Helpful Forex Pointers for Beginners

The Forex market is the biggest financial market worldwide with major trading locations distributed across several different time zones. Consequently, it is the only financial market that is open for twenty-four hours per day with noteworthy liquidity throughout the day. This makes the currency market suitable for traders who don't wish to drop their day jobs. Even though becoming a Forex trader can be both thrilling and satisfying, the risk of losing considerable amount of cash is very real. To help you have more good trading days than bad ones, here are some things to keep in mind.

Choose a reputable broker

In comparison to other markets, the foreign exchange industry has significantly less supervision. This means that the chance of being ripped off is high. You must only sign up for an account with a broker who is currently registered with the regulatory body of your country. In the US, brokerage firms need to be a member of the National Futures Association and recognized by the US Commodity Futures 

Trading Commission.

In addition, you need to find out what the broker's services and products are, the amount of leverage available, details about commissions and spreads, and account funding and withdrawal procedures. Select a broker with a quick and professional customer service staff.

Create a trading plan

Trading without proper planning can be disastrous to your trading account. Sans a plan, it is likely that you will end up trading using your emotions. When you have a trading strategy, test it to see if it really works in a consistent manner and if it provides you an advantage.

Have a record of your trading activities

Maintaining a record of your trades will give valuable insights as to which trading patterns you use provide constant income. This may also alarm you of strategies that aren't as worthwhile so you can make the necessary changes.

Learn how to use stop loss orders

One method to avert considerable losses when trading in Forex is making use of stop loss orders. Placing a stop loss order lets you figure out your allowable loss per trade ahead of time. This tool is also beneficial when you are unable to oversee your trades for long periods.

Use leverage with utmost care

Large amounts of leverage can be accessed by Forex traders. Used properly, leverage can help you earn more. Then again, it can also amplify your losses if you are not careful. Even though using leverage will allow you to open a much larger position, novices should go for smaller positions initially to minimize risks.

Learning various effective strategies and building your own trading pattern can help you increase your profit potential and avoid losing money unnecessarily. If your are a beginner and want information on forex trading, please visit here.

The Three Most Common Mistakes Forex Trading Newbies Make

Join one day the stressful world of the forex market and you will soon understand that this is an information jungle in which it is very difficult to navigate in. Under a constant pressure to increase short-term returns, many traders, especially beginners make mistakes that leave them most often at the edge. In this article we will discuss the three most common mistakes a beginner should try to avoid. To survive long term, arm yourself with an adequate knowledge of the forex market to avoid wasting valuable time and finally seeing all your savings go up in smoke.

I suggest you go through three errors that seem to be most common when someone starts in forex trading.

First Mistake: Responding Too Soon on Financial News

You're excited because you spotted today an economic event that will influence the market and create high volatility. Either you have your own idea on what will happen, so you stand before the release of the figures, or you know nothing but that doesn't keep you from remaining glued to the screen, ready to draw conclusions the slightest fluctuation.

In the Forex market, economic news often causes whiplashes. Significant fluctuations can occur due to twists, undervalued reports, or simply an inaccurate perception of the situation. A lack of liquidity and management plan febrile capital leaves many traders with significant losses once it appears that the news should have been dealt with in a different way.

The slightly smarter traders take a step back and wait a clearer picture of the market situation. They remain calm, follow their management plan, responding rationally. Rather than taking your pulse, first allow a stable trend emerge. Before the first movement, make sure you have a solid business plan. This will allow you to minimize the risks by controlling and reducing the exposure of your capital in strong inversion.

Second Mistake: The Average Down

Almost all traders get to know one day or another the average down. This is a very sensitive technique that can be used effectively by experienced traders, but the beginner can quickly get into trouble by applying it.

To put it simply imagine the following situation:

- You buy EUR / USD at price X because you think the price will go up soon. - Gold continues to drop but you are convinced that it will soon go up. - Suddenly you still buy EUR / USD at a lower price to your starting X price, just to make more profit when prices will begin to rise. - By doing this you can further reduce your overall average purchase.

Unfortunately the market trend that you had anticipated did not occur, so you have to undergo a loss that could have been avoided very easily.

This kind of scenario is very common and many traders sooner or later are faced with this situation. However, averaging down, is valuable time lost and unnecessary resources put on a losing trade.

Firstly, your time would be better placed in positions with greater financial viability and prospects for long-term gain.

Second, it is difficult to replace the "invested" capital in what is essentially a sinking boat. For any capital spend, the adequate profit needs to be made in order to achieve a healthy balance. By injecting money to save a losing position, you cripple your overall capital growth.

While some may argue that many average downs were successful for most traders the final result often ended in a loss. Trends last longer than traders' liquidity and particularly traders whose horizon is very short. So the first rule is to avoid wasting your resources via average down.

Third Mistake: Risking large sums of money

Investing all your capital on one position does not mean that you will increase your chances of becoming profitable. Almost all traders who risked large sums on specific positions ended up losing. If I had to summarize this form of trading activity I would say it is more or less bad risk management. Hotheads do not last long in the forex market, or in any other investing forms of business.

A general rule shared by many traders, says that no more than 1% of your capital must be invested in a single position. This percent is to be understood in the context of the difference between the input value (position) and the output level.

Here's a management rule that you can follow in order to avoid excessive exposure of your funds:

- For a day's trading risk a maximum of 1% of your average daily profit in a month

This will help you avoid putting your capital at severe risk with any of your transactions. Whatever losses may incur, they can easily be regained in a period of about a month, leaving you enough time to make up for the lost income.

To conclude we need to stress the fact that all these mistake occur in the absence of risk management. To avoid falling into these traps, make sure you always have an alternative and realistic plan that takes into account long-term growth. In the case of the average down, have an exit strategy and know when to cut your losses. Remember, trading is all about management and not some random betting card game.

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The Top 3 Myths About Forex Scalping

There are a host of common, erroneous ideas about forex scalping that are available to the trader who simply has not done the proper research. Most of these ideas are perpetuated by marketers who attempt to steer a trader to a trading process that may not suit his personality and, more importantly, his risk tolerance, and that may also draw temptations of large profits with minimal capital outlay.
Emotions often override sound judgment when a trader is looking for a way to generate large profits instantly. When reviewing various forex trading processes, a trader must overcome his preconceived notions and approach the selection process with a spirit of detachment.
Here are three of the most common myths about trading the forex with a scalping technique:

1. Forex scalping means that you are only able to take a small profit.
Not true. Market conditions are what determines the size of the profit one can take. The solid forex scalper understands this. A forex scalper can take a 100-pip profit when trading a fundamental announcement or a 10-pip profit when trading a currency pair with small average-size moves.
A scalper is simply a trader who has a predetermined profit target based on the anticipated trading conditions. A scalp trade has zero limitations regarding profit taking. The market conditions create the limitations.

2. Forex scalping is riskier than trend following.
First the trader needs to understand that the amount of available trading capital determines the amount of risk you can take. The smaller the trading account, the less risk one can take.
The forex trader with limited capital needs to trade with a very tight stop.
When comparing scalping to trend following, trend following requires the trader to trade with a very large stop; scalping techniques allow one to trade with a very small stop. Trading with a tight stop means the trader is trading with less risk. You simply cannot trade a trend following technique with a tight stop.

3. Forex scalping requires you to be glued to your computer for hours at a time.
If you are using a solid scalping process, you should be in a trade for less than 30 minutes in most cases. Scalping is actually less time intensive. Trend following requires the trader to be in a trade for extended periods of time.

Because the forex is the world's most volatile market, the trend follower is always checking on his trade. The trend follower never wants to be far away from access to the market. A common practice for a trend follower is to get up in the middle of the night to check on his trade.
The scalp trader can achieve the exact same profit in a fraction of the time simply by trading multiple lots. Get in, take profit, get out. Turn off your computer and go enjoy yourself.
As is often the case, myths and misconceptions are created from erroneous ideas.
Typically when a trader is tempted by the idea of fast and easy profits, these erroneous ideas become the driving force

.
Forex trading is an excellent way to generate additional income. Forex trading is not a unique endeavor that does not require proper training to realize consistent positive results. The bottom line is, getting properly trained is mandatory if one wants to realize success.
To learn more visit www.theforextradinginstitute.com.

The Best Time To Trade Forex

Traders must remember, just as there is a time to sleep and a time to work, when trading there are specific times when you should trade your favorite currency pairs.
The forex market is open 24h a day, Monday to Friday, and is particularly more active during the opening and closing of banks worldwide.
Although this is an advantage, it does not mean that the same conditions and opportunities are offered to traders during all 24 hours of the day. It is clear that the volume and volatility of the foreign exchange market will be very different when let's say from the major markets, only Japan and Australia are open at a particular time.
To find the most active and profitable period is one of the main problems traders are faced with. Let's look more closely at this issue:

The Period 12:00 - 15:00 GMT

It is generally agreed that the period between 12 hours and 15 GMT are the most active times for investors who wish to take advantage of greater market volatility. New York markets open at 12 GMT, while London markets close at 15 hours and between these two times the greatest liquidity is witnessed.
While this is true, it is important to know that the opening and closing of markets is much more smooth and is not strictly not limited to those three hours. London and New York are two very important financial centers. However, banks open and close throughout the United States and Europe also during the day.

Choosing a Time Period Depending on Your Trading Profile

The best time for a trader is also related to his trading style and choice of strategy. The 12/15h period mentioned above, is courted by the "day traders", speculators and those who use short-term methods to take advantage of short-term fluctuations and various day events (economic events).
'Swing' traders however prefer a low volatility environment, so that the most appropriate timeframe for these type of traders is after the closing of the London market, about 15 hours. Furthermore, if you are strategy is based on weekly or monthly trends, the choice of trading period will be of little importance to you.
This article was not intended to be a comprehensive guide to all matters relating to the choice of the ideal trading time, but with a better understanding, it may be possible to extend your knowledge in this subject and better choose among the numerous different strategies, available for traders. Having said that the points mentioned here can give you an idea of the issues and the importance of an appropriate choice of trading time.
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