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Saturday, January 5, 2008


Well, FOREX isn't really mysterious anymore thanks to the opening up of the market in the last 10 years to private speculators like you and me rather than it being the solely the preserve of major banks and corporations.
Also known as currency trading, FOREX or (Foreign Exchange) trading means speculating on the short or long term movement of a given currency pair. If you have a currency pair such as the British Pound paired against the US Dollar (in short hand GBP/USD). If the pair is currently trading at a value of 1.8025 this means that there are currently 1.8025 US dollars to the British Pound and is the exact value of the current exchange rate.
During an average trading day this value will fluctuate between around 70 and 200 pips. "What on earth are pips?" you may ask, these are simply the number of lowest digit moves (or ticks). For example GBP/USD could start the day at 1.8025 and fall right back to 1.7850 thus losing 175 pips over the day.
When you trade pairs through a FOREX broker you either trade in what are called mini lots which equate to 1 unit of your chosen currency (as I trade in the UK that would be £1 per pip), or you can trade in full lots which equate to 10 units of your chosen currency (e.g. £10 in my case). If you live in the UK then you can trade through a spread betting company (where spreads tend to be wider which makes intraday trading trickier), though all your "winnings" will be tax free as spread betting is considered as gambling for tax purposes.
As you can see, if you manage to call the next major move that the currency is going to make, then with a single mini lot trading just the GBP/USD pair you could earn up to £175 on this example trading day, or with a full lot you can earn up to £1,750 per day. Now, what if you trade several lots rather than just one or trade several currency pairs rather than just GBP/USD ? As you can see - there is really BIG money to be made in FOREX.
If you could always call the market right and the currency always moved plenty of pips in the same direction, then it really would be "money for old rope". Unfortunately, the market may sometimes move in a 70 pip range and then it doesn't go straight from the lowest value to the highest or vice-versa, but tends to waver around all day up a bit, down a bit and so on. This is where you need to hone your skills in technical analysis to ensure that you have an "edge" on someone who is purely gambling on the currency pair price direction at a given time.
When people say that the foreign exchange market is the most liquid of all markets it's true - did you realise that approximately $1.9 trillion worth of currencies are traded every day on the Forex markets ? This liquidity means that markets are more inclined to conform to standard techincal analysis techniques than individual stocks and shares or indicies. These technical analysis techniques include that age old favourite of the floor traders on the commodities markets - pivot points.
FOREX is not a dangerous market to dabble with as those stock market veterans may tell you with a look of terror in their eyes - it is actually the safest and most predictable market to trade in ! Perhaps these reservations stem from 20 years ago when you needed an account with at least $500,000 to even be considered as worthy to enter the FOREX market. Today you can trade the spot FOREX markets through a FOREX broker and trade mini lots as you start for £1 or whatever a pip or you can trade a spread bet with the same amount.
The best traders aim for around 40 pips on average a day consistently - by this I mean every day, or at least when they average their trades over the year they will be looking at 40 pips per day. When you get to this stage and can consistently take 40 pips from the market, by trading just one full lot at a time you can be raking in £8,000 per month - not bad money for watching a computer screen at home! Anyone prepared to play with larger stakes can seriously clean up - some traders have started with $10,000 and in two years have transformed that initial account into several million dollars.
Unfortunately, it's not that simple to become a consistent 40 pips a day trader, there are many hurdles to overcome: you need general FOREX knowledge first (how to select a broker, place trades etc.), then you need the technical analysis knowledge, then you need to practice (prefereably on a demo account so you don't lose any money), then you need to start trading for real and that's where the real fun starts - all the emotional problems kick in such as greed, fear, over-confidence etc.
The purpose of this website is to arm you with all the tools necessary to become a top FOREX trader. The path is long and hard though the rewards can be very substantial making the slog well worth your while.
All I ask for providing all this priceless information for free is that you visit some of the brokers and experts links as this will help to pay for the upkeep of the site.

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