Forex Trading Guide - Forex Capital Markets 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 Capital Markets News

forex capital markets

The bosses of America's top three automotive firms - General Motors (GM), Ford and Chrysler - have called on the government to throw them a $25bn lifeline. We explain why the trio have called for the bail-out. But why should three giants of industry ...

Q&A: US carmakers bailout - BBC Business

Nov 20 - Forex Trading Signals Update: Volatility Has Dropped, Look to Range Trading Strategies Nov 17 - Forex Trading Signals Update: Momentum Strategies Outperform, But Range Maintains Upper Hand Nov 13 - Forex Trading Signals Update: Market ...

Forex Trading Signals Update: Volatility Has Dropped, Look to Range ... - DailyFx

NEW YORK, Nov 20 (Reuters) - Citigroup Inc lost more than one-quarter of its market value on growing worries over whether it has enough capital to withstand billions of dollars of potential losses and despite new support from its largest individual ...

WRAPUP 6-Citigroup slides; eyes options including merger - FXStreet.com

Nov 21 (Reuters) - The Bank of Japan is expected to keep interest rates unchanged at a two-day policy board meeting that ends on Friday after its first rate cut in seven years last month. The BOJ cut its key policy rate to 0.30 percent from 0.50 ...

FACTBOX-Japan policymakers' recent comments on economy - FXStreet.com

Dollar gains vs yen, U.S. stocks steady so far * Risk aversion, stock market still dominant themes * ECB's Trichet to speak later in the day * U.S. capital inflows surge to near 3-year highs (Recasts, adds comment, updates prices, changes byline ...

FOREX-Dollar rises vs yen, US stocks dictate direction - Reuters

TOKYO, Nov 21 (Reuters) - The yen slipped from three-week highs against the dollar and euro on Friday as short-term speculators booked profits, but it retained its overall strength with fears of a deep global recession rippling through markets. Asian ...

Yen slips but global recession fears lend support - Guardian Unlimited

Mumbai, Nov 18: The Indian rupee headed towards the 50-mark as it fell by 37 paise to 49.71/72 against the greenback on Tuesday morning in sync with bearish equity markets due to sustained capital outflows. Traders, however, anticipated intervention ...

Rupee falls by 37 ps, heads towards 50-mark - Zee News

MUMBAI: The Indian rupee lost 33 paise against the US currency to end at 49.34/35 on the back of heavy dollar buying by banks and oil refiners amid sustained capital outflows due to sluggish equity markets. In the Interbank Foreign Exchange (Forex ...

Rupee down 33 paise against dollar - Times of India

NEW YORK (Reuters) - The U.S. dollar slipped versus the yen Wednesday, as worries grew about the ailing U.S. auto industry and a record slide in U.S. consumer prices fanned fears of a deeper recession. The euro, meanwhile, weakened against the dollar ...

FOREX-US dollar slips against yen, up versus euro - Forbes

The Indian rupee on Thursday depreciated by another 38 paise against US$ in early trade on increased capital outflows and strong demand for the US currency from importers amid weakening equity markets. At the Interbank Foreign Exchange (forex) market ...