Wouldn't you love to be a business owner without ever having to show up at work? Imagine if you could sit back, watch your company grow, and collect the dividend checks as the money rolls in! This situation might sound like a pipe dream, but it's closer to reality than you might think. 

As you've probably guessed, we're talking about owning stocks. This fabulous category of financial instruments is, without a doubt, one of the greatest tools ever invented for building wealth. Stocks are a part, if not the cornerstone, of nearly any investment portfolio. When you start on your road to financial freedom, you need to have a solid understanding of stocks and how they trade on the stock market. 

Over the last few decades, the average person's interest in the stock market has grown exponentially. What was once a toy of the rich has now turned into the vehicle of choice for growing wealth. This demand coupled with advances in trading technology has opened up the markets so that nowadays nearly anybody can own stocks. 

Despite their popularity, however, most people don't fully understand stocks. Much is learned from conversations around the water cooler with others who also don't know what they're talking about. Chances are you've already heard people say things like, "Bob's cousin made a killing in XYZ company, and now he's got another hot tip..." or "Watch out with stocks--you can lose your shirt in a matter of days!" So much of this misinformation is based on a get-rich-quick mentality, which was especially prevalent during the amazing  market in the late '90s. People thought that stocks were the magic answer to instant wealth with no risk. The ensuing dotcom crash proved that this is not the case. Stocks can (and do) create massive amounts of wealth, but they aren't without risks. The only solution to this is education. The key to protecting yourself in the stock market is to understand where you are putting your money.

At 2:15 p.m. EST Sunday, trading begins as markets open in Sydney and Singapore. At 7 p.m. EST the Tokyo market opens, followed by London at 2 a.m. EST.  And finally, New York opens at 8 a.m. EST and closes at 5 p.m. EST.  So, before New York trading closes the Sydney and Singapore markets are back open – it’s a 24 hour seamless market!  As a trader, this allows you to react to favorable or unfavorable news by trading immediately. If important data comes in from England or Japan while the U.S. futures market is closed, the next day’s opening could be a wild ride. (Overnight markets in futures currency contracts exist, but they are thinly traded, not very liquid, and are difficult for the average investor to access).

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The foreign exchange markets as we see today have evolved through the gold exchange period, followed by the Bretton Woods Agreement, to its current setting. Although by 1973, the major industrialized nations' currencies were floated more freely across nations, coinciding with currency prices being quoted daily, it was only due to the advent of computers and technology in the 1980s that the market reaches for cross-border forex trading gained momentum extending through Asian, European and American time zones. Gradually over the years foreign exchange transactions increased intensively to all the facets we see today in forex markets worldwide.
Today advances in computer technology have permitted the instantaneous transmission and receipt of currency prices across the world. These technological advances in computer networks are the primary reason behind the growth of forex trading amongst ordinary investors.

It is impossible to quantify the exact amount of money traded in forex markets worldwide since trading is not restricted to one single exchange or location. But several estimates put it between 1-3 trillion US Dollars a day. This is certainly lesser than the volume of stocks traded in all the major stock exchanges around the world and also far less than the gold and forex reserves of the developed world. It also far exceeds the daily volume of foreign trade transactions between different countries. Therefore in terms of size, number of participants and liquidity, forex markets are huge and offer the best opportunities to the investor.
This superior liquidity in forex markets allows traders to open and close positions in a matter of a few seconds or keep that position going on for several years or perhaps indefinitely which is not possible while trading stocks.
Using networked computers, forex trading offers you a world wide market, instantaneously available to you on 24/5 basis from 00:00 GMT on Monday to 10.30 GMT on Friday covering all time zones. When the sun sets in one trading center, it is dawn and the beginning of a trading day somewhere else in the world. On the contrary, stock market in any major country opens at 10 am local time and remains operative till 4p.m local time restricting the possibility of indulging in round the clock trading.
Forex trading is done strictly on your calling. Since forex trading goes on 24 hours a day there is no need to have a fixed schedule, and even if you set one, it’s purely your discretion based on your own trading strategy and of course to your liking.

The Forex market offers many advantages, over stock market trading and other forms of investment opportunity. In forex markets financial reasons compel the execution of a forex deal and not commercial considerations. Also as compared to stock markets, exchange markets do not operate out of any specific building.
In forex it is not obligatory to buy a currency to sell it later but it is enough to open buy/sell position for any currency without actually possessing it, unlike stock trading where you are committed to have the full face value of the stock before you can trade for that amount of stock.
Although Forex markets can be volatile at times, it offers an advantage over a declining stock market, in that with proper knowledge of forex markets you could still key into profitable trades. On the contrary, people tend to avoid stock markets when it is in a downward spiral as no one really knows when it would start on an upward trend. In other words forex trades can be made even if the markets were rising or falling.
The profits you could possibly make in stock markets pales into insignificance in comparison to the windfall profits you could be making in forex markets. For example proper leverage alone can make you huge sums in a very short time and that too by making fewer trades.
The limited number of currencies traded in forex markets makes it easier to monitor market trends that relate to those currencies, whereas in the stock market a lot of factors could affect individual stocks, not to mention the innumerable number of stocks (there are several thousand stocks registered in most stock exchanges) that would have to be monitored at any given point in time.
Although it has its own trends and cycles punctuated by high volatility, forex markets don’t fit into the traditional Bull/ Bear market cycle typical of stock trading. That is because currency rates always throw in new intriguing ways of making profit. For example, interest rates do not adversely affect currency markets as it would stock market indices and stocks in general. When interest rates go up, that country’s currency gets strengthened (giving profitable opportunities to the discerning trader) whereas it would depress stock markets in that country and probably cause losses to a stock trader having several open positions.

Exchange rate is a market-determined phenomenon. In other words, the exchange rate depends on supply and demand conditions in the market for any particular currency. A currency exchange rate is derived from the ‘spot transactions’ (means foreign exchange trades that are initiated and settled within two business days with the respective exchange) of authorized dealers with the public.
This exchange rate that is reported in the price tickers that you see on your trading screen reflect the cumulative transactions undertaken by the major market makers (namely the institutions) with large value transactions reflecting more on the currency prices than a small value transaction. That’s probably one of the reasons why currency prices keep changing on your screen reflecting the rate at which the major market maker’s i.e. the institutions trade.

The biggest foreign exchange markets are in Tokyo, London and New York and they are networked with each other using modern technology creating a seamless interface that transacts currency prices and deals almost instantaneously across the world. The institutional framework that drives the forex markets is perhaps the key to the market itself and comprises the following:

• Commercial and Central banks in different countries
• Exchange markets and firms that conduct foreign exchange deals
• Investment funds
• Brokerages and individuals

By transacting with different clients in exchange conversions, commercial banks accumulate a great chunk of forex market needs and are often shared with other banks in interbank dealings. These banks (Union Bank of Switzerland, Swiss Bank Corporation, Deutesche Bank, and Citibank) with daily volume of transactions in billions of dollars greatly influence forex markets. Central Banks as for example the US Federal Reserve influence forex markets by regulating the investment climate and making market interventions and so on.

To understand how forex markets work, one has to understand what exactly constitutes the forex market, the institutional framework that drives this market, and importantly the process of currency price determination.
Foreign exchange market is no different from any other market where buyers and sellers meet to buy or sell a commodity for a specific price. The only difference in forex markets being, it is the “currency” that constitutes the commodity, and the price at which it is exchanged conforms to the foreign exchange rate for that currency at that point in time.
Export earnings of corporations, overseas remittances, and investment flows (direct or borrowed capital) constitute the main sources of foreign exchange. Individuals and entities who receive foreign currency are the primary market suppliers and they may sell foreign currency to licensed exchange dealers who in turn may pass it to other dealers in need of foreign exchange. The Central banks may sell foreign reserves to make market adjustments, and on the other side companies would need to buy this foreign exchange to make overseas payments. This creates a market for foreign exchange wherein a person may sell a currency today and probably emerge as a buyer the very next day.

Forex is a loose acronym for Foreign Exchange Market that originated in the 1970s around the time free currency exchange rates were introduced in the world. In Forex markets, market participants determine the price of one currency against the other purely from market forces stemming from supply and demand. There are no external controls in a Forex market and is perhaps the best example of a perfect market with free competition. Forex is also the biggest liquid financial market in the world, with market volumes ranging in 1-3 trillion US Dollars a day.
The US Dollar, Euro, Japanese Yen, British Pound and Swiss Francs are the major currencies traded in Forex markets.

Best system will fail in long-term if it is without proper money management. On the contrary, bad system can turn profitable if used with a good money management. Currency trading always go through the cyclical ups and downs, where winning and losing are just part of the game. However, with the right money management, you might be able to hold onto your winnings, while minimizing losses during bad times.
Have you ever wondered why you made so much profit so easily only to lose all of it plus your principal in a flash? Then you're trading without a proper money management. You've got to be disciplined, or your winnings are guaranteed to lose sooner or later. Learn these money management techniques today!

Psychologist Van K. Tharp is an internationally acclaimed trading coach and author, focusing on helping traders who want to understand the psychology behind position sizing, systems development and general trader psyche. He is the only trader to ever write book that covers positions trading as a risky proposition in detail and he is also the only coach to be featured in Jack Schwager’s ‘Market Wizards: Interviews With Great Traders’.

Biography

There is very little biographical information on Tharp who has maintained privacy in his life even through his popularity as a trading coach. He received his doctorate in psychology in 1975 from the University of Oklahoma Health Science Center and he also holds numerous certifications including Master Practitioner of Neuro Linguistic Programming (NLP), Modeler of NLP, Assistant Trainer of NLP and Master Time Line Therapist. He uses these certificates and his training as a psychologist in his training and coaching methods. There is no information available on whether or not Tharp has done any trading of his own.

Claim to Fame

Tharp is unique in his profession and is considered the internationally recognized leader of trading coaching. He has been helping new traders since 1982 in becoming the best they can, sharing his unique strategies with his students. Many of the successful traders of today have been students of Tharp’s. He is also the president and founder of the Van Tharp Institute which offers traders training in system development and trading psychology.

Why was he successful?

With over 5,000 profiles of successful trading in his arsenal that include traders and well known transactions, Van K. Tharp has dedicated his career to researching and studying the industry. With these case studies he has been able to develop a technique for successful training and investing that he teaches through his Van Tharp Institute and lectures.
The technique Tharp has developed includes a five volume home study course called ‘Peak Performance’ which covers everything he researched and studied over a ten year period. His training sessions also include ‘The Investment Psychology Inventory Profile’ that aids in understanding the strengths and weaknesses in a trade or investment, a guide to position sizing, a course on developing a trading system and many other publications all designed to help anyone new to the industry.
Van K. Tharp’s expertise is in finance as well as psychology and his study has helped him determine what has made investors of the past successful.

Publications

Van K. Tharp has published numerous articles in magazines including:
* Barron’s Market Week
* Forbes
* Trader’s Journal
* Technical Analysis of Stocks and Commodities
* Investor’s Business Daily
* Futures and Options World.
His books on investment and trading have been published across the world in numerous languages including German. They include:
* Trade Your Way To Financial Freedom
* Safe Strategies for Financial Freedom
* Financial Freedom Through Electronic Day Trading
Tharp’s other publications include his home study courses on becoming a financial trader and investor as well as two newsletters that are released on a regular basis through subscription.

There are very few people in the stock trading and investment industry that are able to make money with little to no formal financial education. Jesse Livermore was one of those few. Before his death he had gained and lost millions of dollars, speculating and trading for more than 50 years. He also developed some financial ideas and principles that are still used by investors.

Biography

Born in 1877 in South Acton, Massachusetts, Jesse Livermore came from a farming family and never had any formal financial education. He left home with the hopes of escaping the faming life and started his long career as an investor and trader with Paine Webber, a well known and respected brokerage firms. His first job was posting stock quotes.
At the age of fifteen, Livermore began to trade stocks for himself, gaining over $1,000 in his trades. This was a lot of money during those early years of stock trading. He made a name for himself betting against the ‘bucket shops’. These were trading firms that did not make legitimate stock trades, allowing their customers to bet against the current stock price movements. Livermore was so successful that he was eventually banned from the bucket shops in the city of Boston, forcing him to move to New York when he was twenty.
Livermore continued his unusual trading techniques on Wall Street, his speculations gaining and losing him money. He became a known name throughout the world and at one time was extremely wealthy. However in 1940 he committed suicide at the age of 63, unable to handle the financial roller coaster he had been on for so many years.

Claim to Fame

Livermore’s technique of buying and selling stocks made him a highly visible person in the industry. Through his career of almost fifty years he gained and lost numerous multimillion dollar fortunes.

Why was he successful?

One of the reasons Livermore found success in the financial market was the fact that he learned not only from other successful traders but also from those that lost money speculating. Even though he was self-made as a trader with no formal education, he still developed principles that are used in the industry today.
Livermore gained his fortunes by applying these principles to all of his speculations. He firmly believed that one has to look at the whole market and not just individual stocks in order to determine where the market is headed. Traders need to have an exit strategy ready and that they should use a buy and hold strategy when there is a bull market and to sell when the market slows down. He felt that studying the fundamentals of a company was important especially when applied to the overall economy and current stock market. Unsuccessful traders didn’t put enough effort into research. Investors need to look at the long term investment in order to retain their capital and insider information needs to be ignored. The successful trader will use reliable sources. Finally, Livermore emphasized that all traders need to embrace change when it came to the way the market evolved.

Publications

Jesse Livermore authored and contributed to the following books on investment and trading:
* "How to Trade in Stocks” by Jesse Livermore (1940)
* "Reminiscences of a Stock Operator" by Edwin Lefevre (1923)
* "Jesse Livermore – Speculator King" by Paul Sarnoff (1985).
* "Trade Like Jesse Livermore" by Richard Smitten(2004).

I think the success to anything does not simply lie on "Failure is okay; just keep doing it till successful." This is wrong. It urges you to blindly risk whatever it takes in hope that success would come at the end. Of course, success will come after a string of failures but at what price you have paid for it? And when? I hope it will come before your life candle runs out. You won't have a clue about the answers because your mantra lies solely on the foundation of hope rather than reality.
Failure is NOT okay. You are constructing a tall building, for instance. When it collapses and kill a bunch of people, it is NOT okay for you to say, "Nah... I'll just buy more cement and build it again. After a few more collapses, one will stand tall." This is not a statement you will hear from a sane person.
Likewise, if you are a doctor performing a life-threatening surgery on this person, it is NOT okay to say, "I'm going to try removing this black-yellow thing out. Here it goes nothing..." And then the person dies, and you say, "Ops! Hehehe another failure. I did it again! But it's okay." This is not from the mouth of a sane doctor.
Well, don't get me wrong. I am not an expert in this success and failure things. At least I know what works for me and what not. Now I am struggling to be successful myself. In finance and business, I think I have done a pretty good job, having gone from a kid waiting for dollars from his parents to a financial-independent adult running a company in another country. In education, I think I have done a pretty good job too, having transformed myself from a kid who "believes everything people say because he doesn't know much" to an adult who "questions things around him and finds out the truth and what not."
My mantra on success is that, to be successful, one has to understand and manage the risk (and reward) very well. There is no excuse, and there is no easy way to cheat your way around it.
For every business venture, you must pen your ways to achieving the objectives. You are selling clothes, for instance. One of your objectives would be to maximize your profits. Ask yourself how you would do it, what tools you will need, whose expertises you will hire, how much money you will need to keep the cash flow healthy, and last but not least how much time you will consume. You absolutely must not try your ideas out blindly because you think it's cool and that failure is acceptable. If you do that, you will fail, period.
For risk management, you should be aware of the obstacles, big and small, that you may face, and then plan out how you would absorb such impacts on your project. You are buying and selling properties or stocks, for instance. One of the prominent risks is that the prices could fall. What if it falls by 20%, what would you do? Would you sell it as soon as possible? Or would you hold on to it until the prices fall by 50% or even more? Or would you need certain data to make decision? You should never wait for problems to arise first to plan out the solutions later, or you could be too late to solve it.
To conclude, there are three outcomes when people do stuff. One, failed. Two, successful. Three, neither failed nor successful. It is common for people to make mistakes and to fail; however, one should try his best to minimize the chance of failure by managing the risk accordingly. If it does fail, allow it to fail gracefully and controllably. In case of doubt, he should all together avoid the risks that do not suit his risk profile. If the opportunity is too risky, just pass it. Only play on what you can afford to lose, 'cause if you screw it up big time, that one big time, you might end up living on the street screaming why heaven did not help.
There are those rich people out there who write books and do seminars, and they spread lies just to pimp money from your pocket. Are you sure that people like Donald Trump tells you his business secrets in a $19.99 book so that you would become a better competitor who would then bring down his billion-dollar empire? Think about it. Well, I hope you find this article helpful one way or another.

For the newbie trader Forex trading often appears as an esoteric subject. With all the psychedelic colors that appear on the trading screens you would easily start wondering if forex trading can indeed be done by ordinary people. That could well be the case when you open out forex charts as an adjunct to your trading screen, especially as it has a lot to do with lines and colors. But as a matter of fact, forex charts are very easy to learn and doesn’t require any special mathematical skills whatsoever.
Let’s take a look at the 3 types of charts that is relevant to forex trading and learn how to read charts. Before we start looking at charts, one has to understand the concepts of fundamental analysis and technical analysis. Both these concepts are used to analyze currency markets and forecast the direction of future currency price movements.

Fundamental Analysis and Technical Analysis

Fundamental analysis deals with economic, social, and political forces that drive supply and demand of currencies and how price movements take shape on account of the same. On the contrary, technical analysis means studying currency price movements by itself in order to make a prognosis of future currency price trends. A currency “chart” is quite simply a tool used in technical analysis.
Forex investors can use both types of analysis to make trading decisions. But the surmises based on technical analysis is what makes you open or close deals, its all the more important to be able to read charts. In short charts as mentioned earlier are an important tool in technical analysis.

What is a currency chart?

A chart tells you the sum total of what’s happening in the market as a graph of the prices of a currency pair over a fixed period of time. You can call it a visualized representation of currency price movements, as a result of activity that goes on between buyers and sellers in the currency market. Forex charts tell a clear picture of whether a pair of currencies is getting stronger or weaker so that you can make your trade likewise.If it is the currency pair EUR/USD, a chart for the day can offer much insight in terms of price levels and general market trends. Therefore it is an indispensable tool for any currency trader.
So coming back again to the three different types of charts, you can classify them as: bar charts, candlestick charts, and line charts.
Let’s get to analyzing each of these charts and how to read them.

Line chart

A currency line chart is a line that connects different closing prices. These connected prices show the price trend of a particular currency over a specific time frame. As it simply connects the closing price with a line, just glance at the line chart and you get a feel of the market.
Below is an example of a line chart. Take note that a line chart clearly and simply shows the direction of the trend.

The base of the chart gives the timeline. The right-hand side of the chart shows the currency values that generally run from a little below to a little above the lowest and highest prices reached during the time period specified.
For example, in the EUR/USD chart shown above you can see how the US dollar and Euro have moved against one another during the period for which the chart is plotted. Similarly a forex chart can be created for any single currency pair like the EUR/USD, USD/JPY and so on plotted over a period of time.
Before you read the chart first select the time frame for the chart as for example a short time scale can help you discern minor trends while a long time scale can help you to see long term trends. When doing forex trading it is best to refer to the charts as published in the trader’s platform. For example if you are trading through a broker such as fxcm look at their charts to trade and so on.
But the problem with line charts is as for example if the market were to move abruptly/drastically all the line chart shows is the close, which means you could miss out on vital information that is crucial to either making or loosing money as a trader. In other words line charts only measure the overall direction of long-term trends (by measuring closing price for a series of periods), and hence are of limited use.

Bar chart

A bar chart gives a bit more information than a line chart in that it gives you the open, close, high, and low of the market for a particular currency pair. In effect it gives you more data about the price changes that happen during the bar, not just at one point in time.
Bar charts are also referred to as “OHLC” charts. In OHLC the individual letters denotes Open, High, Low and Close for that particular currency pair.
Have a look at this example of a price bar:

OPEN: The horizontal line on the left stands for the opening price of the currency
HIGH: The top point of the vertical line shows the highest price of the currency during that time period
LOW: The bottom point of the vertical line shows the lowest price of the currency during that time period
CLOSE: The horizontal line on the right shows the closing price of the currency.
Essentially a bar chart conveys four key pieces of information for any given time frame. They are the opening price during that time frame; the closing price; the high price; and the low price. As bar charts can be used for all time frames, it could summarize price activity, say over the past minute, hour, day or over the past month. Looking at the chart for example you can figure out when exactly the markets moved quickly.
Have a look at this example of a bar chart for the currency pair EUR/USD.

Here’s how a bar chart is interpreted:

Read bar charts from the left side to the right side. The bottom of this vertical bar indicates the lowest traded price for that time period, while the top of the bar indicates the highest traded price. Therefore the individual vertical bars in the chart above by itself indicate the currency pair’s trading range as a whole. The horizontal tick on the left side of the bar is the opening price, and the right-side horizontal tick is the closing price for that time period.
In effect they offer more data about the price changes that happen during the bar, not just one point in time as in line charts.

Candlestick chart

Candlestick charts were invented by the Japanese in the 1700s to study the movements in the price of rice on Japanese commodity exchanges. Candlestick charts show the same information as a bar chart but in a graphically attractive way.
Candlestick bars indicate the high-to-low range with a vertical line as in any bar chart. But in candlestick charts, the larger block in the middle indicates the currency price range between the opening and closing prices.
Now consider this candlestick bar that is all colored up.

The red or green portion of the candlestick is called the “real body” or “solid body. “The “real body” of the candlestick represents the range between the opening price and the closing price for a particular time frame. Real bodies can be either long or short.
The center of the bar on the left side is green in color and the center of the bar on the right side is red in color. What this means is, if the currency “close” price was lower than it opened, the candlestick would be red in color. On the contrary if the currency “closed” price was higher than it opened the candlestick would be green in color. But in a situation where the closing price is higher than the opening price, the “middle” block is green in color.
The “wicks” above and below the candlestick are called shadows and is where the price dipped or rose to reach a price, albeit transiently although it did not stay at that price. Shadows can be long or short. If the upper shadow on a green candlestick is short it indicates that the close was near the high.
Take look at this example of EUR/USD candlestick chart.

This means that if the price closed higher than it opened, the candlestick would be green. If the price closed lower than it opened, the candlestick would be red. The look of the daily candlestick depends on the link between the day’s open, high, low and close prices. For example, if the upper shadow of the red candlestick is short it indicates that the open that day was closer to the high of the day.
In the final analysis candlestick charts serve as a visual aid, and the information you get from them is no different from what you would get from an OHLC bar chart.

As a forex trader you have recourse to different types of orders in order to enter and exit the forex markets. These different types of orders allow you to specify precisely as to how your broker should fulfill your forex trades. This article explains the different order types that are possible in forex trading and emphasizes the fact that it is important that you place orders with a forex broker in the right way.

Market Order

A Market order is one of the most common types of orders executed in the forex spot market.
A Market order is an order to buy or sell a currency at the best available current market price. In other words, in a market order you buy as per current Ask price and if you are selling it would be as per current Bid price. This is the rule and not a choice or exception. These types of orders can be used to enter a new position (buy or sell) or to exit an existing position (buy or sell).
Currency prices always keep changing with the bid and ask prices often fluctuating considerably. So a market order may not get executed at the last traded price. If the order does not get executed at the last traded price, the broker will usually requote and the trader on his part has to reconfirm the price for the market order to become effective. Generally market orders are favored over other orders with respect to more stable currencies such as EUR/USD.

Slippage

All forex orders including market orders are susceptible to what is called as slippage. Slippage can be defined as the difference between the expected fill price and the actual fill price. Assume you place a market order to buy Euro at $1.3535 (expected fill price). But in reality by the time your order would have actually got filled in or executed, the rate would have moved to say $1.3537 which means there is a difference of $0.0002 (called slippage). This may or may not happen. But the fact is, this often happens even with the best of automatic trading software. Slippage is also referred to as bad fill and generally occurs during volatile market conditions as for instance during economic news releases.
You could say that slippage corresponds to what happens during the few seconds that could elapse between the time of giving the market order command (whether buy or sell) and the actual time when the transaction gets executed (when your order gets filled).

Limit Order

A limit order is an order placed to buy or sell currency only at a particular price and no other price. Just like a market order, a limit order is also executed at the forex spot market. But the difference with the limit order is that the transaction would take place only if the traded currency reaches the limit set by you before you bought or sold.
In other words a limit order helps you to limit the maximum price you pay when you buy a foreign currency or limit the minimum price when you sell a currency. So a limit order protects you, in that you don’t buy a currency for a higher price and don’t sell a currency below a minimum price.
Depending on the direction of the position, limit orders can be either limit-buy order or limit- sell order.

Limit-buy order

A limit-buy order is an instruction to buy the currency pair at the market price if the market reaches your specified price or lower. The limit-buy order price level is always set below the current market price.
Take a look at the following example and learn how to set limit orders when buying a currency? - Assume you want to buy 1 standard lots of EUR/USD. The current bid/ask price on your screen is say 1.3535/38. Then you click on the ask price tab and buy 1 lot of EUR/USD, and then assume you set a limit of 1.3536. This means that unless the ask price is lowered from the current 1.3538 to 1.3536, this transaction will not be executed. So it helps you limit the maximum price you pay when you buy a currency. In this transaction before you place the limit order you have got to reiterate or reaffirm to yourself that you want to buy the currency only if the price were no higher than what you were willing to pay.
As you can see from the above example, the limit order can be used to enter trades. Just set the entry price and the trade will be entered only at that price and no other price.

Limit-sell order

A limit-sell order is an instruction to sell the currency pair at the market price if the market reaches your specified price or higher. Note that the limit-sell order price level is always set above the current market price.
How to set a limit order when selling a currency? – Consider the same EUR/USD example as above. The current bid/ask price on your screen is the same 1.3535/38. In this case you may set a limit order on the bid price for 1.3537 which means you will sell the EUR/USD currency only if it rises to at least 1.3537. So this limit order protects you in that you don’t sell a currency below a minimum price.
As you can see from the above example, the limit order can be used to exit trades making a profit. The sequence is, first deciding your profit set your exit price, and then the trade gets executed only at that price and no other price.
There is a key point to be reckoned with when placing limit orders. For example it is possible that your order may never get executed as the currency price may not reach your set limit order levels. Nevertheless these types of orders are definitely beneficial as when the trade goes through you get the specified purchase or sell price.
To sum up a limit-buy order is an instruction to buy the currency pair at the market price once the market reaches your specified price (lower than current market price). A limit-sell order is an instruction to sell the currency pair at the market price once the market reaches your specified price (higher than the current market price). So limit orders have more to do with profits only.

Stop Order

Now let’s talk of another type of order known as stop orders. A Stop Order (could be either a Sell or Buy Stop Order) which is not executed by your trading platform until the market price has reached your defined price. In other words, a stop order for a currency pair will be executed only when the currency you want to buy or sell reaches a particular price referred to as the stop price. No sooner the currency reaches this price a stop order in effect becomes a market order and gets executed.
The Sell and Buy Stop order is reverse to the Sell and Buy Limit Order. The Sell Stop Order is Always set below the current market price, while the Buy Stop Order is Always set above the current market price. When the market reaches these stipulated prices, it executes and becomes a market order.

Example of Buy Stop order

Assume you expect EUR/USD, which is now at 1.3535 to go up in the next few hours (because of vital economic news releases), but you are unable to keep watch at the trading platform. So what do you do? Set a Buy Stop order and set it at 1.3570. If the market price hits the price, set by you to buy it becomes a market order and execute the deal.
A stop order may be disadvantageous in that it is not guaranteed to be filled at the preferred price you want. Once the stop order gets triggered, it turns into a market order that is filled at the best possible price. Often this price may be lower than the price specified by the stop order.

Stop-loss order

A stop-loss order is akin to a limit order, but importantly it is linked to an open trade and prevents losses should the price go against you. A stop-loss order remains effective until executed or cancelled. Supposing you buy EUR/USD at 1.3535. Therefore, when, you set a stop-loss order at 1.3525 you are limiting your maximum loss. In other words if your calculation went wrong and EUR/USD drops to 1.3525 instead of moving up, the stop loss order will be automatically executed at 1.3525 and close the position for a 10 pip loss. This means you do not have to sit in front of the computer in order to monitor price levels and prevent losses from occurring. Similarly, a stop-loss order can be set on any open position.

Summary of Limit and Stop Orders

Let’s summarize the salient points of Buy Stop Order and Buy Limit Order,

Sell Stop Order, and Sell Limit Order,

Stop orders are where the entry price (buy or sell) is set and is also how we limit our losses. Sell Stop order is set below the market price. Buy Stop order is set above the market price.
Sell Limit orders is set above the market price. However Buy Limit order is set below the market price
One Cancels the Other (OCO) orders are essentially a combination of two limit and/or stop-loss orders placed above and below the current market price. But significantly when one order gets executed the other order gets automatically cancelled.
Consider this example. Assume that the price of EUR/USD is 1.3535. You decide to either buy say over resistance level at 1.3585 or initiate a selling position if the price falls below to say1.3500. In this OCO Order if 1.3585 is reached, the buy order will be executed and the 1.3500 sell order gets automatically canceled.
So OCO order is a situation when a limit order and a stop-loss order exist at the same time. If any one order is executed the other gets automatically cancelled.
This precludes the necessity for you to continually monitor your currency position in the market
The above are the basic orders types available in most of the trading systems. Understanding the different types of orders will empower you with the right tools to achieve your intentions - how you want to enter the market, and how you are going to exit the market. While there may be other types of orders, market, stop and limit orders are the most common of them all. Largely finding the right type of trading software will also have a major role to play in placing forex trading orders.

In a forex trade conducted through a trading platform, you are only speculating on the currency exchange rate and not actually buying all that currencies. Therefore if you speculate the movement of currency rates accurately you make a profit, otherwise not. Margin trading and leverage originate from this belief that speculation in currency positions can be met without real money supply.
Before we learn about Margin trading and Leverage it’s important we try to understand what is meant by lots.

Lots

Units of currencies are bracketed and traded in lots. Lots could be any of the following: “Standard" lots, "Mini" lots, "Micro" lots, and "flexible" lots (also called “fractional" lots).
"Standard" lot: Consists of 100,000 units of the base currency in a currency pair.
"Mini" lot: Consists of 10,000 units of the base currency in a currency pair.
"Micro" lot: Consists of 1,000 units of the base currency in a currency pair.
"Flexible" lots (also called “fractional" lots): In this case you could choose your lot size as for instance it could be 0.5 of a lot, 1.2 of a lot, or any other number of units that suits you. Flexible lot is unlike the set lot sizes you could have with Standard lots, Mini lots and Micro lots.

Example

If you traded 1 standard lot of the currency pair USD/JPY, you're trading $100, 000, if you traded a mini lot it is $10, 000, and if you traded a micro lot it is $1,000. In short, a lot simply indicates how much of currency you are trading in that lot. Remember it is the base currency we are referring to when we talk of lots.
The choice of different lot sizes allows you to fine tune your trading style. For example if the invested funds in your forex trading account is on the smaller side, having an account with a dealer who offers micro or fractional lot sizes helps keep your risks on the lower side.

Leverage and Margin

Leverage is the method by which you could control a significant amount of money in forex trading by borrowing a large portion of the capital required for trading(from your broker) and using very little of your own money.
For example, “a $100,000 position (standard lot) in forex trading can be controlled by using just $1000 of your own money.” The leverage in this case is 100:1 (which is the ratio of 100,000 to 1000). Remember leverage is always numerically expressed in terms of ratios.
For arguments sake supposing the leverage in the above example was 1:1. What would be the situation then? It would mean that you would be putting up- front the whole value of the position i.e. $100,000 as deposit and your borrowing would be nil. The 1:1 leverage would then look confusing as you are not borrowing anything, but nevertheless that’s the way it is. Retail forex trading is never done that way putting in the whole value of the currency position. On the contrary leverage is always used.

What is margin and how does it correlate to leverage?

To understand “margin” let’s refer to the earlier statement “a $100,000 position in forex trading can be controlled by using just $100 of your own money”. This statement obviously refers to a leverage of 100:1.But significantly margin refers to the $1000 deposit you had to invest in order to avail this leverage. In other words, margin is collateral that you have to give your forex broker to conduct your forex trade using leverage. Margin helps secure your trade with your broker.
Earlier we learnt that leverage is expressed in ratios. What about margin? How is it expressed?
Margin is usually indicated as a percentage of the full amount of the position. It could be 1%, 2%, 3%, 5% or even 0.25% and 0.5%. Different brokers have different margin norms. Once you know your broker’s margin requirement you can figure out the maximum plausible leverage that can be availed in your trading account.

Calculation that links leverage and margin

Say your broker has stipulated a margin of 5%. Theoretically it means for a $100 position you need $5. So for standard lot of $100,000 you would require (100,000 x 5) divided by 100 =$5000. This means for a $100,000 position the broker would expect you to put a margin of $5000 which translates to a leverage of 20:1 (100,000 divided by 5000). Similarly you can calculate the maximum possible leverage for different margin requirements as for example for 3%, 2% and so on.
As you can see from above calculations, although leverage and margin are interrelated, leverage does not equal margin. Here’s how different margin requirements could translate to maximum possible leverage.

Margin	Leverage
0.25%	400:1
0.5%	200:1
1%	100:1
2%	50:1
4%	25:1

The concept of Margin per se explained above should not be confused with other similar terminology that you could get to see in your trading platform( as for example account margin, used margin, usable margin etc).
To reckon with this possible confusion, let’s try to understand the different variants of this terminology.
Margin required: Corresponds to what we talked of earlier and refers to the concept of margin as expressed in percentage. In simple terms it’s the amount of money you have to deposit with your broker to open a position.
Account margin: This indicates the sum of money in your forex trading account with your broker.
Used margin: When you open a currency position, your broker will lock in a certain amount of money to keep your position alive. Although this money is technically yours, you cannot utilize it furthermore unless and until your broker returns it to your account margin either when you close the position or when margin call occurs.
Usable margin: This indicates the amount of money remaining in your account to open new positions. Call it clear balance if you like!

How leverage magnifies the profit and loss.

Let’s assume the $100,000 position with 1:1 leverage (which means you invested the entire cost of the position yourself and had no borrowings) has now risen in value to $102,000. This means you have made a $2000 profit and your rate of return would be a mere 2% ($2000 profit divided by $100,000 money you invested as deposit)
But supposing you had a leverage of 100:1 and the $100,000 had risen to $102,000? In that case you would have invested only $1000 of your own money and the remaining $99,000 would have come as a loan from your broker. But importantly your rate of return has increased manifold, and in this instance would be 200% (divide $2000 profit by $ 1000 initial deposit and multiply that figure by 100).
As you can see from the above examples, a 1:1 leverage got you a mere 2% rate of return while a 100:1 leverage got you a 200% return.
Leverage is often referred to as a double edged sword. What does this mean? In the examples we talked of earlier the investment had made a profit of $2000(i.e. $100,000 had risen to $ 102,000).What if it is the other way around?
For example say on a 1:1 leverage what if the value of the position had declined from $100,000 to $98,000. This means you lost $2000 which means a negative rate of return (-2%). If the same deal was made on a leverage of 100:1 it means even more negative rate of return (-200%). What this means is that, just as increased leverage contributes to greater profits when the trade goes your way, similarly if the trade were to go against you increased leverage will certainly result in greater losses. This is what is meant by leverage being a double edged sword.

Margin Call

Margin Call is a call from broker to trader (either phone call, email or alert in the trading platform) asking him/her to deposit more money in the trading account failing which some or all of his trades will be liquidated by the broker at the current market price.

Why and when will the broker make a Margin Call?

Generally a broker will liquidate any position that is losing more than 50% of the margin (this is called Minimum Margin) it uses. The reason why it happens is to preclude the possibility of your loosing more money than you had originally invested.
How a margin call occurs is best explained by this theoretical example.
Let’s assume you are trading in a Mini account with 1% margin and have deposited $10,000. You then buy 1 mini lot of EUR/USD. Your account info snapshot will look as follows.

Account No.	Balance	Equity	Used Margin	Usable Margin
001	$10,000	$10,000	$100	$9,900

Supposing you had closed this position by selling it at the same price as it was purchased, then your account information snapshot would have reverted back to:

Account No.	Balance	Equity	Used Margin	Usable Margin
001	$10,000	$10,000	$0	$10,000

But you didn’t close the position. On the contrary you decided to keep going.
Assume you decide to buy a further 60 lots of EUR/USD making it a total of 61 lots
Your account info snapshot will now look as follows.

Account No.	Balance	Equity	Used Margin	Usable Margin
001	$10,000	$10,000	$6,100	$3,900

From the above consolidated position you stand to make great profits if EUR/USD rises as you had expected. But it will be a terrible scenario if EUR/USD falls
Assume the EUR/USD starts to fall, in which case your Equity will fall too. Your Used Margin will remain at $6100. But once your equity equals the used margin or drops below $6100, you will have a Margin Call. This means that some or all of your 61 lot position will immediately be closed at the current market price, unless you take steps to increase your equity to bring it sufficiently above the used margin. This basically explains how a margin call could be triggered.

Currency pairs are financial instruments traded in forex markets. Every pair of currency traded in the forex market is considered as an individual product (or financial instrument). A set of two currencies always constitute a currency pair, of which one currency is being bought by the other. The buying and selling of currencies from around the world constitute currency trading.

Currency Symbol

Each currency has its own symbol as for example:
For the Euro, it is EUR
For the Japanese, it is JPY
For the Pounds Sterling, it is GBP
For the Swiss Franc, it is CHF.

XXX/YYY is the general format by which currency pairs are denoted, where XXX and YYY both refer to the ISO 4217 international three-letter code of international currencies. Currencies are always traded in pairs, and here are a few examples of currency pairs:
For Euro-Dollar pair, it would be EUR/USD
For Pound Sterling-Dollar pair, it would be GBP/USD
For US Dollar-Canadian Dollar, it would be USD/CAD
For Australian dollar-US dollar, it would be AUD/USD

For Dollar-Swiss Franc pair it would be USD/CHF and so on for other currency pairs according to their three-letter currency codes. 80% of all trades in the Forex market originate from these currency pairs.
Consider this example of a currency pair GBP/USD. In this example of a currency pair, the currency on the left (GBP in this case) is called the base currency. The currency on the right (USD in this case) is called the quote currency (also called counter currency).The base currency (in this case GBP) always has a value of 1 in exchange rate.
In the currency pair GBP/USD, GBP is being bought, and the value of the currency on the right (USD in this case) represents how much of the base currency it is worth.
Consider another example of a currency pair EUR/USD 1.2436. This simply means 1 Euro is equal to 1.2436 US Dollars. Or it means that 1.2436 US dollars are needed to get one EUR. If you want to buy 100 Euros how much would you need in USD? You need precisely 124.36 US Dollars to buy 100 Euros.
Generally you will see the USD quoted first in most currency pairs the exceptions being Pounds Sterling, Euro- Dollar, Australian Dollar and New Zealand Dollar. The predominance of the US Dollar and the fact that it figures in a majority of forex transactions is perhaps a legacy of the Bretton Woods Agreement (1944), which pegged all currencies to the U.S. dollar.

“Bid” and “Ask” prices

All currency pair quotes have a bid and ask price. For example the currency quote for EUR/USD would appear as EUR/USD 1.4888/1.4890. The figure on the left, i.e. the number 1.4888 is called the “bid” price. This means you can sell 1 Euro for $1.4888
The number on the right of the currency quote EUR/USD 1.4888/1.4890, i.e. 1.4890 is called the “ask” price. This means you can buy 1 Euro for $1.4890. It is important to remember that the “bid” price is always lower than the “ask” price.

Spread

As we have seen from example cited above, every currency pair has a "bid" and "ask" price, and further the “bid” price is always lower than the “ask” price. The difference between the “bid” and “ask” price is called the “spread”.
In the currency example EURUSD 1.4888/1.4890 you will notice that there is a difference between the “bid” and the “ask” price. This difference is called as the spread. In other words, the “spread” is the difference between the highest price the buyer is willing to buy the currency and the lowest price the seller is willing to set it. For instance if you assume the “bid” price is $1 and the “ask” price is $1.3 then the spread would be $0.3.
In the example of currency quote EUR/USD 1.4888/1.4890 we discussed earlier, you will notice that the spread is 2 pips being the difference between the ask price and the bid price (1.4890 minus 1.4888). “Spreads” are usually on the lower side in forex markets on account of high liquidity

What is a pip?

Pip, is an acronym for Price Interest Point, and represents the smallest digit in the price of a currency. Pip is also the method by which profit is calculated in a currency deal, and its value depends on the base currency of the pair. Consider this example. A move in the EUR/USD from 1.4877 to 1.4897 equals 20 pips. And a move in the USD/JPY from 89.70 to 89.90 equals 20 pips.
When your trading account is in US Dollars and the U.S. dollar is the base currency, then one pip equals one dollar in a mini account or ten dollars in a standard account. So if you place a trade with one of these currencies and earn 20 pips it would translate to a profit of $20 in a mini account or $200 in a standard one.
If the base currency is not the U.S. dollar, then the value of one pip is equal to one unit of the base currency. For example in the GBP/USD, the pound sterling is the base currency, so one pip is equal to one pound; So if you make 20 pip profits in GBP/USD it would mean a profit of 20 pounds Sterling in a mini account. When you make profits in these currencies, you’re making them in the base currency, which then may be exchanged into the U.S. dollar at the current exchange rate, since your trading account may not be denominated in the base currency.
Summing up, in this article we have learnt what a currency pair is, and what is meant by “bid” and “ask” prices, spread and pip.

Trade balances are evaluations of the relationship between the imports and exports of a given country. Particularly, the purpose of the trade balance is to determine if the amount of goods and services leaving the country is reasonably balancing in good levels with goods and services being imported into the country. Properly assessing the current balance of trade for a given country provides key information about the overall economic health of the nation.

Why is it important?

Since this report has, a drawback in terms of its release timing, it is monitored in conjunction with a variety of other economic indicators to help gauge the direction and strength of the foreign trade. Although it is not as timely as other monthly economic indicators as its data is released approximately six weeks after the reference month, its importance may be overshadowed in the face of fresher economic data. That is released on a monthly basis. It however directs the strength of the forex rates of the dollar in a big way.

How is it computed?

The most common method of computing the current trade balance is by picking a specific period to consider, preferably a gap of between three to six months. Although a complete calendar year can be taken for consideration. On establishing the period, figures relating to the total amount of imported goods and services for the cited-period are compiled. After determining the cost of goods and services that entered the country during the particular period, the next step is to identify the cost of goods and services exported to other countries within the same period. The total cost of imports is then subtracted from the total cost of exports in order to determine the current trade balance. Two prominent terms are then used to describe the results. If the exports exceed the imports, it is considered a trade surplus and when the imports exceed the exports then it is termed a trade deficit. A trade surplus will indicate growth of the economy while a trade deficit is a likely indicator of a troubled economy.

How does it affect forex trading?

International trade in goods and services is the only tangible way through which a country can earn foreign exchange. To have a strong forex rate, the amount of exports should exceed imports. This would mean that the country in question generated more revenue that stayed in the country than what went out to other countries. More exports than imports will translate to a relatively healthy trade balance and most likely lead to a stable economy. On the contrary, if imports exceed exports, more revenue is leaving the country than is coming in. This can lead to a deficit in forex earnings, a situation that would lead to a weaker exchange rate as the country‘s central bank would be forced to buy foreign currencies at higher rates to meet the demand leading to the decline in the exchange rates of the local currency. These circumstances may simply imply that the amount of local production of goods meant for export has drastically dropped and the country has become a market for other countries to come and sell their products at the expense of our local industry. This situation should be swiftly addressed as it may affect even the country’s GDP thus reducing the population’s purchasing power due to increased unemployment.
Changes in the imports and exports levels, along with the difference between the two forms a major benchmark for gauging economic trends locally as well as abroad. The data directly affects all the financial markets, particularly the foreign exchange value of the dollar. High imports indicate an increase in demand for foreign goods and services locally while high exports show the demand for U.S. goods abroad. Such changes in the chronic trade deficit run by the United States can greatly affect the dollar since this trade imbalance creates greater demand for foreign currencies. The bond market is also sensitive to such and therefore the policy makers should try to check the trends or risk importing inflation into the economy.

How does it affect the stock market?

Monetary policies and the perceived direction of the economy play a major role in determining the direction of stock prices. If the trend in the trade deficit narrows in a way that suggests that net-export growth is overheating, bond prices could fall on the outlook for greater overall economic output of goods and services. If investors perceive a potentially higher inflation amid increased chances that the Federal Reserve may hike interest rates, the effect would be a sudden drop in Stock prices as investors seek to release their holdings into the market sooner that the Fed can take any measures that may affect their shares. In the same spirit, a rise in bond yields can eventually make bonds more attractive once the fall in bond prices settles down. Although corporate profit growth may be supported during the period of strong net-export growth, the market will likely see it as short-lived given that expectations for impending rate hikes and eventually slower economic growth will be their greatest perception. Such moves may deflate the values of shares very dramatically
On the other hand if there is a trade surplus; meaning that the exports have exceeded imports and the economy is registering strength and the trend indicates consistency along these lines, the stock shares would take an upward surge as most investors would be reading better economic times ahead. They would therefore want to buy more shares or jealously guard their existing holdings thus reducing the availability of shares for sale. This pattern would mean that the few who are willing to sale would have the privilege of asking for higher prices for their holdings. It is simply a game of perceptions and speculations and the principles of demand versus supply will always prevail during such times.

The German industrial production reflects the industrial performance of the German economy. It measures the per volume change in output from mining, quarrying, manufacturing, energy and construction sectors in Germany. Germany being the second largest industrial products exporter plays a major role in the direction of the European economic trends.

How important is it?

Giving the production volumes of the world’s second largest exporter, this indicator is very important to traders in the European zone as it greatly shapes the trend of Europe’s economic growth. The performance of the German economy can be very much influenced by this indicator even though it is only a preliminary figure that gives an insight into projected monthly activity by percentages.

How is it computed?

The German federal statistics office collects information on the month’s production from the mining, quarrying, manufacturing, energy, and construction sectors. Upon compiling all the statistics fro these sectors the results are then contrasted against the previous month’s production levels to determine the increase or decrease in production. The figure is then tuned in to a percentile rate.

How does it affect forex rates?

Giving the rate of production in the industrial sectors, this index affects the forex rates by the fact that a high industrial production rate signifies a possible increase in export trade. Export trade gives the country most of the needed forex reserves making the German currency stronger on the international market. Good trade balance is very much determined by the country’s performance in export versus import activity. If the country’s export trade falls far below expected rates and over a long time, the result may be an eminent economic recession. If nobody demands for the local products then the companies may have no choice but to reduce the production levels to try and reduce the material costs. This scenario is very unhealthy for the forex trade since the demand for the local currency is likely to decline n the backdrop of low production. In a worst case scenario the government may be forced to take some measures to try and revamp the economy such as shifting of the interest rates in line with the prevailing circumstances.

How does it affect the stock markets?

A decline or increase in the industrial production of any nature can not be treated as a light matter by any stock market player. This is because any indication of production decline or increase means either a loss or gain for any stock holder in the respective share holdings. It is therefore automatic hat news o any impending changes in the production levels will affect the investor’s attitude leading to great shifts in the sock market as every share holder tries to take necessary action to cushion their investment against any losses. All investors both local and international must therefore keep a close watch in the production projections in order to make time conscious decisions for the sake of strategic investments. If there is an anticipated increase in production most investors will try to purchase shares leading to increases in stock prices and vice versa.

OECD Composite Leading Indicators (CLI) is a collection of indicators from 30 countries that strongly believe in the free market system. These countries hold the OECD meeting to make decisions regarding the markets which have impact on the entire region of the 30 member countries. OECD stands forte organization for Economic Cooperation and Development.

How important is it?

Since this indicator reflects the economic trends in a wide area courtesy to its thirty member countries, it is a good indicator to look up, to especially for traders with an international interest. The OECD composite leading index gives traders the global economic outlook thus making it possible to make far reaching investment decisions. If you need to import or export stuff from far off places, this is the indicator to look out for especially with respect to Europe, china, Japan and the U.S. For investors who have business interests across any of these regions, it should be a good insight into the trend of things to come. Further more, since most of the trade takes place between these member sates, they make most key decisions regarding inter trade and these agreements are mostly legally binding and would therefore affect the way transactions by investors across the region are carried out.

How is it computed?

The OECD composite leading indicator is derived from collecting leading economic indicator statistics from all the member countries and compiling the same in a percentile figure to gauge the economic trends with an aim of telling the growth or decline rate of different sectors of their economies

How does it affect forex trade?

This indicator greatly affects forex trade especially among the member states. This report clearly gives the status of the anticipated import and export trade among the member countries. It is quite easy to gauge the balance of trade between member countries from the report thus the reserve banks can easily make monetary policies basing on the report. Decisions such as tax waivers for certain goods ad products being moved across the member countries have a big influence on the forex trading between the concerned countries. The OECD decisions greatly influence the way investors carry out their businesses across the member countries. If there are glaring imbalances in the trade between member states the decisions taken at the OECD to correct the imbalance may result in the change of interest rates in the various states. This move obviously affects the forex trade among member countries.

How does it affect the stock markets?

Decisions made at the OECD obviously affect the way investors carry out their businesses. Since investors like profitable business environments, the OECD decisions will no doubt determine stock prices or even the direction of the import and export business. Think of a scenario where the business prospects in one of the member countries shows good growth potential for one reason or the other. It will automatic that some investors may opt to sell their holdings from one region with a view of investing in the more profitable region. This no doubt affects the stock prices as the demand versus supply principle take effect.

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Voted Best Trading Platform of 2011 by World Finance Magazine, 4XP continues to raise the bar in every aspect. Be it full multilingual support, low fixed spreads, or a robust learning center, 4XP continues to march towards the future with full force.
4XP was founded by a group of entrepreneurs with high expertise in both online and offline trading. With the increasingly challenging world of online trading, 4XP’s founders set out to create a platform based on the model of “par excellence – focusing on honesty, integrity, and professionalism.”

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Voted Best Trading Platform of 2011 by World Finance Magazine, 4XP continues to raise the bar in every aspect. Be it full multilingual support, low fixed spreads, or a robust learning center, 4XP continues to march towards the future with full force.
4XP was founded by a group of entrepreneurs with high expertise in both online and offline trading. With the increasingly challenging world of online trading, 4XP’s founders set out to create a platform based on the model of “par excellence – focusing on honesty, integrity, and professionalism.”

Forex is a loose acronym for Foreign Exchange Market that originated in the 1970s around the time free currency exchange rates were introduced in the world. In forex markets, market participants determine the price of one currency against the other purely from market forces stemming from supply and demand. There are no external controls in a forex market and is perhaps the best example of a perfect market with free competition. Forex is also the biggest liquid financial market in the world, with market volumes ranging in 1-3 trillion US Dollars a day.
The US Dollar, Euro, Japanese Yen, British Pound and Swiss Francs are the major currencies traded in forex markets.

Little Bit Of History

The foreign exchange markets as we see today have evolved through the gold exchange period, followed by the Bretton Woods Agreement, to its current setting. Although by 1973, the major industrialized nations' currencies were floated more freely across nations, coinciding with currency prices being quoted daily, it was only due to the advent of computers and technology in the 1980s that the market reaches for cross-border forex trading gained momentum extending through Asian, European and American time zones. Gradually over the years foreign exchange transactions increased intensively to all the facets we see today in forex markets worldwide.
Today advances in computer technology have permitted the instantaneous transmission and receipt of currency prices across the world. These technological advances in computer networks are the primary reason behind the growth of forex trading amongst ordinary investors.

How Does Forex Market Works?

To understand how forex markets work, one has to understand what exactly constitutes the forex market, the institutional framework that drives this market, and importantly the process of currency price determination.
Foreign exchange market is no different from any other market where buyers and sellers meet to buy or sell a commodity for a specific price. The only difference in forex markets being, it is the “currency” that constitutes the commodity, and the price at which it is exchanged conforms to the foreign exchange rate for that currency at that point in time.
Export earnings of corporations, overseas remittances, and investment flows (direct or borrowed capital) constitute the main sources of foreign exchange. Individuals and entities who receive foreign currency are the primary market suppliers and they may sell foreign currency to licensed exchange dealers who in turn may pass it to other dealers in need of foreign exchange. The Central banks may sell foreign reserves to make market adjustments, and on the other side companies would need to buy this foreign exchange to make overseas payments. This creates a market for foreign exchange wherein a person may sell a currency today and probably emerge as a buyer the very next day.

Forex Market Framework

The biggest foreign exchange markets are in Tokyo, London and New York and they are networked with each other using modern technology creating a seamless interface that transacts currency prices and deals almost instantaneously across the world. The institutional framework that drives the forex markets is perhaps the key to the market itself and comprises the following:

• Commercial and Central banks in different countries
• Exchange markets and firms that conduct foreign exchange deals
• Investment funds
• Brokerages and individuals

By transacting with different clients in exchange conversions, commercial banks accumulate a great chunk of forex market needs and are often shared with other banks in interbank dealings. These banks (Union Bank of Switzerland, Swiss Bank Corporation, Deutesche Bank, and Citibank) with daily volume of transactions in billions of dollars greatly influence forex markets. Central Banks as for example the US Federal Reserve influence forex markets by regulating the investment climate and making market interventions and so on.

Exchange Rate

Exchange rate is a market-determined phenomenon. In other words, the exchange rate depends on supply and demand conditions in the market for any particular currency. A currency exchange rate is derived from the ‘spot transactions’ (means foreign exchange trades that are initiated and settled within two business days with the respective exchange) of authorized dealers with the public.
This exchange rate that is reported in the price tickers that you see on your trading screen reflect the cumulative transactions undertaken by the major market makers (namely the institutions) with large value transactions reflecting more on the currency prices than a small value transaction. That’s probably one of the reasons why currency prices keep changing on your screen reflecting the rate at which the major market maker’s i.e. the institutions trade.

Advantages of Forex Over Other Markets

The Forex market offers many advantages, over stock market trading and other forms of investment opportunity. In forex markets financial reasons compel the execution of a forex deal and not commercial considerations. Also as compared to stock markets, exchange markets do not operate out of any specific building.
In forex it is not obligatory to buy a currency to sell it later but it is enough to open buy/sell position for any currency without actually possessing it, unlike stock trading where you are committed to have the full face value of the stock before you can trade for that amount of stock.
Although Forex markets can be volatile at times, it offers an advantage over a declining stock market, in that with proper knowledge of forex markets you could still key into profitable trades. On the contrary, people tend to avoid stock markets when it is in a downward spiral as no one really knows when it would start on an upward trend. In other words forex trades can be made even if the markets were rising or falling.
The profits you could possibly make in stock markets pales into insignificance in comparison to the windfall profits you could be making in forex markets. For example proper leverage alone can make you huge sums in a very short time and that too by making fewer trades.
The limited number of currencies traded in forex markets makes it easier to monitor market trends that relate to those currencies, whereas in the stock market a lot of factors could affect individual stocks, not to mention the innumerable number of stocks (there are several thousand stocks registered in most stock exchanges) that would have to be monitored at any given point in time.
Although it has its own trends and cycles punctuated by high volatility, forex markets don’t fit into the traditional Bull/ Bear market cycle typical of stock trading. That is because currency rates always throw in new intriguing ways of making profit. For example, interest rates do not adversely affect currency markets as it would stock market indices and stocks in general. When interest rates go up, that country’s currency gets strengthened (giving profitable opportunities to the discerning trader) whereas it would depress stock markets in that country and probably cause losses to a stock trader having several open positions.

Comparison of size and liquidity, and market time

It is impossible to quantify the exact amount of money traded in forex markets worldwide since trading is not restricted to one single exchange or location. But several estimates put it between 1-3 trillion US Dollars a day. This is certainly lesser than the volume of stocks traded in all the major stock exchanges around the world and also far less than the gold and forex reserves of the developed world. It also far exceeds the daily volume of foreign trade transactions between different countries. Therefore in terms of size, number of participants and liquidity, forex markets are huge and offer the best opportunities to the investor.
This superior liquidity in forex markets allows traders to open and close positions in a matter of a few seconds or keep that position going on for several years or perhaps indefinitely which is not possible while trading stocks.
Using networked computers, forex trading offers you a world wide market, instantaneously available to you on 24/5 basis from 00:00 GMT on Monday to 10.30 GMT on Friday covering all time zones. When the sun sets in one trading center, it is dawn and the beginning of a trading day somewhere else in the world. On the contrary, stock market in any major country opens at 10 am local time and remains operative till 4p.m local time restricting the possibility of indulging in round the clock trading.
Forex trading is done strictly on your calling. Since forex trading goes on 24 hours a day there is no need to have a fixed schedule, and even if you set one, it’s purely your discretion based on your own trading strategy and of course to your liking.

Benjamin Graham is considered a legend in the stock trading and investing industry. He was an excellent financial educator, investment manager and author. Even today, thirty-three years after his death, two of Graham’s investment books are still used at the university level in financial investing classes.

Biography

Born in London in 1894, Graham was one years old when his family immigrated to the US. He was raised in Brooklyn and Manhattan during a time of economic hardship, losing his father at the age of nine. It was at this point that the young Graham became obsessed with obtaining financial security for himself and his family. As soon as he graduated from Columbia University he got a job on Wall Street with Newburger, Henderson & Loeb. He started as messenger for the firm and within six years worked his way into a partnership with the company.
In 1926 he and Jerome Newman started their own investment partnership and he became a regular lecturer at his alma mater of Columbia University. He lectured on finance until he retired in 1956. Three years after he formed the partnership with Newman, Graham lost everything in the 1929 stock market debacle. The firm eventually turned the corner by surviving, gaining experience from the lesson it learned. When Graham retired in 1956 the partnership was dissolved at 17% average return annually. Graham passed away in 1976.

Claim to Fame

Graham is looked at as the father of value investing and security analysis, two fundamental disciplines in the investing industry. He was also looked on as an important ‘thinker’ in the industry when it came to portfolio investment, developing it from what was considered an art to a disciplined science.
In addition to his work in the stock trading field, Graham was also the mentor to well known stock trader of today Warren Buffet in addition to other well known names in the field.

Why was he successful?

It is hard to outline Graham’s very detailed investment strategy. He felt that any investor should thoroughly analyze the investment they were considering and that it should give them more than what it would cost. He made it a point to look for companies that had solid financial fundamentals or had very little debt and a good cash flow with above average returns to invest in.
The term ‘margin of safety’ was first used by Graham to describe companies who were undervalued with low stock prices but sound fundamentals. According to Graham, it was the difference between a stock’s cost price and the intrinsic value it held. The larger the margin, the safer the stock and the overall investment. He also strongly believed that stock prices were usually wrong and that smart investors should buy judiciously when their is a sharp fall in price and sell judiciously when the price rises.

Publications

Graham was the author of the following books on stock trading and investment:
* "Security Analysis" (1934) by Benjamin Graham and David Dodd
* "The Intelligent Investor" by Benjamin Graham (1949)
* "Benjamin Graham: The Memoirs Of The Dean Of Wall Street" by Benjamin Graham and Seymour Chatman (editor) (1996)
* "Benjamin Graham On Value Investing: Lessons From The Dean Of Wall Street" by Janet Lowe (1999)

Anyone who has the desire to gain huge profits from a business venture should realize that it is best to learn all you can about your particular type of business. The knowledge you gain from learning and doing things will be a big boost to your self confidence and ultimately to your business success.
This basic belief also applies when you are trading on the 4x currency trading market. It is known that the forex market is the largest market around the world. It involves trades in excess of over two trillion U.S. dollars in foreign currencies each day. it is even larger than the two trillion U.S. dollars New York Stock Exchange and it exceeds the sum of all equity markets around the world.
Your assignment should you choose it, is to secure as large a piece of the two trillion U.S. dollar forex market pie as you can. But, exactly how can you do that if you don’t know the way to handle your forex business? The answer: You must use reliable online forex software that can help you fulfill your goals in this investment.
For newbies it’s not easy to come up with your own methods that will bring about huge profits. You could first study to gather knowledge about the terminology and methods of trading the forex market, and then build your own software program. However, this could take a rather long period of time to accomplish. There is another way and that is to purchase trading software that does the hard part for you and leaves the profits in your hands.
You must be careful to select the right software – one that will get the job done in a reliable way. This software should have the attributes of a profitable currency Trading System:
1. The profitable currency trading system should first be easy to use and with simplicity. It should be clear what you are to look for, and easy to see exactly when to do a trade or not. Why use a hard to use system when trading can be so much easier.
2. The profitable currency trading system can follow short term trends as well as long term trends. The money is in the long term trends and you should trade that way whenever possible, however, money can be made with short term trades as well.
3. The profitable currency trading system allows you to stop losses and to multiply your profits based on how you set the system to perform.
Trading the forex marketplace is the best profit venture in the world. Many have made huge profits trading currencies, but most important of all, the door is still wide open for you or anyone else to earn those huge profits over and over again. So, get yourself 4x currency trading software and get busy.
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n this era humans are investing maximum money instead to put the money in the bank for fixed deposit. Many people understand now what the importance of investing money is and because of that now they invest in Forex market or Foreign Exchange market. Now it becomes the biggest market in the World and it is still growing. But you can lose if you have not any idea regarding Forex.

If you make a commitment to join this market, then there are certain facts that can make an influence to the market and you need to familiar with them. Here are the three factors which generally influence the market- economy, political conditions and market psychology.

You might think that this is just another Forex trading tutorial which teaches the basics of trading. However, this tutorial will actually cover what you should NOT do in your trading. Take the initiative to learn from the common mistakes made by novice traders, and strive to do better without going through the heartache and loss they went to. These are among the common mistakes made by novice traders that you should avoid.
Most novice traders make the mistake of trusting in Forex robots, purchasing them and thinking that they could just sit down while these Forex robots work on autopilot making them money. This is wrong, and causes more loss than it could ever give you winnings. It is pretty obvious that if it is too good to be true, most of the time it is. If it was really that easy, plenty of people would be millionaires now, having these “robots” trade for them.
Another mistake most novice do in Forex trading that you should avoid is trusting cookie-cut formulas sold by so-called trading gurus. There are no such thing is surefire way, or formula that will 100% allow you to win at all time. Once again, the simple rule of “if it is too good to be true, it is” applies here as well. The trading market is an unpredictable one, and it is impossible to come up with formulas, patterns or so-called surefire ways to always win. You need powerful and intricate strategies to be successful.
Avoid the mistake that most novice traders do, which is following Forex trading tutorials blindly. Tutorials are meant to help and educate, however, in order to succeed in Forex trading, it requires for one to invest time, energy and effort making proper planning, intricate strategizing, and calculating risks as well as following the latest news on the Forex market.
This brings us to another mistake – which is the lack of research, planning, strategizing and practice. There is no excuse to be lazy in the world of trading. Unless you do not mind losing money, you should put in effort and once you have a plan set, practice it. Never compromise in studying and researching as trading is a never ending journey.
Hope you learned a thing or two from this Forex trading tutorial – and what is most important is to continue learning and researching and find more sources to learn from.