How to trade Gold as a currency

All of us keep hearing about Gold Standard, usage of gold and silver as currency. When was gold discovered? Since when is gold being used as a currency? Where did it start? Which are the countries which have followed it? When did the world enter the gold standard in modern times? Why was it abandoned? Will we again enter the gold standard again? This article will answer all these questions and much more.

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First metal to be found by humans

The first metal readily available on earth for use was gold. It was available in many regions of the world and was found in its original form. Other metals were discovered and found their use much later. Most other metals are found in the form of ores, which can’t be used directly. It is necessary to smelt and extract them from their ores, purify them for proper usage. On the other hand, gold is soft and can be shaped into any form easily.

Qualities of Gold

The natural beauty of the yellow metal is widely accepted.  With its glitter, it was initially used only for ornaments and jewelry. Gold doesn’t corrode or rust and its longevity is unquestionable. It is presumed that 90-95% of all the Gold ever mined or found is available in some form even today.

Early use

The earliest usage of Gold must have been for ornaments for personal use. The other widely popular use was to make idols of deities in Gold, ornaments for them, various utensils used for prayers, and other items required for the Gods.  Due to its exquisite beauty it was also used by the royalty and was used as a medium of exchange of gifts among the rich and the royals.

Importance world over

Another interesting point is that though Gold was found in different places around the world which were not connected to each other in ancient times; their usage has been very similar throughout the world. All the early civilizations have used them for similar things, their usage as currency started much later.

Early work of gold

The excavations in Turkey show exquisite work of Gold as early as 2450-2600 BCE. Many different civilizations went to great efforts to excavate gold. There are instances of using slaves, prisoners of wars, and criminals to mine gold.

Greeks

The Greeks recognized the value of gold and mined it from early times. Both Plato and Aristotle have written about gold and have their own theories about its origins. In earlier days, most of the gold was found in the streams; therefore, it was presumed that gold was formed due to the combination of sunlight and water under certain conditions.

Gold as a currency

First use as medium of exchange

The first usage of Gold as a medium of exchange is presumed to have started in 1500 BCE in Nubia. It was along the river Nile and large quantities of Gold were found in this region. The ancient Egyptians are credited with starting the legacy of Gold.

First use as currency

The first use of gold in the form of currency was started by the Chinese in 1091 BCE. The initial currency was in the form of little squares.

Gold transitioned from being a valuable metal to being used as a currency in the early 600 BCE. The earliest coins are considered to be the Lydian coins, found in Turkey. They were struck during the reign of the King of Lydia, Croesus in 550 BCE. This started the use of Gold coins as currency which continued for many centuries.

Since then both silver and gold coins continued to be used as currencies for several hundred years. The next important step was in the 1066 AD with the Norman Conquest. Post which the British Pound sterling was established, which is the oldest currency of the world and continues to be in use even now in the UK. Though most countries have changed over to different currencies and mostly paper currency. The Pound Sterling is a reminiscence of gold being used in the form of coins.

Coins minted in Venice and England

The longest design of a coin

The gold ducat also known as the Zecchino minted in Venice is the most famous coin in the history. It’s design remained the same for more than 5 centuries. It was minted from 1284 and continued to be in use until 1797 when Venice was conquered by Napoleon. No other coin in the history has been minted with the same design for such a long time. The name Zecchino was derived from the name of the mint Zecca in Venice. In 1543, a silver coin called a ducat was started, the Gold coin was then named the Zecchino to differentiate it from the silver ducat.

England

Another important Gold coin to be minted in 1284 is the Florin from England. The angel, noble, crown and guinea were the other coins that followed the florin. In 1377, England entered a monetary system based on gold and silver.

Gold Standard

The credit of Gold standard in modern times partially goes to Sir Isaac Newton who was the master of the Royal mint. He fixed the price of gold at 84 shillings, 11.5 pence per troy ounce. He also fixed a new mint ratio of silver to gold at 16:1 which effectively ended the silver standard and started the gold standard. Britain adopted the gold specie standard in 1816. British currency was convertible to a specific quantity of gold. The gold sovereign was also introduced during this time.

Other countries join

Various other countries followed the Great Britain and adopted the gold standard. Barring China and a few other countries, the whole world was part of the Gold standard by 1900.  The Gold standard continued till the start of the First World War post which most of the Countries left the Gold Standard. They tried to unsuccessfully return to the Gold Standard on completion of the war, but the Great Depression of the 1930s and a wrong system of returning to the standard caused most of the countries to leave the Gold Standard again.

The Bretton Woods system

What is it?

The whole of Europe and Japan were in need of money to rebuild their economies. After the completion of WW II, the US emerged as the economic and military leader of the world. It used this leadership position to its advantage and pegged the value of gold at $35 per troy ounce. All other currencies in the allied nations were to fix their currency rates with reference to the US dollar.

Overvaluation of the US dollar

The world progressed during this system and both Europe and Japan progressed economically. The cold war with the USSR and the Vietnam War took its toll on the US economy. Though the US dollar was overvalued the US did not devalue it to maintain its international credibility.  The Japanese and European currencies were undervalued; both did not revalue it to maintain their export advantage. The newly formed currency markets the world over had sufficient money and speculation was rife. Large pools of money were being bet against currencies which led to quick profits.

The Nixon shock

These factors led to the loss of faith in the US dollar, a reduction in the US Gold coverage from 55% to 22%. The US international reserves which were at 50% post WW II reduced to just 16% by 1970. All this led to the US government abandoning the Bretton Woods system and an announcement in this regard was done by President Nixon on 15 August 1971.  This is also termed as the Nixon shock as this was done without consulting the members of the IMF or even his state department.

The last country to leave the Gold Standard

Though the Gold Standard came to an end with the failure of the Bretton Woods system, Switzerland continued to remain in a Gold Standard and only left it in 1999.

The future of Gold

Gold has maintained its value over the centuries and will remain to do so in future. There have been periodic attempts by economists to discuss the return to some form of a gold standard to keep a check on the money printing by various nations and to stop currency wars to gain an advantage in exports. However, with the world economy being dynamic, the gold standard will not be feasible.

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Conclusion

In the absence of the Gold Standard, money printing by all the large nations is rampant to recover from the financial crisis of 2007.  Four of the major economies of the world, the US, the Europe, Japan and China have resorted to quantitative easing to prop their economies. The demand for gold during times of crisis increases as can be seen in the last few years. Gold presently is in a bear market and will again come into prominence during the next financial crisis which is likely to cause hyperinflation world over.

How to choose the Best Forex Brokers in the world ?

How to choose the Best Forex Brokers Online ?

There are a large number of forex brokers in the retail forex market these days, each touting its services as the best in the entire market. It can be a daunting task to sort out between them seeking those that are best suited to your needs, however, as usual; we have worked to simplify your task by reviewing some of the most reliable brokers in the market. 

Here we would like to explain the importance of the various criteria according to which you can screen the brokers we have reviewed, and make your choices. Due to the vast diversity of options, it is not possible to speak of a broker who is perfect for all kinds of traders. Instead, you should carefully consider your own expectations from trading, and compare that with what is offered by the broker, and choose the one that is best suited to your needs.

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Security - Regulation

Without a doubt, the most important thing your broker must have is proof of regulation.

What is the point of opening a forex account if the funds we deposit will be unsafe with the broker, or worse yet, will be stolen and misappropriated? What is the logic of studying analysis and currency fundamentals if the profits that we make are pilfered by shameless crooks, or squandered by irresponsible individuals who cannot even manage themselves decently? If you choose to do business with an unregulated broker, you are opening yourself up to a whole slew of potential problems.  If you have to dispute a trade or action facilitated by the broker, who do you turn to? If they are unregulated, you are going to have very little if any legal protection from fraud. Or if the broker goes bankrupt, will you lose your deposit? Thus, the first necessity for the right broker must be the safe and reliable track record of the firm. On the other hand, it is clear that the retail trader possesses neither the tools, the time, nor the expertise for determining which of the brokers are reliable, and which are not. Fortunately, the regulatory authorities in this country and in other financial centers of the world do their best for screening and weeding out the unreliable ones among the many decent firms. Our best course is to ensure that the broker we choose is a member of NFA, and is registered with CFTC in the US, and with other relevant authorities in other parts of the world.

Of course, simply being regulated isn’t enough. You need to have a broker that is regulated in a country where the law is followed and legal protection is strong. Needless to say, this is absolute folly and very reckless for a trader to deposit money at this broker, no matter how tight their spreads were. The fact is that tight spreads won’t do you much good if you cannot get your money back! This could be the case either by fraud, as there is very little legal protection, or by an overthrowof the government. As a general rule, if you don’t feel safe visiting the country, depositing your money there isn’t a good idea either!And last but not least, to make the task even easier for you, we have reviewed some of what we believe to be the best and most reliable firms in the market. 

Initial Deposit

Unavoidably, the second most important variable in our equation for comparing brokers is the initial deposit requirement. Many traders prefer to begin their careers by risking very small amounts which leads them to seek the broker offering the lowest initial deposit requirement naturally. This reasoning certainly has its merits; however, the initial deposit requirement should in fact be one of the last considerations in choosing the best broker for you, unless you really have a very small amount of capital that you want to risk for forex trading.

A serious broker offering excellent services may choose to keep the initial deposit requirement relatively high (around $500, for example) in order to ensure that the clients are serious about their trading practices. In addition, forex is usually so volatile that a less than optimally capitalized account is highly likely to be wiped out during the ordinary fluctuations in the market. We have already discussed the difficulties associated with undercapitalization, and those who have read that article should have little trouble in understanding the reasons behind our deemphasizing the importance of initial deposit requirements.

It is self-evident that a beginning trader should only risk the amount that he can comfortably afford to lose. In that sense, the initial deposit requirement of the broker should never be more than what we can afford. On the other hand, beginning our career with a pittance like $10-50, and trading at 10:1 leverage cannot be considered a wise choice. Trading with such small sums is similar to trading in a demo account, and the emotional lessons gained will probably be of little value.

Deposits and Withdrawals

It is not a good idea to trade forex if you cannot withdraw your earnings with ease. Conversely, the broker must facilitate your termination of the account in case that you’re not entirely satisfied with the services offered, regardless of the reasons. This should be non-negotiable: since the broker is only the custodian of your funds, there’s no justification for any unreasonable delays or excuses when you make the request to withdraw your funds.

Similarly, you, as the client, should have no headaches at all when depositing funds with the broker. Come to think of it: if the broker is not even capable of ensuring that your deposit process is smooth, how likely is he to guarantee a painless and satisfactory trading experience for you?

Spreads

Spreads are extremely important for forex traders, seasoned, or novice. Since the broker usually receives the compensation for its services by widening the bid-ask spread beyond the quoted values in the wholesale interbank market, a wide bid-ask spread represents a larger amount of money leaving your pockets, and entering those of the broker’s. You pay this fee regardless of the profit or loss you make with your trade: so there’s always good sense in ensuring that you choose the broker which offers one of the more competitive spreads in the market. Sometimes it may be advisable to open an account with a broker that charges slightly higher spreads in exchange for the safety offered by its long history and track record. But even in that case, a spread beyond three for the EURUSD pair, for example, is not a very good idea.

Margin Requirement - Leverage

Margin requirement and leverage ratios are the second most important aspect that must be considered during the choice of the broker. For the beginner, the lower the leverage the better. Since higher leverage is only advisable for traders with a proven track record of profits and success, the beginner should be uninterested in the maximum leverage offered by a broker. Instead, since he must be allowed to get used to leverage on a step-by-step basis, the minimum leverage available is far more useful as a criterion.

For an experienced trader, evaluating the value of a high leverage options can be a bit more different. Since, by definition, successful traders use highly divergent techniques in their trades, there is no general rule for determining the optimal leverage ratio for a seasoned trader. However, for traders who plan to hold a position for long term, 10-to-1 may well be the highest sensible value.

In short, beginners should choose brokers that offer the lowest minimum leverage option, and the greatest customizability. With such a setup, it is possible to increase leverage gradually, in tandem with our improving and developing skills.

Trading Platform

In online forex trading, almost all activity is conducted through the trading software. Indeed, for a safe trading experience, this is also a must: in order to ensure that the broker doesn’t temper with your trades, and misquote currency prices to you, you should always seek those offers which allow the greatest automation, and reduce human interference to the lowest level possible. This is only possible with a successfully implemented trading platform.

What should you look for when choosing the trading platform? Does it offer a wide array of charting tools and technical indicators for evaluating the price action? What about financial news? Is the interface clean and uncluttered? Since you may spend a long time looking at the graphics and examining charts, is the appearance of the platform physically pleasing and relaxing?

Are the servers of the broker reliable? Do you have connection problems in the middle of something important while using the demo account? How wide are the spreads during market volatility and news releases? Is slippage and misquoting a problem? Can you customize the platform to suit your trading needs and language requirements? Does the platform receive frequent updates and bug fixes?

These are the most basic issues related to the trading platform. Needless to say, an advanced, easy-to-use, and uncomplicated trading platform can make the task of the beginner a lot easier. But even the seasoned traders will find that using a well-crafted, well-maintained forex software can greatly reduce the element of stress during trading.

How to Choose the Right Trading Platforms for You

While there are literally hundreds of trading platforms to choose from, there are some major ones that you will see time and time again. Without a doubt, the most popular one is MetaTrader 4. There is a newer MetaTrader 5 out there as well which some traders prefer. The MT4 platform allows traders to import trading robots, hundreds of free indicators that are readily available on the Internet, and many more features. It is offered for free, and it estimated to facilitate over 85% of the retail trades in the forex market. Because of this, there is a real strong chance that you will either be using it, or at least have the opportunity to use it with whatever broker you choose.

In reality, picking a trading platform is going to be a very personal choice, but by far the best way to make that decision is to try demo accounts in that platform. You will find that a lot of the same basic features are found in all of them, and it is graphically representations and indicators that tend to make the difference with these different platforms. As a general rule, if a demo isn’t available it’s not worth dealing with.

Broker Types

There are two main types of brokers that you can deal with when trading forex

. The first model, the dealing desk is sometimes called a Market Maker. This dealer will often take the other side of your trade, as they will first try to match your order with another customer, but will be the other side of the trade if necessary. This type of dealer typically will make their money based upon the spread of the trade. For example, there might be a 2 pip spread in the EUR/JPY market, but the broker only offers it as a 4 pip spread, thus pocketing 2 pips for facilitating your trade. As a general rule, there are no other costs involved in trading with this broker. Of course, there is potential for the dealer to manipulate the market, and slip you on fills, but these practices are becoming more and more uncommon as the markets mature, and the regulatory bodies are very strict on these types of dealers. Again, another reason to trade with a dealer based in an industrialized country.

The other type of broker is an actual true broker. The ECN, or Electronic Communications Network, allows trader to match orders with other traders electronically. The broker will not take the other side of the trade. So for example, if you are bidding the EUR/USD at 1.4056, and there is no seller there, you simply won’t get filled as there is nobody to sell it to you at that price. (This is rare, but it can happen.) Many people say that the ECN has no interest in the results of your trades, but this is not true. In fact, the ECN wants you to do well so that you will continue to trade as they make their money off of the commissions they charge for each trade. Because of this there is no markup in the spread to compensate the broker. You typically will see tighter spreads, but there will be an added transaction cost in the form of a commission for facilitating the trade.

Let us consider the following example:

You see an opportunity in the AUD/USD pair, and you believe it is going to rise in value. Because of this, you are ready to enter a long position. If you had two separate brokers, you could have the following two scenarios possible:

Traditional Dealer:

You buy AUD/USD with a 5 pip spread, and thus start out the position 5 pips down. However, the total cost is 5 pips to place this trade. So in order to make money, you need the market to move at least 5.1 pips in your favor. Some dealers offer variable spreads, so this could change in the middle of the trade as liquidity increases or decreases, but in order to keep things simple, we assume that the spread is a fixed one. If you are trading at $1 a pip, this trade costs you $5 to do. If you are trading standard lots, it costs $50. As you can see, the trade size makes a massive difference.

ECN:

In the same set up, you see that the ECN broker is offering the same rates, but with only a 1.5 pip spread. However, with this broker you are required to pay $2.50 for each trade. Remember, when you open the trade that is one trade. When you close it that is another. So when they say per turn, you simply should double the amount to understand what the trade will cost you.

Much like the dealer situation, the value in this spread will depend on the size of the trade. For example, if you are trading at $1 a pip like the first example above, the trade will cost you $1.50 for the spread difference, $2.50 to open it, and $2.50 to close it. This is a total of $6.50 for the total position, which is actually more expensive than the dealer. However, if you compare it to the trade above that involved the standard sized lot, the cost is $15 for the spread, $2.50 to open the trade, and $2.50 to close the trade. This totals $20, saving you $30 over the dealer’s price!

As you can see, it all comes down to the trading size you will be trading.

Margin can vary from broker to broker, and country to country. As of the time of this writing the US had recently brought down the allowable leverage for its citizens to trade. Because of this, a US broker will only allow 50 to 1 leverage, which means you need to place 2% of the value of the trade for margin. For less liquid trades, it has been dropped down to 20%, meaning a 5% margin amount is necessary. Contrast that with countries around the world that allow unlimited leverage, and you can see it as high as 700 to 1! Because of this, margin requirements can very drastically, depending on your broker.

Account Types

There are many different types of accounts you can get at the various brokers available to you. Some of the most common include standard, mini, micro, and demo. The differences all basically come down to the trading size, which can also vary from broker to broker. For example, a standard account might mean that you have to trade full lots or more on your trades at one broker, but at another broker it may mean that you simply have the ability to trade them, but can trade much smaller amounts.

The most common difference is the spread that brokers will charge you. Under most circumstances, there will be lower spreads for the larger account. (When there is one.) Another common difference is that some brokers will offer value-added services for larger accounts as well, which can also be called Platinum, Premium, or Gold. Make sure to see if there are any differences at the broker of your choice listed on the website before opening your account.

Some brokers offer a large number of account packages. Others choose to offer one package with many customization options. In general, the number of account packages is not very important, provided that the broker offers a highly customizable main offer with adjustable leverage and margin requirements suitable to the needs of clients from different backgrounds and experience levels.

Currencies Offered

Finally, it is a good idea to choose a broker that offers the widest array of tradable currencies. In evaluating the currency pairs offered, you should try to make sure that different currency pairs of different classifications are available, instead of concentrating on just the number of the total offers. For example, if a broker offers three pairs of major economic powers, three pairs of emerging nations with floating currencies, three of fixed or pegged currencies, and three rare pairs (like the Saudi Riyal, or the Chinese Yuan), the offer is much better than that of a firm which offers 12 pairs all of which belong to major, developed economies.

Such details are especially important for the experienced trader, but the beginner can focus on the more important, basic aspects of the broker’s package before worrying about the intricacies of the various currency pairs on offer.

Customer Service

Customer service is paramount when it comes to dealing with a broker. Remember, they need you not the other way around. If you do not see a clear route to contact someone at the brokerage on the website, this should be a huge red flag when it comes to using them. The professional firms will have several different ways to contact them including phone, email, live chat, and many others. If you ever run into a problem, the last thing you want to do is have an issue getting a hold of your broker in order to fix it. If the broker only has limited hours of customer service, that is also a sign that bad things could come of the business relationship.

Software is prone to generating errors. This has always been the case, and will remain so for the foreseeable future. When there are problems with the trading software, or delays, or issues with deposits and withdrawals, you will need to seek the aid of the customer service.

A friendly, patient, and helpful customer service can be profit multiplier if used correctly. In those cases where the customer service is run by individuals with trading experience and understanding of economics and analysis, you can even hasten the learning process by asking questions.

Before opening your account, it is perhaps a good idea to read our reviews on customer service of various brokers to receive a preliminary impression of how competent the people are. While we cannot just pick a broker because its customer service department is professional, success in this department is certainly a promising sign for overall competence.

Additional Services

Value-added services are starting to become the norm as the competition between forex dealers heats up. The competition dictates that many of them are offering analysis,news,signals,and even education for free. Some will ask that you deposit a certain amount before offering all of these features, but they are starting to become a regular feature of dealers. Some of these technical analysts are even well-known, such as Kathy Lien and Boris Schlossberg from GFT. Brokers that are ECNs typically will offer less, as the account size needed to trade those types of accounts normally suggests that the trader is a little more sophisticated. However, even in these firms there is a bit of a change in that thinking.

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Conclusion

If you have confidence in your forex broker, you will be able to devote more time and attention to analysis and developing forex strategies. A bit of research before committing to a broker goes a long way, and can increase an investor's odds of success in the competitive forex market.
As you can see, there is a lot to think about when choosing a broker. However, by using these simple guidelines, you should be able to narrow down the list quite a bit. A lot of it comes down to personal preference as well, and what your trading needs and wants are. 
We have made every effort to make sure that you find the most realistic assessment of each firm’s offerings, so that you can form your independent judgment on their suitability your purposes. Regardless of your decision, we wish you the best luck in your new career.

How to Make Profit From Trading Forex

In the forex market, you buy or sell currencies.

Placing a trade in the foreign exchange market is simple: the mechanics of a trade are very similar to those found in other markets (like the stock market), so if you have any experience in trading, you should be able to pick it up pretty quickly.

The object of forex trading is to exchange one currency for another in the expectation that the price will change, so that the currency you bought will increase in value compared to the one you sold.

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Example:

Trader’s Action	EUR	USD
You purchase 10,000 euros at the EUR/USD exchange rate of 1.1800	+10,000	-11,800*
Two weeks later, you exchange your 10,000 euros back into U.S. dollar at the exchange rate of 1.2500	-10,000	+12,500**
You earn a profit of $700	0	+700

*EUR 10,000 x 1.18 = US $11,800

** EUR 10,000 x 1.25 = US $12,500

An exchange rate is simply the ratio of one currency valued against another currency. For example, the USD/CHF exchange rate indicates how many U.S. dollars can purchase one Swiss franc, or how many Swiss francs you need to buy one U.S. dollar.

How to Read a Forex Quote

Currencies are always quoted in pairs, such as GBP/USD or USD/JPY. The reason they are quoted in pairs is because in every foreign exchange transaction, you are simultaneously buying one currency and selling another. Here is an example of a foreign exchange rate for the British pound versus the U.S. dollar:

The first listed currency to the left of the slash (“/”) is known as the base currency (in this example, the British pound), while the second one on the right is called the counter or quote currency (in this example, the U.S. dollar).

When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency. In the example above, you have to pay 1.51258 U.S. dollars to buy 1 British pound.

When selling, the exchange rate tells you how many units of the quote currency you get for selling one unit of the base currency. In the example above, you will receive 1.51258 U.S. dollars when you sell 1 British pound.

The base currency is the “basis” for the buy or the sell. If you buy EUR/USD this simply means that you are buying the base currency and simultaneously selling the quote currency. In caveman talk, “buy EUR, sell USD.”

You would buy the pair if you believe the base currency will appreciate (gain value) relative to the quote currency. You would sell the pair if you think the base currency will depreciate (lose value) relative to the quote currency.

Long/Short

First, you should determine whether you want to buy or sell.

If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader’s talk, this is called “going long” or taking a “long position.” Just remember: long = buy.

If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called “going short” or taking a “short position”. Just remember: short = sell.

Bid/Ask

All forex quotes are quoted with two prices: the bid and ask. For the most part, the bid is lower than the ask price.

The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency. This means the bid is the best available price at which you (the trader) will sell to the market.

The ask is the price at which your broker will sell the base currency in exchange for the quote currency. This means the ask price is the best available price at which you will buy from the market. Another word for ask is the offer price.

The difference between the bid and the ask price is popularly known as the spread.

On the EUR/USD quote above, the bid price is 1.34568 and the ask price is 1.34588. Look at how this broker makes it so easy for you to trade away your money.

If you want to sell EUR, you click “Sell” and you will sell euros at 1.34568. If you want to buy EUR, you click “Buy” and you will buy euros at 1.34588.

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Forex profit is an idea that has been sold around the internet to people looking for easy answers to their money problems. It's elusive to most forex traders though because everyone is looking for profit at high speed. Sometimes forex profit can come quickly, but more often than not, it takes planning and patience.

If you can make a plan, and be patient and follow that plan, you can profit from forex trading. It's as simple as that.

Planning
Trading takes planning, that is just common sense. It is common sense that is usually thrown out the window in the search for fast forex profits. You have to plan your trades ahead of time, and then execute them according to your plan. The more you change your plan, the more you end up in trouble, and the less likely that elusive forex profit will end up in your pocket.

Patience
Patience is the number one key to achieving forex profit. Patience combined with careful risk management will allow you to ride through poor entries and other minor forex mistakes.

Sometimes profit will come fast and other times it will take some time. If you open each trade prepared to wait for the profit to come, you will be more successful over all.

Use the Big Picture
While it's true that in forex you can trade using whatever chart time frame you want to use, it's better to use a longer time frame as you point of reference. For forex, the daily and the weekly charts are really stable for beginners. Look at the daily chart and plan your trades in the direction of the daily trend, set a stop that would be triggered if the price changed direction enough for you to feel convinced that the trend was over. There is no way to predict this for sure, it's really just a safety precaution.

There are three ways to play this trade from here.

1. You can set a take profit order for an easy target on the daily chart of 100 pips
2. You can look at the daily chart over a wide range of days and look for the next support or resistance area to set a take profit
3. You can set your stop to be a trailing stop that will lock on profits as the trade progresses

No matter which method you choose, this type of trading will take some patience. Forex traders, particularly beginners are prone to getting nervous if a trade doesn't go their way immediately, or if the trade gets into a little profit they get itchy to pull the plug and walk away with a small profit that could have been a large profit.

If you have set your stops and you are trading with prudent risk managment, you can just allow the trade to develop until stop or profit.

Rinse and repeat and you have yourself a forumla for making forex profit. It's all a game of averages. You are going to lose some trades and you are going to win some trades. Using the laws of probability will tip the scales in your favor as long as you follow the rules and think carefully.

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How to Trade Forex Online

How to Trade Forex Online

Trading foreign exchange on the currency market, also called trading forex, can be a thrilling hobby and a great source of investment income. To put it into perspective, the securities market trades about $22.4 billion per day; the forex market trades about $5 trillion per day. You can make a lot of money without putting too much into your original investment, and predicting the direction of the market can be quite exciting. You can trade forex online in multiple ways.

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1. Learning Forex Trading Basics

Understand basic forex terminology.

• The type of currency you are spending, or getting rid of, is the base currency. The currency that you are purchasing is called quote currency. In forex trading, you sell one currency to purchase another.
• The exchange rate tells you how much you have to spend in quote currency to purchase base currency.
• A long position means that you want to buy the base currency and sell the quote currency. In our example above, you would want to sell U.S. dollars to purchase British pounds.
• A short position means that you want to buy quote currency and sell base currency. In other words, you would sell British pounds and purchase U.S. dollars.
• The bid price is the price at which your broker is willing to buy base currency in exchange for quote currency. The bid is the best price at which you are willing to sell your quote currency on the market.
• The ask price, or the offer price, is the price at which your broker will sell base currency in exchange for quote currency. The ask price is the best available price at which you are willing to buy from the market.
• A spread is the difference between the bid price and the ask price.

Read a forex quote.

You'll see two numbers on a forex quote: the bid price on the left and the ask price on the right.

Decide what currency you want to buy and sell.

• Make predictions about the economy. If you believe that the U.S. economy will continue to weaken, which is bad for the U.S. dollar, then you probably want to sell dollars in exchange for a currency from a country where the economy is strong.
• Look at a country's trading position. If a country has many goods that are in demand, then the country will likely export many goods to make money. This trading advantage will boost the country's economy, thus boosting the value of its currency.
• Consider politics. If a country is having an election, then the country's currency will appreciate if the winner of the election has a fiscally responsible agenda. Also, if the government of a country loosens regulations for economic growth, the currency is likely to increase in value.
• Read economic reports. Reports on a country's GDP, for instance, or reports about other economic factors like employment and inflation, will have an effect on the value of the country's currency.

Learn how to calculate profits.

• A pip measures the change in value between two currencies. Usually, one pip equals 0.0001 of a change in value. For example, if your EUR/USD trade moves from 1.546 to 1.547, your currency value has increased by ten pips.
• Multiply the number of pips that your account has changed by the exchange rate. This calculation will tell you how much your account has increased or decreased in value.

2.Opening an Online Forex Brokerage Account

Research different brokerages.

Take these factors into consideration when choosing your brokerage:

• Look for someone who has been in the industry for ten years or more. Experience indicates that the company knows what it's doing and knows how to take care of clients.
• Check to see that the brokerage is regulated by a major oversight body. If your broker voluntarily submits to government oversight, then you can feel reassured about your broker's honesty and transparency. Some oversight bodies include:

1. United States: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
2. United Kingdom: Financial Conduct Authority (FCA)
3. Australia: Australian Securities and Investment Commission (ASIC)
4. Switzerland: Swiss Federal Banking Commission (SFBC)
5. Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
6. France: Autorité des Marchés Financiers (AMF)

• See how many products the broker offers. If the broker also trades securities and commodities, for instance, then you know that the broker has a bigger client base and a wider business reach.
• Read reviews but be careful. Sometimes unscrupulous brokers will go into review sites and write reviews to boost their own reputations. Reviews can give you a flavor for a broker, but you should always take them with a grain of salt.
• Visit the broker's website. It should look professional, and links should be active. If the website says something like "Coming Soon!" or otherwise looks unprofessional, then steer clear of that broker.
• Check on transaction costs for each trade. You should also check to see how much your bank will charge to wire money into your forex account.
• Focus on the essentials. You need good customer support, easy transactions and transparency. You should also gravitate toward brokers who have a good reputation.

Request information about opening an account. 

You can open a personal account or you can choose a managed account. With a personal account, you can execute your own trades. With a managed account, your broker will execute trades for you.

Fill out the appropriate paperwork.

You can ask for the paperwork by mail or download it, usually in the form of a PDF file. Make sure to check the costs of transferring cash from your bank account into your brokerage account. The fees will cut into your profits.

Activate your account. 

Usually the broker will send you an email containing a link to activate your account. Click the link and follow the instructions to get started with trading.

3.Starting Trading

Analyze the market. 

You can try several different methods:

• Technical analysis: Technical analysis involves reviewing charts or historical data to predict how the currency will move based on past events. You can usually obtain charts from your broker or use a popular platform like Metatrader 4.
• Fundamental analysis: This type of analysis involves looking at a country's economic fundamentals and using this information to influence your trading decisions.
• Sentiment analysis: This kind of analysis is largely subjective. Essentially you try to analyze the mood of the market to figure out if it's "bearish" or "bullish." While you can't always put your finger on market sentiment, you can often make a good guess that can influence your trades. [6]

Determine your margin. 

Depending on your broker's policies, you can invest a little bit of money but still make big trades.

• For example, if you want to trade 100,000 units at a margin of one percent, your broker will require you to put $1,000 cash in an account as security.
• Your gains and losses will either add to the account or deduct from its value. For this reason, a good general rule is to invest only two percent of your cash in a particular currency pair.

Place your order. 

You can place different kinds of orders:

• Market orders: With a market order, you instruct your broker to execute your buy/sell at the current market rate.
• Limit orders: These orders instruct your broker to execute a trade at a specific price. For instance, you can buy currency when it reaches a certain price or sell currency if it lowers to a particular price.
• Stop orders: A stop order is a choice to buy currency above the current market price (in anticipation that its value will increase) or to sell currency below the current market price to cut your losses. [7]

Watch your profit and loss. 

Above all, don't get emotional. The forex market is volatile, and you will see a lot of ups and downs. What matters is to continue doing your research and sticking with your strategy. Eventually you will see profits.

Tips

• Try to focus on using only about 2% of your total cash. For example, if you decide to invest $1000, try to use only $20 to invest in a currency pair. The prices in Forex are extremely volatile, and you want to make sure you have enough money to cover the down side.
• Start trading forex with a demo account before you invest real capital. That way you can get a feel for the process and decide if trading forex is for you. When you're consistently making good trades on demo, then you can go live with a real forex account.
• Remember that losses aren't losses unless your position is closed. If your position is still open, your losses will only count if you choose to close the order and take the losses.
• If your currency pair goes against you, and you don't have enough money to cover the duration, you will automatically be canceled out of your order. Make sure you don't make this mistake.
• Limit your losses. Let's say that you invested $20 in EUR/USD, and today your total losses are $5. You wouldn't have lost money. It is important to use only about 2% of your funds per trade, combining the stop-loss order with that 2%. Having enough capital to cover the downside will allow you to keep your position open and see profits.

Warnings

• Check to make sure that your broker has a physical address. If a broker doesn't offer an address, then you should look for someone else to avoid being scammed.
• Ninety percent of day traders are unsuccessful. If you want to learn common pitfalls which will cause you to make bad trades, consult a trusted money manager.

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How to start Forex trading

Find out what you need to know so you can get started trading forex.

 

Any form of currency trading will require a computer with a decent broadband connection as you will be streaming a lot of data. Access to the Forex market is usually provided by brokers through their own online trading platform or downloadable software.

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Many online brokers will also offer you the opportunity to open a virtual account for at least a couple of weeks before you start trading with real money. This is a great way of familiarising yourself with the foreign exchange market without having to incur the losses you may encounter through your own inexperience with a 'live' account.

Knowledge is key when trading foreign currencies and you should take the opportunity afforded by your virtual account to study how different pairs of currencies behave over a period of time and how they behave in relation to each other. While you are still learning the intricacies of the market, it might also be a good idea to stick with just one currency pair and then expand as your confidence grows.

Staying in touch with what is happening in the world through the regular news agencies is always a good idea as knowledge of what might cause a currency to rise or fall (like government debt, economic growth or inflation rises) is always useful. Things like a basic knowledge of commodity markets can also be of value as fluctuations in the price of commodities like gold or oil can also be a factor in affecting currency.

Many Forex brokers offer access to live news feeds to all account holders and this is something to look for when you're choosing a broker and an account. These news feeds are well worth taking advantage of as the information they include is likely to be both relevant to, and influential on the movement of currency in the Forex market and therefore your buy and sell decisions.

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