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CURRENCY EXCHANGE - A BEGINNERS GUIDE

Global economies are fueled by the exchange of goods and services. Every country maintains a standard currency with which these goods and services are bought and sold.

A currency exchange can be used for several different purposes-for tourists to convert their cash into the local economy's cash, for businesses wanting to maintain banks in foreign countries, and for speculators to buy and sell currencies and attempt to profit from price discrepancies.

The primary mechanism to make all these activities happen is through a currency, or foreign, exchange.
This article will explain what a currency exchange is, services provided by an exchange, and the impact of the internet on currency exchanges.

What is a currency exchange?

Simply put, to exchange currency means to exchange one country's monetary legal tender for the equal amount in another country's tender.

Every country's currency has an exchange rate in relation to every other currency in the global market. This price relationship is called an "exchange rate". This rate is determined by supply and demand.

There are three main reasons why someone would want to exchange currencies.

What services does a currency exchange offer?

1. For the tourist. When you travel to another country, you exchange your country's currency with the local currency so you can buy in the local markets. How much money you get in exchange depends on the market relationship at the time.

Most currency exchanges adjust their rates on a daily basis, even though price fluctuations occur every second.

2. Foreign Business. Businesses who conduct commerce overseas will setup a bank account, or multiple bank accounts, to conduct transactions. If a businesses wishes to convert the local currency into another currency, the bank's currency exchange function will handle it.

3. Investors/Speculators. Futures speculators can buy and sell foreign currency in an attempt to profit from the difference in two separate currencies. Investors use currency exchanges to hedge their market investments. An investor may invest in foreign companies and hedge those investments in the foreign currency markets.

The Internet's impact on currency exchanges

The Internet has certainly made a huge impact on currency exchange operations. Instead of visiting a physical currency exchange location, tourists can exchange their money online and pickup the cash at a local business.

As for the currency futures markets, investors no longer hail from large institutions or banks. The retail investor-the guy sitting at home in front of his high speed enabled computer-can buy and sell currency at the click of a mouse. This has created an explosion in the currency trading industry.

Currency exchanges provide essential services to three types of customers-tourists, businesses, and investors. By using the latest technologies, currency exchanges are at the forefront of online financial markets.

HOW TO MAKE PROFIT FROM THE FOREX MARKET

The forex, or foreign exchange, is simply a marketplace for the sale and purchase of various world currencies. Forex trading aims to take advantage of the floating exchange rates of these currencies, which literally fluctuate moment-by-moment, 24 hours a day. It is this volatility in the market which creates enormous opportunities for profit.

Forex trading used to be solely the domain of large financial institutions and investment groups. Thanks to the advent of online trading platforms on the internet, more and more individual traders are now able to participate in the market. There are many online brokers with whom you can open and fund a trading account. Most of them offer a free demo account, which allows you to learn to read the various charts, evaluate different types of technical analysis indicators, and practice risk management techniques, all without risking any of your own capital.

It is important to understand that currencies are traded in pairs on the forex. While there are countless combinations of different currencies, it seems that the most commonly traded pairs are: Euro/US Dollar (EUR/USD), Great British Pound/US Dollar (GBP/USD), US Dollar/Swiss Franc (USD/CHF), and US Dollar/Japanese Yen (USD/JPY). Many traders, especially in the beginning, will choose to settle on one currency pair such as the EUR/USD, and focus on the nuances of that one particular market. After gaining some experience and knowledge of currency interactions, many traders eventually go on to trade several currency pairs in order to increase their profit potential.

As with other financial markets such as stocks or futures, the market responds to the classical influences of "support and resistance." These are simply price levels that are determined by well-established mathematical models of price action over time, and serve to provide the trader with a reasonable expectation of the range that a particular market will trade within, on any given day. This fundamental knowledge (which is very easy to acquire), combined with even a minimal amount of technical analysis (also very easy to acquire), gives even the beginning trader the basic tools to trade the profitably.

It is widely known that every investment activity carries with it a certain risk of loss, and the forex is no exception. The extreme volatility of the market serves to amplify this risk factor at times. It is therefore imperative that traders implement an effective risk management strategy from the beginning. Fortunately, most online trading platforms simplify this task by providing the ability to place "stop loss" orders, either at predetermined levels or according to a rule specified by the trader. In this way, trades can be automatically terminated if they are going against the trader, thereby minimizing any loss of capital.

Success in trading the forex depends upon learning to balance the risks and rewards inherent in this market. There are many, many tools available online to accomplish that goal, even for the beginning trader. Overall, the dynamics of the forex market make it a very attractive investment vehicle for the individual investor, providing a unique profit potential with a minimal investment of time and money.

CURRENCY TRADING SYSTEM - BUILDING A PROFITABLE ONE IN 4 STEPS

If you want to trade currencies then you need a currency trading system that will get the odds in your favour and here we will show the basics that make a successful one. Anyone can build one and incorporate it in their Forex trading strategy and it's easy to do - Let's look at the basics.

1. Identifying the Opportunity

The best way to identify an opportunity is to use support and resistance and good old trend lines. We won't explain support and resistance here - but if you are not familiar with it look it up on the net - Here we want you to keep in mind one key point:

When you trade be selective and only trade valid support and resistance.

What do we mean by valid?

- The more tests the better - The more time frames involved the better - The longer the duration between the time frame the better

The above are just general guidelines - you can use 2 tests but 3 tests or more, are better and look for resistance or support that is considered important by the market.

You then need to decide after spotting the opportunity on your forex charts when to trade.

2. Executing the Trading Signal

Never simply buy into support or sell into resistance with your currency trading system.

This wont work, as your predicting what may happen and as you can't predict the future ( despite what many guru's will tell you), you are simply hoping or guessing and the market will kill you.

You need confirmation.

If you don't know what momentum indicators are look them up - you need them and there an essential part of your forex education.

You only need a couple to confirm the move - more is not better as you need a simple system - more complicated ones have more elements to break.

The way to use them is to watch for a level to hold and when momentum shifts away from the level then you trade.

Don't just look for support or resistance to hold though - incorporate breakout methodology. It's a fact that most trends start form new market highs NOT Market lows. So, if prices breakout supported by momentum buy them!

Most traders can't do this they want to get back in on a pullback that never comes - don't make this mistake trade the breakouts like the pros do.

Finally be very selective and only trade the best set ups - in forex trading you don't get paid for how often you trade you get paid for being RIGHT.

Trade sparingly and only trade the big high odds trades.

3. Stops and Profits

Stops are easy and behind support and resistance. Place them as soon as your currency trading system gives a signal.

If you are long term trend following, keep your stop well back and give the market room to breathe, so you don't get stopped out by random volatility.

You are going to miss the turn but as you can't predict that anyway, that's fine.

Catch 50 - 60% of the big trends and you will become very rich.

Swing trading is another matter.

You're looking for smaller moves and they can disappear quickly, so use a profit target and take your profit early!

Don't worry about perfection of what you might have made - concentrate on making money - no one is perfect but that won't stop you enjoying currency trading success.

4. Managing Your Money

Forex trading is risky, that's why the rewards are so high. Many traders however try and restrict risk so much they create it.

They trade to often have stops to close and move them too quickly and end up losing.
Confront risk cheerfully!

Forget all the common wisdom about risking 2% per trade- if you're trading a $10,000 account that's 200! If you don't risk much you wont win.

If you have a high odds trade risk 20% and have the courage of your conviction.

If you take calculated risks at the right time you can enjoy currency trading success.

FINALLY REMEMBER THIS!

So there you have it the above is a simple system - support resistance and a few confirming indicators and the best systems are.

Keep in mind that forex trading is as much to do with mindset as method and you need to maintain discipline.
Simple currency trading systems are easier to understand, apply and have confidence in which leads to the discipline to follow your currency trading system to long term currency trading success.

FOREX DAY TRADING - THE ILLUSION OF PROFIT THE REALITY LOSSES

More novice traders try forex day trading than any other method and while you will hear people telling you it makes money and see gurus selling courses, the fact is you never see a real track record of profits - Why? Because - it doesn't work.

The Illusion

Forex day trading doesn't work in the real world - because all daily volatility is random.

The net result is that support and resistance levels (and any technical tool you try) have no chance of working, therefore you have no chance of winning.

Millions of traders, trade trillions of dollars and to say that you can tell what this huge mass all driven by different motivations, experience and emotion will do in a few hours is laughable.

The illusion day trading makes money is just that - an illusion.

Traders back test data and bend their systems to make them fit the data.

Of course, when these systems are traded the data never replicates itself EXACTLY the same way again and they lose.

This is known as "curve fitting" i.e. bending the system to fit the data.

One trader I know likened this to shooting at a barn door and then afterwards drawing a circle around everyone, to show it as a bulls-eye.

If we all knew tomorrow's price today, we would all be rich - shame it's not that easy in forex trading - we have to trade not knowing the prices!

Vendors feed on this naivety and greed, by making up track records based upon hypothetical simulations done knowing the closing data, put a disclaimer on and forex traders think it will work in the real world.

They don't - ask for a real time track record and you simply won't get one.

The vendor makes a guaranteed profit from selling the myth and the trader gets the reality of a loss.
The Reality Is..

If you can't trade with the odds in your favour, you're going to lose and we have already told you why.
Another reality is that forex trading involves risk.

Day traders think their restricting risk and will have small losses - sure they do but over time they get a lot of them!

Of course one of the well known phrases of trading is "cut your losses and let your profits run" this totally alien to forex day traders - what do they do when they get a profit?

They snatch it!

So they have lots of small losses and a few marginal profits (even day traders get lucky ) and the result is the demise of their account equity - PERIOD.

If you want to win at forex trading - forget forex day trading and either try forex swing trading or long term trend following, where support and resistance levels can be used to generate high odds trades.

Today, most traders are looking for an easy buck and forex trading is not easy, they buy day trading systems with the illusion of low risk, regular profits and that's all it is an illusion.

The reality is a wipe out of equity.

Avoid forex day trading, if you want to win at FX Trading.

WIN FOREX TRADING - THE ONLY WAY TO WIN & NOT JOIN THE LOSING MAJORITY IS

It doesn't matter what system you use there are plenty of ways to make money but you need one thing to help you avoid becoming one of the 95% of traders who lose. So, if you want to know if you can win answer this question below:

I will win at forex trading because: I have a trading edge which is (Defined)

Now a trading edge is something that separates you from the majority of losers and a trading edge is NOT any of these!

- I am following a guru blindly - I have bought a system that can predict tops and bottoms in advance - I have a successful day trading system (a contradiction in terms!) - I am trading news stories - I trade by my gut instinct

The above are common answers and there all guaranteed to lose you money.

Most people approach forex trading like it's a walk in the park and its not - that's why the rewards are so high and so many people lose.

Listen to what I say, because I am not a self proclaimed expert telling you its easy and if your serious about forex trading your wouldn't expect it to be, there is big money at stake!

The good news is...

Everything about currency trading can be learned by those willing to get the right forex education and who have a desire to succeed.

In fact, if you can get the right forex education and forex trading system the money that can be made is life changing.

It doesn't matter what your edge is, so long as you know it, it's based on sound logic, you are confident in it and have tested it.

Mine for example is:

Hitting contrary trades hard by using 3 indicators to spot the set up and two to time entry and hitting them hard even though I am going against the herd.

Yours maybe something else - it doesn't matter, so long as you know that it will help you beat the losing majority.

A trading edge is a combination of learning, understanding and confidence that leads to discipline to execute your system.

Unless you have confidence and discipline in your forex trading system, you won't be able to execute it and you may as well not have a system at all.

A trading edge is an acceptance of responsibility for your own destiny and working smart to get a system you know will win.

If you like to follow and blame others do something else.

If you don't like taking calculated risks or being wrong then again go and do something else.

Forex trading is not for cry babies, it's a big boys (or girls!) game, where you need to accept the responsibility for your destiny and the challenge.

A trading edge can as we have said earlier be acquired by anyone - if you have the desire to succeed and a willingness to learn, you can be a winner to.

The markets are unforgiving and brutal - they can only be right and you can only ever be wrong - but that doesn't mean you can't get an edge and win.

You can ...

When you trade the markets you must understand how to play the odds just like the successful card player.
You fold when the odds are against you and bet big when there in your favour.

Sure, you will have losers but if you trade with the odds and an edge, you can enjoy currency trading success and win at forex trading and in many instances, make gains that can be life changing.

The question is are you up for the challenge?

If so, welcome to the worlds most exciting and lucrative business!

FOREX CHART MISTAKES 6 COMMON ONES THAT WILL SEE YOU LOSE !

Forex charts are an excellent way to make money yet most traders have no idea on how to use them correctly and 90% of traders lose. Here we will outline 6 common mistakes traders make with forex technical analysis and if you make ANY of them you will lose to.

1. Using Science

Many novice traders make the mistake of thinking that forex prices move to scientific law - stand up the devotees of Gann, Elliot and Fibonacci - but of course they don't. If they did then we would all know the price in advance and there would be no market - period.

These traders are naive or lazy - what they need to understand is trading is a game of odds not certainties.
Leave the scientific theories to the far out investment crowd and dreamers and concentrate on the reality of making money - and that means trading the odds.

2. Trying to Predict

Even traders who don't use scientific forex trading strategies try and predict.
For example, they see prices dip toward support and buy - but this is hoping and guessing and they are going to get a lesson.

If you want to win you wait for the test of support and pfirs to move away from the level supported by momentum.

If you don't know what momentum oscillators are now is the time to learn and make them an essential part of your forex education - if you don't trade with price momentum, you are simply guaranteed to lose.
Look up our other articles for further details - you must trade with momentum indicators to get the odds in your favour.

3. Using invalid data

Day traders! All volatility is random in daily time frames and prices can and do go anywhere so you can't get the odds in your favour and you will lose.

More novice forex traders use forex day trading systems than any other method and it's the best way to lose money - Don't try it.

4. Using Indicators The Wrong Way

How many times have I seen people buy dips to a moving average? Loads of times and it's a guaranteed way to lose money - it's a lagging indicator!

Another great one is - traders using outer Bollinger bands to set stops - that's not what it should be used for, it's a gauge of volatility.

These are just two examples - but there are many more - always use indicators for what they are supposed to be used for.

5. Being To Complicated

Many traders think the more the better and try and use loads of indicators and complicated equations in their currency trading system.

Their wrong!

Simple systems using support, resistance and a few momentum indicators are all you need to succeed.
Why?

Because - simple systems are more robust and less likely to break in the brutal world of trading.

You don't get paid for being clever in forex trading; you get paid for being right - so keep it simple.

6. Being too Subjective

The more objective you're trading, the more likely you are to stay disciplined and keep your emotions out of trading.

Avoid using indicators that are subjective such as, cycles etc and stick with objective rules.

Finally...

Using forex charts is easy and quick and you can soon be enjoying currency trading success, so long as you use them the right way.

When you use forex charts you are a bit like a ships captain - you can use them to navigate correctly but if you don't, then just like the captain at sea who makes errors the market will drown you and your equity.