As it was mentioned earlier, there are TWO timeless rules of Investing in FOREX:
RULE #1) ~ Cut your losers; let your winners ride.
YOU WILL HAVE LOSING TRADES.
We do. Every FOREX trader does. The key to being a consistent, predictable, reliable trader is to, at the end of the day, add up more wins than losses. And, when you KNOW (based off your trading rules), without a doubt, that YES, indeed you are, in a losing trade, don't keep losing money (lowering your stop loss) just to *prove you are right* or your rules are wrong (however you want to look at it).
Let's face it - you can't turn a sow's ear into a silk purse. You can't change the spots of a leopard and you can't turn chicken poop into chicken salad. The best trades are usually "right" immediately (the techniques, rules, methods and strategies we teach at RapidForex.com will be your best indicator for just what a "right" trade really is).
Remember, people have been trading the markets for a hundred and sixty years. The smart traders know there's going to be another trade. Cut your loses short and compound those winning positions.
RULE #2) ~ Thou Shall Not Trade the FOREX Without the Placing of a Stop Loss Order.
When you place a STOP order, right along with your ENTRY order, via your online trade station, you've just automatically prevented a potential loss from "running" too far.
Before initiating any trade, if you haven't already figured out at what point you would be wrong and would want to cut your loses or, at the very least, reevaluate your position from the sidelines, then you shouldn't be putting on the trade in the first place.
Show us a FOREX trader who doesn't use stop loss orders and we'll show you someone who loses a lot of money.
To make a profit, in the FOREX, a trader (possibly YOU soon?) can enter the market as a *buy position* (known as going "long") or a *sell position* (known as going "short").
For discussion, let's assume you've been studying the EURO.
Your trading methods, rules, strategies, etc., tell you that prices will rise during a particular timeframe. So you buy the EUR/USD pair (or, technically, you will simultaneously buy euros, the base currency, and sell dollars).
You open up your handy trading station software (provided to you for free by the online broker), which resides on your desktop, and you see that the EUR/USD pair is trading at:
<< EUR/USD: 1.3242/45 >>
REMEMBER: the quote to the left of the / (1.3242) refers to the bid or "sell" price (what you obtain in USD when you sell EUR). The quote to the right of the / (1.3245) is used to obtain the ask or "buy" price (what you have to pay in USD if you buy
So, since you believe that the market price for the EUR/USD pair will go higher, you will enter a *buy position* in the market. For simplicities sake, let's say you bought one lot at 1.3245. As long as you sell back the pair at a higher price, then you make money.
But, no worries. This seemingly elaborate process is handled, and even calculated for you, via the broker's software mentioned above. The chart software and the quote board are in agreement with all sides of the currencies.
To illustrate a typical FX SELL trade, consider this scenario involving the USD/JPY currency pair:
REMEMBER ~ Selling ("going short") the currency pair implies selling the first, base currency, and buying the second, quote currency. You sell the currency pair if you believe the base currency (USD) will go down relative to the quote currency (JPY), or equivalently, that the quote currency (JPY) will go up relative to the base currency (USD).
NOTE: while the Profit Calculations, on the Short-sell trade scenario below, may seem somewhat complicated if you've never been in the FOREX market before, trust us when we say, "this process is nearly seamless through your broker trade station (software). We're just showing you this thought- process below so you can SEE how a PROFIT occurs even when SELLING a currency pair.
The current bid/ask price for USD/JPY is 105.26/105.30, meaning you can buy $1 US for 105.30 Japanese YEN or sell $1 US for 105.26 YEN.
Suppose you decide that the US Dollar (USD) is overvalued against the YEN (JPY). To execute this strategy, you would sell Dollars (simultaneously buying YEN), and then wait for the exchange rate to rise.
So you make the trade: selling US $100,000 and purchasing 10,526,000 YEN. (Remember, at 1% margin, your initial margin deposit would be $1,000.)
As you expected, USD/JPY falls to 104.26/104.30, meaning you can now buy $1 US for $104.30 Japanese YEN or sell $1 US for 104.26
Since you're short dollars (and are long YEN), you must now buy dollars and sell back the YEN to realize any profit.
You buy US $100,000 at the current USD/JPY rate of 104.30, and receive 10,430,000 YEN. Since you originally bought (paid for) 10,526,000 YEN, your profit is 96,000 YEN.
To calculate your P&L in terms of US dollars, simply divide 96,000 by the current USD/JPY rate of 104.30.
Comments on Forex Trading Account Sizes, Lots and Margin Calls.
Forex trading is one of the best business opportunities you can
think of joining these days. No other market in the world allows
the "Leverage" that the profitable world of currency-trading
does. Leverage is all about margin trading. In the Forex...
Forex Online Trading – An Introduction
The Foreign Exchange Market (better known as the FOREX or FX market) as we know it today was established in 1971, following the abolishment of fixed currency exchanges. Operating 24 hours a day, 5 days a week, the daily currency trades on the FOREX...
Home Based Business Opportunity: Secrets Of Success In Home Based Business Opportunity, Exposed
Do you have a home based business opportunity or program?
Are you doing any affiliate program?
What type of home based business opportunity are you doing?
Are you a shining success in the home business opportunity that you’re doing?
How Do Other Countries Devalue Their Currencies?
Countries devalue their currencies only when they have no other way to correct past economic mistakes - whether their own or mistakes committed by their predecessors. The ills of a devaluation are still at least equal to its...
Trading Profitably on the Foreign Exchange Market
You may be asking yourself "how does one begin to trade profitably as a currency trader?". First, it is important to closely monitor foreign equity markets to attempt to predict or model how their respective currencies will perform against...
Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest / trade in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading.
** The Views and opinions represented in the provided website links and resources are not controlled by the Referring Broker or the FCM. Further, the Referring Broker and the FCM are not responsible for their availability, content, or delivery of services.