Online Forex Trading Tutorial

There is an old adage connected to online forex and stock trading. It goes some what like this If you are inexperienced and have money and meet an experienced trader, but without money, you are likely to end up with experience and the experienced trader your money. There can be some semblance of truth in this but what this infers is trading without experience and strong fundamental knowledge of the market is an invitation to loss making.

Online Forex Trading Tutorial
There are several reputed online forex trading houses that cater to retail investors and traders. The same trading houses offer to train their prospective and existing clients on the nitty gritties of online forex trading most of the times free of cost.

What You Need To Learn About Online Forex Trading?
If you are a novice you need to start from the beginning. The macro economic factors that affect price volatility and the demand and supply of currencies that trigger the short term fluctuations which are your trading opportunities and most importantly the points of entry and exits form the basis of your learning.

Most of the online forex trading tutorials available require you to open a cost free demo/practice account so that you get exposure to either real time or simulated environment for better understanding.

Online Forex Trading Tutorial Curricula
You will see that, generally all the tutorials have more or less the same curricula. Basically speculations are made through a number of charts and indicators.
Chart Types:
1. Line chart
2. Bar chart
3. Candle stick chart

All these charts are price plots for selected periods. Then there are several indicators that help make decision. The important and most followed ones are

1. Average true range (ATR)
2. BOLLINGER BAND
3. Commodity Channel Index
4. Linear Regression
5. MACD
6. Momentum
7. Moving average
8. Parabolic time price
9. (ROC)Rate of Change
10. Relative Strength Index
11. Slow Stochastic
12. Standard Deviation
13. Stochastic

All charts and indicators are taught with sufficient demonstrations for self study. The tutorials deal with the patterns and formations made by charts/indicators and what they mean. While charts help you for short term speculative trading (technical analysis) they don't concentrate on the underlying reasons for price movements. This is the ground for fundamental analysis. The study of macroeconomic factors such as changes in government policies, wars etc that influence supply and demand, and as a consequence prices, constitute the fundamental analysis. These things are illustrated in contrast with demonstrative price movements.

Money Management – A Crucial Aspect of Trading

Many traders believe that the obvious way to make money is simply to have more winners than losers, but this is too simplistic, and what often trips up the unwary player is a lack of money management and attention to risk. Clearly, entering positions correctly and where to place stop losses are of great importance, but one area that is rarely examined because it is very complex is money management, and the reason is probably quite simple.

Certain trades or investments appeal to different people, and who is to know what their overall financial position is before giving them the correct advice on what amount to trade or invest. Furthermore, it is very easy for an investor to confuse a trade with a portfolio investment of stocks, or make a long term purchase but with one eye on a quick buck. For these reasons, money management rules must be adhered to for each trade.

A typical experience

One of the experiences many of the great traders have in common is that they blew a fortune early on, simply because they had no conception of money management. A typical story was that they had traded well, running a sum of say $10,000 up to $15,000 in six months, and they began to think that because they had a good trading system, they would have done better by leveraging up for super fast profits. In some cases they simply doubled up trading positions, but ran into a string of losses. As they did not reduce trading size accordingly, the account equity was wiped out and they ended up actually owing money within days it was that quick.

For sure, they probably were not limiting risk with stop losses, but in some cases the share or commodity gapped up or down, and just one big trading position was all it took to blow away months of hard work.

Extreme events and the problems they can cause

One of the more remarkable aspects of trading is the frequency of extreme events, but these are simply statistical anomalies which occur with random regularity (forgive the lapse into chaos theory, but it's important). There have been instances of a doubling of a share price overnight � this occurred with Psion twice in 1999. At the other extreme, there was a fall of 70% in a day with Marconi on the 21st March 2002, where they opened at 92.5p (adjusted for share consolidation), and the next day hit 27.5p. At the time, these were both FTSE 350 stocks at the time, and not small companies.

How to reduce the risk of wipeout

These might be extreme examples, but the bottom line is that events often happen when you least expect them. You must treat your trading account as distinct from all other investments, and once you've done this, there are three things you can do:

1. Accept that occasionally there will be an extreme event, so if the worst that can normally happen is a 30% fall on a profit warning, or an equivalent rise on a bid overnight, work out how much that would impact your equity.
2. Don't feel that by buying five blue chips of equal amounts, you've diversified your risk - if they are highly correlated i.e. high beta stocks, or they are all tech stocks, then it is virtually the same risk as buying five times the amount in one stock.
3. If your equity is falling, and statistically you can expect a run of eight or more losses in a row more than once within a typical trading lifetime, keep reducing your size until you start winning again.

How much should you risk on each trade?

From experience, if you aim to lose an absolute maximum of 5% of your account equity on one trade, and combine a wide range of trades in different asset classes with long and short positions, then you should have at least 20 consecutive attempts before it's time to give up.

So if you have to set a stop loss on a volatile share which is wider than normal, then simply reduce the trade size for that share so that your maximum loss is no higher than usual. Furthermore, if you do run into a string of losers, if you keep reducing position size, then your losses will slow down.

Finally, all trades should be treated in the same way, and if you don't feel that a potential trade looks as good as others in your list, then don't do it. The converse is that you must take every trade that fits your entry criteria, whether or not you have won or lost recently. The whole point is that a good disciplined system will only work when all trades are taken with equal amounts using realistic targets, stops and money management.

Make Money Forex Trading by Utilizing Volatility

Traders in the forex market are now a savvy lot. Almost everyone in the forex market nowadays are self trained in reading charts, or a user of some form of high technology software to trade the forex market. Some have graduated from using simple technical analysis to the new fangled sophistication of neural network forecasting and artificial intelligence. But yet a great majority of these professed experts fail in their trading, losing money from their trading rather than making profits. Why is it so?

The answer lies in the devil within. The traders who win are those who are capable of executing their trading plans with discipline and precision, and more importantly, they can cope with the VOLATILITY of forex trading.

Theory is if you can identify volatile movements, even if they are small, and execute trades with these volatile movements, buying on the lows and selling them at the peaks, you stand to make big profits. However, in practice, many volatile movements are too fast and tiny to be identified in time to be traded profitably. Where larger volatile movements are identified, it is error in judgment and the speed of execution of the trades that reduce the amount of profits.

When I was conducting research into writing a report on how a trader can recoup his losses after a horrendous period of bad trading, I was pleasantly surprised by a veteran trader who told me he was a profitable trader from day one of his starting trading. This is by no means a false claim, because this flamboyant trader has always been known both for his tremendous skill in trading and for being anything but decent about his skills and his ability to make the correct calls in the market.

Being surprised, I asked him what was his profession before he became a professional trader and a trading coach. His answer added to my surprise, because he said, " I was a professional poker player and the runner up in the Australian poker championship!".

Therein lies his great success as a forex trader as well, because as a poker player and a champion player at that, he was accustomed to taking calculated risks.

The secret to trading his style was to take calculated risks in his forex trading.

For example, if you have identified a trade, and you have placed a trade, do not place your stops too near the entry price because the odds favor the stops being hit most of the time.

Rather, you can assess the odds and probability of the stops being hit before you place them.

Again, when a trade presents itself, and you can compute that the odds of winning is in place rather than losing, it is then that you can increase your trades.

If you desire to win big, learn to compute the odds of winning, and like the successful poker player, bet big when the odds are in your favor and stay away from a trade where the odds indicate you will lose.
This is where forex traders will measure their risk-reward ratios for their favorite trade setups and can identify which trade setup will result in bigger profits and with lower risks. This is a skill that you ought to learn to become more profitable.

Foreign Currency Trading – F.A.Q. for Travelers.

Get your currency needs managed in advance. Many airports, railroad stations, bus depots, and other points of entry have no currency exchange. When currency exchange is available in airports, lines can be long and rates can be "sky high."

Aren't US dollars accepted everywhere?.

In the majority of countries, including all of Western Europe, only the local currency is accepted. Some tourist businesses, such as hotels, will offer to change money for you, but the rates you get can be much higher than you would pay if you were to complete your foreign currency exchange before you leave the US.
Business hours and holidays are not the same in other countries, and banks there may very well be closed when you expect them to be open.
You will need local currency to get into town.
When exchange facilities are available in the airport, lines are frequently long, and rates are often high. Also, many countries have no currency exchange facilities in airports, railroad stations and other points of entry.
Changing money before you go buys you peace of mind.

Can't I just change my money at my bank?

Compare the rates offered to those at from vendors listed above. Outside of major cities, foreign exchange is a very tiny business for US banks. Most branches don't keep foreign currency on hand. You'll have to order it from a main branch, pay in advance, and make two trips to the bank.

Can I take my bankcard instead of exchanging my money?

Depending on where you're going, you may be able to find many bank machines that will accept your bankcard.

However, you should be aware of some disadvantages of using your bankcard abroad. You cannot always be certain that you will find a bank machine that accepts your card. In addition you may be charged high network access fees and disadvantageous exchange rates.

Many tourist-related merchants, restaurants and hotels will accept your creidit card. Lately more of them will automatically ring them up in your home country's currency which makes it easy to see how much you are actually paying. The challenge is that you may get socked with a dismal exchange rate�considerably higher than if your card provider were making the conversion.

How can I transfer funds internationally?

You can transfer funds directly into another account or you can transfer funds by Bank Draft�essentially a Bank Check written in a foreign currency. Also known as an International Draft or International Money Order, they can be deposited directly into a foreign bank account. International payments can be made with a wire transfer, also known as a Money Transfer. International Wire Transfers can take 3 to 10 business days. A Foreign Curency Draft can be used to pay suppliers or vendors internationally.

How about foreign curency trading?

Currency trading is the simultaneous exchange of one country's currency for that of another for the purpose of hopefully making a profit. Currency markets offer 24-hour trading, high liquidity and low transaction costs which may make it attractive for stock, futures and options traders.

You'll want to limit risk with stop and limit orders. While it is possible to leverage currency trading transactions, remember that leverage exaggerates both gains and losses and can generate large gains and losses even when market conditions are relatively calm.

Getting Into The Lucrative World Of Forex Trading

For many years the foreign exchange market was the preserve of major players such as national banks and multi-national corporations. In the 1980s however new rules were introduced which permitted smaller investors to enter the market through a margin account. In simple terms, a margin account allows you to trade with more money than you actually have in your trading account. For example, a 100:1 margin account allows you to participate in trading up to $100,000 with an investment of only $1,000.

Now, although this entry level has clearly opened up the market to the smaller investor, care needs to be taken as Forex trading is not an easy undertaking and is certainly not without its risks. For this reason the very first thing that any novice trader needs to do is to sit down, study the foreign exchange markets carefully and learn the ins and outs of trading before putting any money at risk.

In addition to some basic training, the newcomer will also need to find a good broker as all trading must be conducted through a broker. Here a personal recommendation is often the best place to start but, in the absence of this, you should choose a broker who is registered with the Commodity Futures Trading Commission (CFTC) as a Futures Commission Merchant (FCM). This will provide you with protection against both abusive trade practices and fraud.

It is normally a fairly simple process to open an account with a broker and once this has been done and funds have been added to your account you can begin to trade. Brokers will normally offer a number of different accounts to suit individual clients and most will have "mini Forex accounts" which will allow you to begin trading with as little as $250. The margin on which you the broker will permit you to trade will vary from one account to the next.

One thing that you should always look for when your are selecting a broker is the ability to cut your teeth by carrying out simulated, or paper, trades for a reasonable period of time. This is a facility which the vast majority of good brokers will provide and which simply allows you to trade in the normal manner but to do so on paper and without any money changing hands until you have found your feet. Many of the online brokers provide simulated trading accounts which allow you to make free paper trades for up to 30 days.

One of the things which worries a large number of newcomers to the world of Forex trading is the subject of trading charges and brokerage fees. Unlike many of the other markets, the Forex market is free of commission and so you can make as many trades as you like without worrying about running up huge brokerage fees. Your broker will make his profit from the 'spread' on each trade, which is simply the difference between the buying price and the selling price of a currency pair and is a subject all of its own.