Forex Trading Guide - Forex Analysis Section

Welcome to Forex Trading Guide

Article

Your FOREX Trading Philosophy
Ron King

"Easy money" is the allure that captivates many beginning FOREX traders. FOREX websites offer "risk-free" trading, "high returns", "low investment." These claims have a grain of truth in them, but the reality of FOREX is a bit more complex.

Mistakes Of The Beginning Trader

There are 2 common mistakes that many beginner traders make: trading without a strategy and letting emotions rule their decisions. After opening a FOREX account it may be tempting to dive right in and start trading. Watching the movements of EUR/USD for example, you may feel that you are letting an opportunity pass you by if you don't enter the market immediately. You buy and watch the market move against you. You panic and sell, only to see the market recover.

This kind of undisciplined approach to FOREX is guaranteed to lose money. FOREX traders must have a rational trading strategy and not make trading decisions in the heat of the moment.

Understanding Market Movements

To make rational trading decisions, the FOREX trader must be well educated in market movements. He must be able to apply technical studies to charts and plot out entry and exit points. He must take advantage of the various types of orders to minimize his risk and maximize his profit.

The first step in becoming a successful FOREX trader is to understand the market and the forces behind it. Who trades FOREX and why? This will allow you to identify successful trading strategies and use them.

Accountability

There are 5 major groups of investors who participate in FOREX: governments, banks, corporations, investment funds, and traders. Each group has its own objectives, but 1 thing all groups except traders have in common is external control. Every organization has rules and guidelines for trading currencies and can be held accountable for their trading decisions. Individual traders, on the other hand, are accountable only to themselves.

Large organizations and educated traders approach the FOREX with strategies, and if you hope to succeed as a FOREX trader you must follow suit.

Money Management

Money management is an integral part of any trading strategy. Besides knowing which currencies to trade and how to recognize entry and exit signals, the successful trader has to manage his resources and integrate money management into his trading plan. There are various strategies for money management. Many rely on the calculation of core equity -- your starting balance minus the money used in open positions.

Core Equity And Limited Risk

When entering a position try to limit your risk to 1% to 3% of each trade. This means that if you are trading a standard FOREX lot of $100,000 you should limit your risk to $1,000 to $3,000. You do this with a stop loss order 100 pips (1 pip = $10) above or below your entry position.

As your core equity rises or falls, adjust the dollar amount of your risk. With a starting balance of $10,000 and 1 open position, your core equity is $9000. If you wish to add a second open position, your core equity would fall to $8000 and you should limit your risk to $900. Risk in a third position should be limited to $800.

Greater Profit, Greater Risk

You should also raise your risk level as your core equity rises. After $5,000 profit, your core equity is now $15,000. You could raise your risk to $1,500 per transaction. Alternatively, you could risk more from the profit than from the original starting balance. Some traders may risk up to 5% against their realized profits ($5,000 on a $100,000 lot) for greater profit potential.

These are the kinds of strategic tactics that allow a beginner to get a foothold on profitable trading in FOREX.

About the Author

Visit FOREX Trading to learn more. Ron King is a full-time researcher, writer, and web developer. Copyright 2005 Ron King. This article may be reprinted if the resource box is left intact.

Forex Analysis News

forex analysis

Jan. 7 (Bloomberg) -- Russian natural gas exports through Ukraine to Europe halted for the first time in three years, threatening to create shortages as freezing weather spurred demand for power. The two sides blamed each other for the disruption ...

Russian Gas Shipments to Europe Through Ukraine Are Halted - Bloomberg

Rate is two-way and firmer due to cross-spreaders liquidating EURO-Sterling; repatriation also lending to the firm tone. Rate is likely to have a knee-jerk reaction to more rate cuts due later in the week but with a new 2008 low late in the month ...

GBP USD Technical Forex Analysis for Forex Traders - Top News India

The USD is better against most major pairs this morning as traders unwound EURO-Sterling and Yen pairs giving the Greenback a boost by default some desks report. Stops were driving trade as the USD crossed several important S/R levels overnight; most ...

USD Technical Forex Analysis for Daily Traders - Top News India

Movements in Euro crosses continue to drive the currency markets. While dollar retreats mildly after Fed warned of 'distinct possibility of a prolonged contraction' in the US economy, overall outlook of the greenback is mixed. Note that dollar's ...

Daily Forex Technical Report − Dollar Mixed as Markets Driven by ... - FXStreet.com

Jamie Saettele was key speaker at the FXstreet.com International Traders Conference in October 2008 - Barcelona. Jamie Saettele is the Senior Currency Strategist at Forex Capital Markets LLC in New York and author of Sentiment in the Forex Market ...

Jamie Saettele - FXStreet.com

IntegrityFX, LLC (IntegrityFX) announced today that it would begin offering LIVE Forex training in Dubai beginning in May 2009. This 4‐day, hands‐on Basics and Intermediate combo training course will give a person everything they need ...

IntegrityFX Announces LIVE Forex Training for the Middle East - MENAFN

Forex Pros have launched the much awaited real-time currency quotes section of the website. The free Forex portal is offering real-time quotes on all the world currencies to its readers. It’s one of very few websites to offer a product of this ...

Forex Pros launch the new quotes section of the website. - WebWire

Every year, FOREXYARD analysts come together and discuss the most intriguing events and currencies that made this year special for forex traders. In 2008, it was a tight race between the EUR/USD and the EUR/GBP as both pairs made significant price ...

Forex Analysts Pick the Top Currency Pair of 2008 - PR Inside

I wrote yesterday that “the decline from the July 2008 high (1.6040) can be counted as a 5 wave drop (wave 5 is truncated). 5 waves down at this degree of trend indicate that the long term trend has changed and that a multi-year bear is underway ...

Euro Expected to Form a Low Soon; British Pound Breakout Trade - DailyFx

Vanguard was reliably informed by banks’ foreign exchange dealers and bureau de change (BDCs) operators that contrary to expectations the apex bank did not sold foreign exchange yesterday. Vanguard investigation revealed that instead of selling to ...