Psychology

Is psychology of trading a big problem for all traders? This question has been all over the industry.

It is said that the reason that most traders lose is because they are not psychologically prepared to trade, that is they are not prepared to accept financial risk for something of which they have no control over the outcome. Trading psychology is the reason why there are many winning
systems but yet so many traders still lose money.

Without an understanding of trading psychology, there will be virtually no chance to overcome the fear, confusion, and despair that can be inherent in trading. Ultimately, after a series of consecutive losses, method becomes replaced with a feeling that it is impossible to do anything right.

Learn why many traders fail and how you can succeed in Forex trading by making your trading decisions without the influence of your unrelated emotions by watching this video in youtube.

http://www.youtube.com/watch?v=EUxbOaacipA






Forex Trading Education

-Disadvantages of trading-

In my previous post, we tackle about the advantages and the good side that they will get from trading forex .

This time, we will going to discuss what really are the disadvantages of this whole thing called Forex.

Below are the things that a trader should have to consider:

Leverage -- With huge leverage available to forex traders the danger is that positions which carry too much risk for the account size can be taken on, leading to margin calls. Effective money management rules must be adhered to.

24 Hours Market -- Although it is convenient for the trader to trade whenever it is suitable to him, it can be a rather tough job too. This is because, at times, it is not possible for an individual trader to keep track of the Forex market, 24 hours a day.

This is where a broker comes into the picture. Retail or individual investors should try taking help from a professional broker rather than doing all the dealings himself straight with the huge market.

Brokers -- Retail traders must use a broker rather than dealing directly in the interbank market. The broker will be the counterparty in all transactions and is, effectively, making the market. They can, therefore, widen spreads or even refuse to trade during volatile trading conditions. To avoid dealing with brokers an alternative to forex is to use futures. See online futures trading for more details.

Spreads -- As the retail trader must use a broker to trade, they cannot deal at the interbank rates. A broker will generally quote a fixed spread of 3-20 pips depending on the currency pair. The underlying interbank rate might be as little as 1 pip.

Forex is a very large market but for most retail traders dealing with brokers the odds are shifted against them. Online futures trading provides a much more level playing field for most traders who want to take part in forex trading.

WHY TRADE FOREX - - - reasons to trade

Forex attracts so much investor interest due to the many advantages not found in other financial markets, such as:

• High Leverage Up to 200:1

With more buying power, you can increase your total return on investment with less cash outlay. Of course, increasing leverage increases risk. With $1,000 cash in a margin account that allows 200:1 leverage (.5%), you can trade up to $200,000 in notional value.

• 24 Hour Trading

Forex is a true 24-hour market, open continuously from 5:00pm ET on Sunday to 5:00 pm on Friday. During this time, you can enter or exit the market whenever you like. It's a continuous electronic currency exchange. This is great because you can trade whenever you have spare time.

• No Commissions

No clearing fees, no exchange fees, no government fees, no brokerage fees. Brokers are compensated for their services through something called the bid-ask spread.

• No middlemen

Spot currency trading eliminates the middlemen, and allows you to trade directly with the market responsible for the pricing on a particular currency pair.

• Superior Liquidity

The forex market is so liquid that there are always buyers and sellers to trade with. The liquidity of this market, especially that of the major currencies, helps ensure price stability and narrow spreads. The liquidity comes mainly from banks that provide liquidity to investors, companies, institutions and other currency market players.

• Market Transparency

Market transparency is highly desired in any trading environment. The greater the market transparency, the more efficient the market becomes. This is an advantage in any business or trading environment. It means you can manage risk and execute orders within seconds. It's highly efficient and allows you to avoid unexpected 'surprises'.

Online Forex Trading

FOREX GLOSSARY

The most commonly used terminology in forex trading :

Appreciation - an increase in the value of currency.

Ask - the price at which the dealer will sell the base currency in exchange for the quote currency.

Base Currency - the currency that the investor buys or sells (i.e. EUR in EURUSD ).

Bear - someone who believes prices are heading down.

Bid - the price at which an investor can place an order to buy a currency pair; the quoted price where an investor can sell a currency pair. This is also known as the 'bid price' and 'bid rate'.

Bid/Ask - the point difference between the bid and offer (ask) price.

Bull - someone who is optimistic about the market. A bull market is characterized by enthusiastic and sustained buying.

Cross rate - an exchange rate that is calculated from two other exchange rates.

Depreciation - a fall in the value of a currency.

Exchange Rate - the ratio of one currency valued against another currency.

Long - to buy.

Long position - a position that increases its value if market prices increase.

Liquidity - refers to the relationship between transaction size and price movements.

Margin - the deposit required when entering into a position as well as to hold an open position. Your margin status can be monitored in the Account Summary.

Open position - any position (long or short) that is subject to market fluctuations and has not been closed out by a corresponding opposite transaction.

Pip - is the smallest unit by which a Forex cross price quote changes.

Risk - a chance in which an effect will occur. Mainly used as a negative effect.

Quote Currency - the second currency in a currency pair.

Short - to sell.

Short position - a position that benefits from a decline in market prices.

Spot Market - market where people buy and sell actual financial instruments (currencies) for two-day delivery.

Spread - the difference between the bid and the ask rate.

Swap - a transaction which moves the maturity date of an open position to a future date.

Tick - the smallest possible change in a price, either up or down.

Transaction date - the date on which a trade occurs.

Volatility - statistical measure of the change in price of a financial currency pair over a given time period.


Trade Forex

Why Traders Lose?

The very main question of all traders... why do most traders consistently lose?

Many people think trading is the simplest way of making money in forex market. Far from it, I believe it is the easiest way of losing money.

Below are the few of undisciplined trading which lead to losses.

1. Lack of discipline is a major shortcoming

Lack of discipline includes several lesser items; i.e., impatience, need for action, etc. Also, many traders are unable to take a loss and do it quickly.

2. Psychology

Psychology plays a huge part in trading and most traders are not mentally prepared to trade. When money is on the line, fear, greed, and other emotions make trading very hard. Make sure you understand the emotional aspects of trading and be prepared to deal with them before you put your money on the line.

3. Many traders overtrade their account

Future traders tend to have no discipline, no plan, and no patience. They overtrade and can't wait for the right opportunity. Instead, they seem compelled to trade every rumor.

4. Future traders tend to do inadequate research

Traders don't clearly identify and then adhere to risk parameters. Many speculators use "conventional wisdom" which is either "local," or "old news" to the market. They take small profits, not riding gains as they should, and tend to stay with losing positions. Most traders do not spend enough time and effort analyzing the market, and/or analyzing their own emotional make-up.

Currency Trading Course

Overview on Forex Trading

WHAT DO YOU MEAN BY FOREX?

Foreign Exchange, forex or just FX are all terms used to describe the trading of the world's many currencies. The forex market is the largest financial market in the world, with trades amounting to more than USD 1.5 trillion every day. The Forex market is considered an OTC (Over-the-Counter), due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period.

FX trading is the simultaneous buying of one currency and selling of another one. Currencies are always quoted in pairs, such as USD/GBP where in the USD is the base currency and GBP is the quote currency. The base currency is the basis for buying and selling.

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.

The most important forex market is the spot market as it has the largest volume. The market is called the spot market because trades are settled immediately, or “on the spot”.

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