact that prices are also formed on a very complicated basis, which means that you can not predict with high precision the daily quotes.
Mistake № 4: The idea that when you need money you can get rich quickly with Forex trading.
Forex trading can make you rich very quickly, but in most cases this not happening, because the Forex market is not a casino. You can take a risk and trade with large amounts of money at once, but the result may be very bad if the Forex market turn in the opposite direction.
If you want to be a successful Forex trader you should start by trying to avoid the above four basic mistakes. In the case that you fail to deal with their overcoming your career as a Forex trader is doomed to failure.
Advantages of forex trading
Forex trading is a kind of buying and selling different currencies, which are combined in the relevant currency pairs. To make a profit, Forex traders, need to buy a currency at a low price, then sell it at a higher, or sell the currency at a higher price and then in some period of time to buy currency at a lower price.
Novice traders should understand that making a profit is not enough simply to buy and sell a currency, but it should also be taking into consideration current market conditions and the factors contributing to its changes. Therefore, profitable trades often associate with good (detailed) analysis of the Forex market.
Forex trading has many advantages and benefits compared to stock trade and other financial instruments. In the following lines you can learn more about the advantages of Forex trading that are the basis for the tendency more and more people to perceive an opportunity for own online business.
24-hour working time
Market participants can trade 24 hours from Sunday evening to Friday afternoon EST (Eastern Standard Time), without waiting Forex market to open, like in the case of stock markets. As a result, anyone can choose to trade in his convenience.
Lack of commissions
In most cases, Forex brokers do not charge commissions on currency traded quantity, because their profit come from the difference between the buy and sell course. Moreover, traders (Forex traders) are not charged for clearing and state taxes.
Advantage to choose currency amount for trading
Unlike the futures market, Forex market participants are not obliged to trade predetermined amount of a currency under a lot or contract. Therefore, traders have the opportunity to enter the market with small accounts on the order of $ 100, € 100 or £ 100.
Forex market can not be controlled by anyone
Due to the large size of the Forex market can not be controlled by one person for a long period of time, in consequence of which he can be easily manipulated in the long run.
High liquidity
The size of the Forex market makes it extremely liquid, which allows investors to buy or sell the currency when they want, without having to wait a long time to find partners whose interests correspond to the demand or supply.
Ability to open a demo account
The majority of online brokers offer free Forex "Demo" accounts, which are very useful for traders because through them can improve their trading skills without risking real money, as is the case with real accounts. Moreover, free demo accounts allow traders to compare the features of trading platforms offered by various online brokers and so to choose the one that is best for them.
Ability to open the Mini, Micro and Macro accounts
Most online brokers offer to their clients the opportunity to open various types of accounts, such as mini, micro or macro, depending on the amount of the initial deposit. A variety of accounts offered by brokers allow investors to become part of the Forex market through an initial deposit of $ 100, € 100 or £ 100. Low level of initial investment makes Forex trading available to anyone who wants to engage this kind of "business".
Profit in both bull and bear markets
In the case of stock market traders can profit only if the value of the stock rises. An exception to this rule is only shares authorized for short sales in a recession and falling markets.
Unlike other markets, financial instruments, Forex market is different in that it investors can generate profits in both terms of a rising market and in the event of market downturns and profit depends entirely on whether it is taken short or long position.
Opportunity for margin trading
Based deposit (margin) can be used for trading currencies, stocks and stock indexes. The basic idea is that you do not need to have the full amount in your account to buy 2,000 shares from the company Apple Inc. for example - totaling 95,800 dollars.
"Margin" literally means difference or reserve. In this context Margin trading is trading on a guarantee amount provided by you (the amount used for guarantee and is in your account). Margin (guarantee) is defined as the percentage of the total value of the position. 1% margin means that you ca open position ( if you have $1000 in your account ) for the $ 100,000. If margin is 5% you ca open position for $ 20,000.
Novice traders should understand that making a profit is not enough simply to buy and sell a currency, but it should also be taking into consideration current market conditions and the factors contributing to its changes. Therefore, profitable trades often associate with good (detailed) analysis of the Forex market.
Forex trading has many advantages and benefits compared to stock trade and other financial instruments. In the following lines you can learn more about the advantages of Forex trading that are the basis for the tendency more and more people to perceive an opportunity for own online business.
24-hour working time
Market participants can trade 24 hours from Sunday evening to Friday afternoon EST (Eastern Standard Time), without waiting Forex market to open, like in the case of stock markets. As a result, anyone can choose to trade in his convenience.
Lack of commissions
In most cases, Forex brokers do not charge commissions on currency traded quantity, because their profit come from the difference between the buy and sell course. Moreover, traders (Forex traders) are not charged for clearing and state taxes.
Advantage to choose currency amount for trading
Unlike the futures market, Forex market participants are not obliged to trade predetermined amount of a currency under a lot or contract. Therefore, traders have the opportunity to enter the market with small accounts on the order of $ 100, € 100 or £ 100.
Forex market can not be controlled by anyone
Due to the large size of the Forex market can not be controlled by one person for a long period of time, in consequence of which he can be easily manipulated in the long run.
High liquidity
The size of the Forex market makes it extremely liquid, which allows investors to buy or sell the currency when they want, without having to wait a long time to find partners whose interests correspond to the demand or supply.
Ability to open a demo account
The majority of online brokers offer free Forex "Demo" accounts, which are very useful for traders because through them can improve their trading skills without risking real money, as is the case with real accounts. Moreover, free demo accounts allow traders to compare the features of trading platforms offered by various online brokers and so to choose the one that is best for them.
Ability to open the Mini, Micro and Macro accounts
Most online brokers offer to their clients the opportunity to open various types of accounts, such as mini, micro or macro, depending on the amount of the initial deposit. A variety of accounts offered by brokers allow investors to become part of the Forex market through an initial deposit of $ 100, € 100 or £ 100. Low level of initial investment makes Forex trading available to anyone who wants to engage this kind of "business".
Profit in both bull and bear markets
In the case of stock market traders can profit only if the value of the stock rises. An exception to this rule is only shares authorized for short sales in a recession and falling markets.
Unlike other markets, financial instruments, Forex market is different in that it investors can generate profits in both terms of a rising market and in the event of market downturns and profit depends entirely on whether it is taken short or long position.
Opportunity for margin trading
Based deposit (margin) can be used for trading currencies, stocks and stock indexes. The basic idea is that you do not need to have the full amount in your account to buy 2,000 shares from the company Apple Inc. for example - totaling 95,800 dollars.
"Margin" literally means difference or reserve. In this context Margin trading is trading on a guarantee amount provided by you (the amount used for guarantee and is in your account). Margin (guarantee) is defined as the percentage of the total value of the position. 1% margin means that you ca open position ( if you have $1000 in your account ) for the $ 100,000. If margin is 5% you ca open position for $ 20,000.
Learn to trade in Forex market
If you've ever searched for information on how to learn to trade on Forex market, it can not but you have come upon some of the many online courses and educational materials. Typically, most of them show how the investment of a few hundred dollars can make profit of $ 10, 000 or more for a period of several months to 1-2 years.
The main issue in this case is whether, as a novice Forex traders can learn in a short period of time the intricacies associated with Forex trading and expect such a great return on your money.
The answer is - unlikely! In practice, the generation of profits is not mission impossible in the medium-term, but to achieve the best results every newbie should not go on shortest path to success, which is dotted with continuous learning and practical sessions. If you are determined to take this time we recommend that you load with a large dose of patience because the acquisition of the necessary knowledge, experience and skills that lead to making a regular income, you will need between 1 and 1.5 years. In general, the period for acquiring practical skills and knowledge vary according to the individual abilities and free time for everyone.
In the other rows you can understand much what are the main craft and skill to acquire to make money from Forex trading:
1. Learn basic concepts (terms) and basic concepts related to the functioning of the Forex market.
2. Open virtual account with an online broker, download the trading platform and focus on graphic module (package / software) that is part of it.
3. Understand how work the major technical indicators included in the graphics module, which in most cases are:
- Moving Averages
- Fibonacci levels
- MACD (Moving Average Convergence Divergence)
- Average True Range
- Stochastics
- Bollinger Bands
- RSI (Relative Strength Index)
4. Learn concepts for Pivot Points and Support / Resistance.
5. Learn the strategies related to the above indicators by subscribing online course or visiting seminars organized by your Forex broker.
6. Try to develop a traders' thinking
Months, even years, may be required for the development of emotional and mental discipline which are the basis for the implementation of successful transactions. Two of the biggest enemies of novice traders: fear and greed.
Usually fear causes investors to close their positions premature to deprive them of the full benefit of the possible profit.
The main issue in this case is whether, as a novice Forex traders can learn in a short period of time the intricacies associated with Forex trading and expect such a great return on your money.
The answer is - unlikely! In practice, the generation of profits is not mission impossible in the medium-term, but to achieve the best results every newbie should not go on shortest path to success, which is dotted with continuous learning and practical sessions. If you are determined to take this time we recommend that you load with a large dose of patience because the acquisition of the necessary knowledge, experience and skills that lead to making a regular income, you will need between 1 and 1.5 years. In general, the period for acquiring practical skills and knowledge vary according to the individual abilities and free time for everyone.
In the other rows you can understand much what are the main craft and skill to acquire to make money from Forex trading:
1. Learn basic concepts (terms) and basic concepts related to the functioning of the Forex market.
2. Open virtual account with an online broker, download the trading platform and focus on graphic module (package / software) that is part of it.
3. Understand how work the major technical indicators included in the graphics module, which in most cases are:
- Moving Averages
- Fibonacci levels
- MACD (Moving Average Convergence Divergence)
- Average True Range
- Stochastics
- Bollinger Bands
- RSI (Relative Strength Index)
4. Learn concepts for Pivot Points and Support / Resistance.
5. Learn the strategies related to the above indicators by subscribing online course or visiting seminars organized by your Forex broker.
6. Try to develop a traders' thinking
Months, even years, may be required for the development of emotional and mental discipline which are the basis for the implementation of successful transactions. Two of the biggest enemies of novice traders: fear and greed.
Usually fear causes investors to close their positions premature to deprive them of the full benefit of the possible profit.
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