If you are considering venturing into the realms of forex trading, you will not be disappointed with the amount of information available at your fingertips to help you with your investments. There is an abundance of forex trading companies, forex forums, videos, tutorials, guides and gurus that you can look at online to get you started, and help devise a suitable forex trading system for you.
Some examples of forex trading sites
Trading brokers – most forex trading brokers will have their own website. Also online are a variety of review and comparison sites, which look at the different brokers in the market and offer useful advice to help you choose the right broker for you. These kinds of forex trading sites will give you hints, tips, guides, tutorials and lessons to assist you in the development of your forex trading career. They will offer you a variety of trading platforms with which you can make your trades. All your trading can be done via these websites. Some offer trading bonuses to encourage you to join them. Forex trading site comparison websites will allow you to see what the brokers have to offer and enable you to easily compare one against the other. There will also be links to take you to a particular brokers website if you like what you see.
Trading information sites – these sites also offer a wealth of tutorials, guides, tips and general forex trading information. You can learn about the special language forex traders use, read up on different forex trading strategies, as well as keep yourself informed of the latest forex news.
Trading forums – these are usually set up by other forex traders. They are a place you can go to pose a specific question regarding your foreign currency trading. Most private forex traders enjoy sharing their knowledge and giving advice. A forum is a good way to tap into this, whatever you need to know.
Trading rooms – here you will be able to look over the shoulders of an expert, understand their forex trading strategies and copy their forex trading techniques. You may be required to pay a monthly membership fee, but on offer is the opportunity to watch how successful other experts can be and imitate the methods they use.
Some basic forex trading terms explained to help you build your system
Before starting your research across the various forex trading sites lets look at some of the basic terms you may come across when visiting them.
- QUOTE – always given for a currency pair, it gives the up to date market price. The first price in the pair is the quoted currency and the second is the counterpart. There are always two prices for each currency, one being the bidding price or selling price while the second is the asking or buying price.
- BID/ ASK – a currency is offered up for sale with a bid or selling price. A currency can be bought at the asking or buying price.
- LOT – a lot is the standard unit used in a transaction. It also represents the minimum quantity of a currency that can be exchanged in a single trading deal.
- PIP – the smallest value in a currency quote. Any trading profit is expressed in terms of pips. For example, if you chose to purchase GBP/USD at an exchange rate of 1.6412 and sell at 1.6472 your pip profit would be 60 pips (1,6472 – 1.6412 = 0.0060)
- SPREAD – simply the difference between the buying and selling price. Private individuals who trade in forex have to use the services of a broker. In order to make a profit from the trades they undertake for their clients, brokers attach a spread to the currencies they buy or sell.
- MARGIN – in order to keep or begin a trading position a margin is required. If, for example, you wish to hold a position of 100,000 GBP/USD, you may have a margin requirement of 0.5%. This means that you have to maintain an equity level of 500GBP.
- LEVERAGE – this refers to using credit or margins to increase the level of currency trading you can undertake. With leverage one british pound can have as much trading power as fifty. Extreme care has to be used when adding leverage to the mix. Although it offers the opportunity of huge profits this can also easily and quickly be translated into huge losses.
- LONG – the expectation that the price will rise, when buying a currency pair
- SHORT – the expectation that the price will go down, when selling a currency pair
- VALUE DATE – the date on which payment will be made
- ROLLOVER – explains the rolling over of a settlement date to the next day.
Deciding on the best forex trading system
When trawling through the sea of forex trading sites you will find that “forex trading systems and strategies” are discussed rather a lot. So just what is a forex trading system? Well simply put is is the information a forex trader uses to decide when, where and how much to invest in a particular forex trade. The best forex trading strategies can be based technical analysis through the use of online trading tools or what is happening in the various economies of the world at large. You can make use of top rated forex trading systems by visiting the variety of forex trading sites. You will find them at a fixed price or a monthly subscription and even for free.
Technical or fundamental analysis for the best forex trading system?
There are many tools and techniques the professional forex trader will utilise when developing their forex trading strategies. Basically they fall into two simple groups.
- TECHNICAL ANALYSIS
This method relies on historical data with regards prices to predict what will happen to prices in the future. It has been a type of analysis that has been in use for many years, particularly with regards the movements of the stock market. It can take a variety of forms and use a range of tools and ways in which the information can be used. We will take a look at some of these shortly.
- FUNDAMENTAL ANALYSIS
Fundamental analysis involves looking at world and individual countries economies, the financial standing of particular companies, current political trends and even weather conditions. Based on the detailed information a trader has chosen to focus on, they then decide when, where and how to invest their money. Decisions are based on the belief that world events affect foreign currency values in certain ways and future prices can be predicted dependant on certain factors coming into play.
A forex trading method that is based on technical analysis
Using technical indicators is one way of developing forex trading methods. As always, with forex trading, there are numerous forex trading sites that will help you with your analysis. This form of analysis is usually displayed in graph form. A renowned technical indicator is MACD or moving average convergence/ divergence. It was created by Gerald Appel late in the 1970s. Basically it is based on moving averages. There are however, other forex trading methods that make good use of technical analysis. You could use trendlines, or calculate support and resistance. Both mean you are looking at charts and viewing price history. You will be looking closely at what the price is doing. Is it moving in a pattern, or between certain points? It will usually be doing one of these two things so you can predict what will happen to the price and also when it will change.
However, it is important to remember that even the top rated forex trading system is not perfect. Accurate figures are provided but the actual interpretation of that data is down to the individual and we all know very few people think exactly alike. The many ways in which the trends can be viewed means there are innumerable forex trading strategies that you could choose to adopt as yours.With a bit of experience under your belt you are sure to come up with your own individual best forex trading system. You can be sure that the forex trading sites you visit will have many tools to help you hone your own trading strategy.
A top rated forex trading system that is based on fundamental analysis
Fundamental analysts work on the belief that world events, whether political, economic, financial or even natural, influence the foreign exchange markets in certain ways. Based on these beliefs they make decisions regarding when, where and how to trade in foreign currencies. Fundamental analysis has been used by traders since trading markets began, as it did not require the intervention of computers. Nowadays, of course, the amount and variety of worldwide information has greatly increased.
Countries regularly release reports regarding their current economic situation. They will give the reader details of employment figures, inflation, trade figures, growth and productivity. By reading these reports and looking at other country specific information a trader uses their own intuition to predict what is going to happen to the price of particular currencies. As with technical analysis it is a person thing and the way in which traders view the market can differ greatly.
Different types of forex trading styles to adopt
There are many different styles you can choose to adopt for your forex trading strategies. Lets look at a few of them and see what you need to know in order to adopt one or more as your own individual trading style.
Originally the exclusive trading style of banks, day trading is now open to all. This is because banks were historically the only institutions who had ready access to up to date information. The increased number of forex trading sites means that the ordinary man on the street now has the required information at his fingertips. As the name implies, the trade is completed in less than one day. Positions are not held overnight, or rolled over. They can be held for a few seconds or minutes, known as short term trading, or for as long as the trading day, known as longer term swing and position trading. This type of trading is extremely flexible. Traders can decide how long they want their position to stay open and whether they want to make just one or multiple trades during the day.
If you choose to adopt a position trading style you are in for the long haul. This type of trading style requires predictions to be made over the long term. The time scale can be weeks, months or even years into the future. Experience and knowledge are a requirement for this style of forex trading system. You could decide not to put all your eggs in one basket and trade in a combination of styles, in order to maximise your profits. You will need to focus on long term goals rather than trouble yourself with day to day fluctuations.
This is a popular style of trading for the seasoned veteran, with big pots of money to invest. The profits can be large, particularly when leverage is taken into account. A popular currency pair for carry trading is AUSD/JPY. Charts and indicators are used to calculate the right time to enter the market, as well as pull out. This type of forex trading strategy requires an investor to sell a currency with a relatively low interest rate and buy another that yields a high interest rate. Carry trading can be very risky because of the uncertainty of exchange rates.
Conlusion and some things to watch out when trading
Before you venture into the forex trading market, make sure you do your research and learn as much as you can. You are not on your own as there are plentiful forex trading sites to visit to increase your knowledge and hone your skills.You will be able to gain valuable information and practise different strategies before you decide on the best forex trading system for you.