Currency Trading Rules.

1. PLAN YOUR TRADE AND TRADE YOUR PLAN. You must have a trading plan to succeed. A trading plan should consist of a position, why you enter, stop loss point, profit taking level, plus a sound money management strategy. A good plan will remove all the emotions from your trades.2. THE TREND IS YOUR FRIEND. Do not buck the trend. When the market is bullish, go long. On the reverse, if the market is bearish, you short. Never go against the trend.
3. FOCUS ON CAPITAL PRESERVATION. The most important step that you must take when you deal with your trading capital. You main goal is to preserve the capital. Do not trade more than 10% of your deposit in a single trade. For example, if your total deposit is $10,000, every trade should limit to $1000. If you don't do this, you'll be out of the market very soon.
4. KNOW WHEN TO CUT LOSS. If a trade goes against you, sell it and let go. Do not hold on to a bad trade hoping that the price will go up. Most likely, you end up losing more money. Before you enter a trade, decide your stop loss price, a price where you must sell when the trade turns sour. It depends on your risk profile as of how much you should set for the stop loss.
5. TAKE PROFIT WHEN THE TRADE IS GOOD. Before entering a trade, decide how much profit you are willing to take. When a trade turns out to be good, take the profit. You can take profit all at one go, or take profit in stages. When you've recovered your trading cost, you have nothing to lose. Sit tight and watch the profit run.
6. BE EMOTIONLESS. Two biggest emotions in trading: greed and fear. Do not let greed and fear influence your trade. Trading is a mechanical process and it's not for the emotional ones. As Dr. Alexander Elder said in his book Trading For A Living, if you sit in front of a successful trader and observe how he trades, you might not be able to tell whether he is making or losing money. That's how emotionally stable a successful trader is.
7. DO NOT TRADE BASED ON A TIP FROM A FRIEND OR BROKER. Trade only when you have done your own research and analysis. Be an informed trader.
8. KEEP A TRADING JOURNAL. When you buy a currency or stock, write down the reasons why you buy, and your feelings at that time. You do the same when you sell. Analyze and write down the mistakes you've made, as well as things that you've done right. By referring to your trading journal, you learn from your past mistakes. Improve on your mistakes, keep learning and keep improving.
9. WHEN IN DOUBT, STAY OUT. When you have doubt and not sure where the market or stock is going, stay on the sideline. Sometimes, doing nothing is the best thing to do.
10. DO NOT OVERTRADE. Ideally you should have 3-5 positions at a time. No more than that. If you have too many positions, you tend to be out of control and make emotional decisions when there is a change in market. Do not trade for the sake of trading.

Point (Pip) Price

How to calculate the point (pip) price.All currency pairs can be subdivided into three logical groups - pairs with direct quote (EURUSD, GBPUSD), pairs with inverse quote (USDJPY, USDCHF), and cross rates (GBPCHF, EURJPY etc.). 1. The pip price for currency pairs with direct quote is calculated according to the following formula:[pip] = [lot size] × [tick size]where [tick size] - is the smallest possible change in price, for example for USDCHF and EURUSD it's 0.0001. For currency pairs with direct quote the pip price is constant.Example.EURUSD. Lot size is 100,000, tick - 0.0001. [pip] = 100000 * 0.0001 = $10.00
2. For currency pairs with inverse quote:[pip] = [lot size] × [tick size] / [current quote]For currency pairs with inverse quote the pip price varies depending on the current quote.Example.USDJPY. Lot size is 100,000, tick - 0.01. If current quote is 129.20, [pip] = 100000 * 0.01 / 129.20 = $7.74
3. For cross rates:[pip] = [lot size] × [tick size] × [base quote] / [current quote]where [base quote] - the current base pair quote.Example.GBPCHF. The lot size is J62500; if the current quote is 2.3000 and the base GBPUSD quote is 1.4550, [pip] = 62500 * 0.0001 * 1.4550 / 2.3000 = $3.95.

Forex Training

Learn to Trade Forex encompasses the extensive knowledge and expertise of GAIN Capital Group's senior trading and market analyst teams.GAIN Capital Group is one of the most respected online forex trading firms in the industry. The company provides a full range of forex investment services to institutional and individual traders worldwide, currently serving clients from over 110 countries.For individual investors, GAIN offers FOREX.com, a service tailored to meet the needs of the retail trading community. Through FOREX.com, GAIN offers individual investors access to award-winning trading technology and professional-level services. GAIN also operates a successful Managed Accounts (MAC) program for investors who prefer to have their investments professionally managed.Recognized industry-wide as FX market experts, GAIN's senior traders are regularly sought after by major news organizations such as The Wall Street Journal, Reuters, Bloomberg, Dow Jones, CNBC and other media outlets for market commentary. GAIN also regularly tops the charts of FX Week's "Currency Index" by consistently providing accurate market forecasts.GAIN traders have a level of market awareness that is simply unrivaled in the industry, making them an ideal source to tap into for practical know-how and trading skills.Dedicated to advancing trading education, GAIN Capital Group is pleased to introduce Learn to Trade Forex as a complete educational resource for novice traders.

Forex Business

For the last three decades Foreign Exchange market - briefly Forex or FX, had integrated into the world's biggest financial market. The volume of daily transactions is about 1-3 trillion of US dollars. The trading instruments on this market are the currencies of different countries, so the fluctuation of currency's rates allows to gain a real profit.
Of course monetary assets of different countries exchanged since the term money appeared as well as an idea to obtain profit from currency's rates difference. Now it is not a new idea, but the transformation of foreign exchange market to the modern stage with an opportunity to conduct conversional operations of such volumes arose only after an introduction of floating rates regime by the state-members of IMF. Within this regime's framework the rate of one currency to another is defining only by the supply and demand on the market.
Presently Forex market is a global telecommunication network of banks and different financial organizations. It does not have any fixed trading place and time restrictions - the trade starts on Monday morning in New Zealand and closes on Friday evening in USA
The advantages of Forex market are:
Round-the-clock trading access: the ability to trade for 24 hours a day;
Liquidity: the market works with a huge money and gives the customers complete freedom to open or close their position of different volume;
Leverage: an ability to use leverage. It decreases requirements to the sum of the initial deposit (margin trade). So in case you deposit 10 000 USD into your account you'd have an opportunity to work with 1 000 000 USD (leverage 1:100);
Objectivity: no exterior regulated structures, so the currency's rate is establishing in accordance with current supply and demand on the market;
Globality: everyone can become a market participant irrespective to the living place, as trading requires only your skills and Internet access.
At present mostly all the operations on the market are conducting only to obtain profit. With the development of Internet and other means of communication this sector of the financial markets becomes more accessible and attractive for the investors of different levels.

Today's Currency World

In the 30 years since the collapse of the last gentlemanly agreement on currency rates, many momentous events have occurred that have affected currencies worldwide. The Japanese yen gained prominence because of Japan's heavy export relationship with the United States. The USSR collapsed. We have had several undeclared wars, the south Asian economies have risen and collapsed, and several investor bubbles have come and gone.Each time, currencies have come away with a newly earned respect by the masses. There has also been a constant element of surprise that keeps you guessing what's next.Current conditions, such as the United States' perpetual war on “terror”, the permanent introduction and dominance of the euro currency, the steady O.P.E.C. increases in oil prices, and gold's renaissance as a store of value, will likely have a tremendous impact on the future of what it means to trade currencies.This could be a fundamental shift in the next phase of currency development.

New Rules of Currency

In 1971, the Smithsonian Agreement replaced the Bretton Woods Agreement and authorized “forward currency contracts”, adding validity to the Eurodollar phenomenon. It didn’t work. A year later the European Joint Float was established. It, and the Smithsonian Agreement, were scrapped in 1973. Even though they were dissolved the concept of “forward currency contracts” stayed as part of the banking system.Once currencies began to “free-float”, they immediately moved away from their gentlemanly 1% fluctuations on either side to huge price ranges, going anywhere from 20-25% daily.From 1970-1973, the total foreign exchange volume went from US$25 Billion to US$100 Billion. With oil prices up, gold prices up, and an economy still reeling from the rapid currency shift, “stagflation”, rising inflation while real incomes remained the same, soon hit the United States.

The 1970's United States Currency Policy Meltdown

Once again, we are hit with the triumvirate of war, the restrictive gold standard, and dollars in foreign banks.This time, each problem was feeding directly off of the others. The Vietnam Conflict had drained our gold reserves heavily. By 1970, Fort Knox only held US$12 Billion.The growth of the oil business and the increase in foreign trade caused a boom in the demand for US dollars in foreign banks. Over US$ 47 Billion was sitting in overseas banks.On paper, our gold reserves were over-leveraged by almost 4 to 1. As a nation, we did not know how to react to such an overbearing assault on our currency. Then along came the invention of the Eurodollar to make our nightmare worse.Foreign banks with US dollars would make low-interest loans in US dollars to importers and exporters. Although the dollars were never repatriated, the US was still on the hook to exchange these “credit”-created dollars for the gold we kept on reserve.Then came a miracle in disguise . The Bretton Woods Agreement collapsed. In the over-leveraged gold-dollar environment, many countries began to feel frustrated with the artificial peg.In blatant defiance to the agreement in 1971, Germany declared that they would float the Deutsche mark. They were tired of the artificial peg that was keeping their economy depressed.In the first hour of trading, over US$1 billion were exchanged for Deutsche marks. For the first time, the public had voiced their opinion against being so heavily weighted with dollars.With Germany completely ignoring the Bretton Woods Agreement by floating their currency, the US government had nothing left to do but put the final nail in the coffin of the U.S.'s currency policy. The Bretton Woods Agreement was dissolved.Three short months after the Deutsche mark began to float, the US moved off of the gold standard. Gold was allowed to float freely like any other currency. Oil, although priced in US dollars, soon switched to a peg against gold. Gold and oil prices jumped ten-fold.The currency dynamics were soon changed on a global scale and it became accepted practice that countries began to float their own currency.

Pre-Currency Trading Era – The 1950s

Entering into the 1950s, the United States of America had a distinct advantage over war-torn Europe. While Germany was heavily sanctioned, England, France, Italy, and several other Old World nations were just coming to terms with the heavy investment needed to rebuild their countries.As a way to make it easier for the rest of the world to rebuild, the Bretton Woods Agreement was adopted. It was innocuously simple: in an effort to keep the United States of America (USA) from buying everything in sight, the Bretton Woods Agreement kept the USA in check by requiring all foreign currencies be pegged to the US Dollar. Some pegs were strong, some pegs were weak, but at the end of the day they never moved more than 1% in any direction. Like today's problem with the Chinese Yuan, forced to a peg against the dollar, it kept a constant, controlled flow of US dollars out of the country.The peg would not have been so bad if not for the fact that the US dollar also had a unique relationship with gold. Just like currencies, gold was pegged to the dollar at a fixed value of US$35/ounce. What made it even worse was that US currency, at the time, was directly exchangeable for gold. This strategy was fine as long as the Fort Knox gold reserves exceeded $23 billion.After World War II, the USA became the primary economic super power. Many foreign countries began to acquire US currency in lieu of gold. The dollar gained prominence in a way no other currency ever had before.At the same time, we began to see the rebuilding of the Old World and foreign trade began to gain momentum. In 1950, foreign countries held US $8 billion. We also saw the oil business begin its ascent as a prominent import/export industry.

History Of Forex

Friday, January 16, 2009

The History of Firefox
The Forex trading market is a relatively new phenomenon. Never before in the history of the world have we seen such an amazing event. In only 30 years, this industry has developed from almost nothing to a daily US$1.5 trillion market. How did this happen? Was it by design? Or was it by accident?Well the answer falls somewhere in between. There are three distinct time frames that set the stage for today's style of currency trading. The first time frame is the pre-currency trading era of the 1950s. The second time frame is the worldwide, politically volatile atmosphere of the 1970s. The third time frame is what has occurred in this free market economy since the demise of the gold standard 30 years ago. In each time frame, there have been three catalysts: war, gold, and foreign banks- that have played a significant role in propelling currency development.