Last updated on March 31, 2019
Currency Trading An Introduction For Newcomers
We all have to start somewhere and where better than providing some definitions of what currency trading is commonly known as in trading circles.
Simply put, Forex is the business of buying and selling money. Currency trading is also known as the FX market but the most common usage is the vernacular phrase of Forex.
Within your local area you can see how prevalent this currency trading business has become. From the malls, the streets, and around the commercial district areas, you can find these small booths that carry the label Foreign Exchange Traded Here.
In places that never sleep such as the casinos and other entertainment hubs, foreign exchange trading can also be found. Many people treat currency trading as an on line casino as it can be traded 24 hours each day Monday through Friday.
Currency trading and Forex are two terms that mean the same thing and involve similar practices, which are the buying and selling of their main product: money. They are both over-the-counter markets that are trading money. Hence, they may fairly be used interchangeably.
What Is Currency Trading
Forex means Foreign Exchange and it is also known as FX. In Forex trading, you are buying one kind of currency while selling another kind at the same time. This means that you are exchanging your money for the one that you are purchasing. The basic rule is that every currency has its corresponding value in another currency. Currency exchange rate is the term used for the value of a certain currency that is being exchanged for another.
Currency Trading Can Be A Home Business
In the Forex business, the different currencies are dealt with in pairs, such as Euro to US Dollar or US Dollar to the British Pound. Although this kind of trade can be said to be one of the largest and widest trading market in the world, you would be surprised to note that it is an unregulated kind of industry. More than $1.9 trillion are being traded every single day, as trading is being conducted throughout the entire twenty-four hours.
Foreign currency trading is the market that has the highest financial liquidity. The most common traders in this business are the banks, central banks of every country, investors in big financial institutions, currency speculators, governments, corporations, the small retail investors, and other financial institutions. There is no formal forex market with an exchange like the London Stock Exchange or the New York Stock Exchange and in this informal global financial market there is more money traded than in all those stock exchanges put together.
Like all the other corporations and business entities around the globe, Forex has also been growing and developing over time. Today, trading of currencies has become simpler and easier because of online forex currency trading. Buying and selling currencies by currency trading can even be conducted through your computer at home utilising an online broker platform like meta trader 4.
Currency trading can therefore become a home based business without the need to commute to one of the city centres.
How do you improve your spread betting of the forex markets or get into spread betting forex?
Spread Betting Forex
That is the question I asked myself when I first decided to try my hand at spread betting the forex markets and the first place I decided to look was to look at some one that knew what they were doing. Who better than the spread betting giants IG Index?
11 Things To Think About
- Spread betting Forex:Understand the ways in which spread betting forex gives you an advantage over trading the underlying asset. Spread betting forex is tax-free; has no brokerage charges; leveraged trading makes your money go further; you can benefit from falling markets; low stakes; access to thousands of instruments from a single account. You can use a Forex EA
- Equally, understand the disadvantages of spreadbetting forex: it has the potential for more dramatic losses (on leveraged trading); its losses are not tax-deductible; you have no shareholder rights; and it’s not suited to buy-and-hold investing.
- When you are spread betting forex you need to plan your trade, and trade your plan. I talked about this last week – and I’ll no doubt talk about it again, and again. Why? Because it’s so important. Trading without a plan leads to impulse trading, emotional trading, and head-in-the-sand trading! None of these are good things!
- Keep a log of your trading when you are spread betting forex – a simple Excel spreadsheet is enough – and map your successes and failures.Train, practise, and limber up. Never embark on any form of trading without first practising. Some people are scathing of demo accounts, as they have different data feeds to live accounts, and don’t always give an accurate representation of results. But demo accounts have a valuable place in testing and training. Of course, they aren’t a substitute for live trading or spread betting forex for real, and for starting small and building your profits slowly which is a fundamental pillar to achieving success in spread betting forex.
- Manage your risk is very important when spread betting forex: match your trade size to your risk. If you’re spread betting forex prepared to risk £150 on a trade, and your stop is 15 points from your entry level, your stake size should be £10; if your stop is 30 points away, your stake should be £5.
- Always look at the overall equity in your account when spread betting forex – set a percentage of your fund you are prepared to risk on a trade. It should be your primary concern to protect this equity. If you make a lot of money in a short period of time, consider banking it, or taking some of the profits. Again, it comes down to protecting your core equity
- Understanding your margin is equally important when spread betting forex. There are a lot of myths banded about relating to leveraged trading and the risks that it entails. Trading on margin involves a higher degree of risk than other forms of trading – provided you understand that risk and manage your trade accordingly, this should not be a problem. Margin gives you more ‘bang for your buck’ – a way of making the most of your trading capital. It also allows you to spread your risk across many different shares and sectors. It is often abused by traders, who use it to overstretch themselves. However, used correctly, it is an effective trading tool when you are spread betting forex.
Watch for your emotional triggers. It is vital with any form of trading to keep your emotions in check. If you get the urge to go “off piste”, it’s a sure sign that you’re about to do something irrational and impulsive. “Irrational” and please believe me when I say “impulsive” should never be part of your trading plan – learn when to pull yourself up when spread betting forex
- Make friends with your losses. Losses are a valid part of the trading process – it’s important to understand that and not to equate losses with failure. It’s equally important to balance your win/lose ratio with your profit/loss ratio. It’s very possible to be a successful trader with a low win ratio, providing your profit/loss ratio is high enough.
- Eggs and baskets: don’t put all your eggs in one basket, but – equally – don’t try to specialise in too many areas. One of the joys of spread betting forex is that you can access so many instruments from your account: the FTSE, the NASDAQ, the DAX, futures, options, ETFs, currencies, commodities …. It’s impossible to keep track of all these instruments. Find one or two that interest you, and master trading with those before you expand your repertoire.
- Shop around. Different spread bet accounts offer access to different trading tools, like trailing stops, or different types of order. Charges, spreads and initial margin requirements also vary from platform to platform. I always recommend having at least two different accounts – that way you’ve got a back-up if one system goes down. There are also some great offers out there from companies keen to get your business.With thanks to Mark Rose of Traders Bulletin for compiling this list.
Forex Time Charts – Currency Pairs I Trade
The forex currency pairs charts that I trade most of the time are EURUSD, GBPUSD, EURJPY and AUDUSD
Each morning I look at 4 forex time charts for the various currency pairs that I trade as per my current currency trading plan and in line with my overall trading strategies.
The charts that I open are the Daily, 240 minute, 30 minute 5 minute and then trade the 2 minute chart.
Why do I do this the answer is simple it will help me make more money in the forex market and technical analysis is all about following and learning from previous price action. I choose different forex time charts which give me a broad view of what’s happening in the forex market right down to a micro level using real time forex charts.
Now what does each chart tell me? By the way forex charts are normally available free from your forex broker or spread betting company.
Technical Analysis With Forex Time Charts
Forex Time Charts I Use
This chart gives me the longer term trend, I also look from time to time at the weekly chart and the monthly chart too, but every day I check the daily chart.
240 minute chart
This gives me a perspective of the most recent trend
30 minute chart
This gives me a perspective on the previous day’s trend
5 minute chart
As I trade the European session even when I travel overseas this will give me the Asian market trend and what has happened overnight. I mark up the highs and lows of that trading session.
2 minute chart
Finally this is the forex time chart that I trade from and I consider it to be the best of my forex time charts for helping me to enter the markets at the best price. I find anything shorter in terms of time frame is too jumpy for me and anything longer does not give me enough of feel for the market and would give a greater risk to my trade.