12 Dec 2014

How To Trade Forex Profitably (I)


Thank you for staying with me on this series on 40 different ways to make money online. I hope and believe you have gained a lot so far. Today, I continue in this section on making money as an online trader, and I have arrived at my specialty Forex trading.

If you have been following this blog for some months now, you already know that I am a Forex trader. Though I have only just decided to take it up professionally as a teacher and long-term trader, instead of the short term get-rich-quick mindset I applied to it for years. The difference is in both the mentality and discipline. And that applies to any form of online trading, whether sports betting, binary options, stocks trading or Forex.

I will explain some of the terminologies and give you some strategies you can apply to becoming a successful trader. I will give you useful links, websites, and signals providers (both free and paid) that you can subscribe to, to guide you daily in your trading, especially at the beginning. 

I will also show you how you can pay for or set up a free robot to trade for you even while you are asleep. A programmer can even develop an expert advisor to trade for him/her. I will explain how the news guide fundamental traders and how technical traders use the common indicators.

By the end of the series on Forex, you should be very knowledgeable about Forex even if you will never trade the market.

The Forex market is by far the largest market in the world, with an estimated $1.6 trillion average daily turnover. It is distinguished from the commodity or equity markets by having no fixed base.
In other words, the foreign exchange market exists at the end of a telephone, the Internet or other means of instant communication; it is not located in a building, nor is it limited by fixed trading hours. The foreign exchange market is truly a 24-hour global trading system. It knows no barriers and trading activity in general moves with the sun from one major financial centre to the next. 

Foreign exchange or FX or Forex comprises all claims to foreign currency payable abroad, whether consisting of funds held in foreign currency with banks abroad, or bills or cheques payable abroad; i.e. it is the exchange of one currency for another.

A foreign exchange transaction is a contract to exchange one currency for another currency at an agreed rate on an agreed date. How can you make sense of all this and make money too?

For example, Naira has presently lost so much value to Dollar and Pound. $1 was formerly 165.00 Naira just about a month ago. But as I type this, Google says

$1 = N180.75 (while £1 = N284.16) 

Therefore, If you had bought and kept $1000 in your wardrobe one month ago worth N165,000, today @ N180,750, you'd have gained N15,750.

Common terms you will often hear include: 
PIP: The smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point - for most pairs this is the equivalent of 1/100 of one percent, or one basis point.

Such that, with the example above, when $1 becomes N180.76, it has moved 1 pip up. And if it becomes N180.74, it has moved 1 pip down. When it becomes N181.75, it has moved 100 pips up.
In that example, you gained 1,575 pips keeping $1000 in your wardrobe.

Others are:

You can check up any of the terms and more at investopedia.com or babypips.com (glossary).


Let me leave you with these two quotes from Jared Martinez's free Forex ebook (some of you must have been seeing the Google advert to download it free, on websites including this one). He does a good job in Forex teaching especially with his free webinars, which I join from time to time:

Every new trader has dreams and those dreams can quickly turn into nightmares when they don’t know what they are doing. That is why I am so adamant about new traders finding a trading mentor. I didn’t have a mentor and my dreams quickly turned into nightmares. The only way I was able to overcome my nightmares was through the support of my wife who helped me to stay focused on my dreams.

And this one:

The Forex market is a place where organized chaos exists. It is a dynamic system that is extremely sensitive to the human condition. It is the science of matter and energy and their interactions. The ebb and flow, the yin and yang, the action and reaction, and the ups and downs of life have all been explained by Fibonacci.
Humans act within the market; not banks or financial institutions, but human beings with human feelings and human emotions cause the market to move. Our greed, fears, and habits create the market; yet we are nothing more than nature’s puppets acting, in most cases, in an unconscious state enabling us to participate in the balance of nature.

I will continue from here tomorrow.

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