Forex Killer

FOREX KILLER

Forex Killer is a Mathematical Forex Trading Software. Andreas Kirchberger, the creator, designed this software to generate trading signals based on statistical analysis from the closing prices of forex currencies.

From the last 10 closing prices, Forex Killer will generate one of the following three signals:

Buy
Sell
No Trade
What Is Forex Killer?
Forex Killer is a completely mechanical and mathematically based forex trading system. In terms of deciding entries, there is absolutely no discretion involved. Entries are a clear cut, 100% mechanical Buy, Sell or No Trade.

To use Forex Killer, you simply input the closing prices of the last 10 bars of whichever currency you are trading in the time frame you are trading in.

Once you’ve punched in the numbers, you click on “Calculate” and you get a signal which tells you either to Buy, Sell or Stay Out. It’s that simple to use.

The Forex Killer Calculator

This is a trade generated by the Forex Killer Calculator on the GBPUSD 4H chart:

It’s pretty impressive in finding good entries into trends as well as for short term trading.

Testing Out The Forex Killer Calculator
After testing the Forex Killer, it definitely does find the beginning of new trends. As a trading signal generator, it works especially well in trending markets, and if you notice a trading range forming, you simply drop into a lower time frame like the 1 hour or 30 min charts to find a signal.

And here’s another idea how you can reduce the number of losses through a trading system filter.

Using A Fibonacci Moving Average Filter



While you get high probability trading signals, one way of finding those really huge trending trades is going for larger profit targets when your Fibonacci Moving Averages indicate a trend in the direction of the signal.

There’s a chapter on using Fibonacci EMAs, where moving average lengths are suggested for different time frames.

By having all the Fibonacci EMAs supporting the trade, you are identifying that a potential BIG trend is beginning. And together with the Forex Killer Trading Software, you have a high probability entry almost right at the beginning of a huge trend!

Does the Forex Killer calculator work every time? No trading system does that, but it definitely is a great help in finding mechanical entries that leave no room for guessing. There’s no discretion, and that’s really useful to many traders who have a hard time with discretionary trading.

Work You Still Have To Do With The Forex Killer Calculator
Once a signal has been generated with the Forex Killer, you simply open a market order with the recommended stops and profit targets for the time frame you’re trading in. It can be from the weekly charts all the way down to even the 5 minute charts.

If you want more action, go down to a lower time frame. If you want to trade in a more relaxed manner, trade on a higher time frame.

While the Forex Killer is great to use for beginners, experienced traders will love using it to find trades into big killer trends. You could use Fibonacci Retracements and Expansions to find stop loss levels and potential profit targets, giving you larger profit targets and bigger profit potential.

Forex Killer definitely simplifies trading for those who want a mechanical trading system, while allowing experienced traders to enhance profit potential by adjusting profit targets in larger trends.

Will Forex Killer Work For You?
Forex trading has the potential to make a lot of money with very little work, and Forex Killer reduces that workload even further. If you want a mechanical, mathematical forex trading system you have found one in the Forex Killer software.

You can even use it to confirm trades on your existing forex trading systems.

The Forex Killer is one of the simplest mathematical forex trading system software I’ve seen, and it’s a very good tool to have in your trading toolbox!

Finding Your Trading Success

In the course of your trading education, you’ll come across many various trading strategies, tactics and techniques. Some of them might make sense to you, some of them won’t.

There are traders who have traded for quite some time (and I mean in terms of years, not weeks or months) who still find it difficult to find trading success. Some long-time traders feel they are so close, yet seem to be unable to break through into consistent profits.

The Reality Of the Trading Game


When you consider the minority of traders are the ones who are able to consistently make money, you may wonder how you will ever get into that elite group of traders. So, I want you to consider this:

Trading, in terms of physical labor, is almost sedentary in nature. What do you actually do? Read a few reports, press a few buttons, draw a few lines, etc. You don’t even need to get out of your chair to trade.

So what’s the difference between a winning and a losing trader?

The Mental Game of Trading

Trading is a mental game. It’s a mental game in terms of having the proper understanding of how the markets operate, and having realistic expectations in what you can accomplish within a specific time frame.

Surely you don’t expect a newborn baby to be able to jump and slamdunk a basketball minutes after entering this world, right?

Drawing a parallel, new traders come into this business and expect to consistently make 100% or more a month, when it would be more realistic to serve an apprenticeship over the course of months, sometimes years. Just as you don’t expect a baby to slamdunk right out of the womb, you wouldn’t expect a new trader to consistently turn 100% profits on a consistent basis every month.

In most cases, if you are able to break-even every month you are already on the track towards trading success. That’s because you just require the occasional month of large profits, with the many months of small wins/losses to be profitable for the year.

Realistic Trading Expectations

A realistic expectation of trading would be many small wins, many small losses, and a few big wins that give you your trading profits.

Getting the right perspective on trading success is crucial, because in most cases with new (and sometimes experienced but not profitable) traders is their expectations don’t match with trading reality. And when expectations don’t match, that’s where the frustration and emotional upheavals occur.

But when you realize this is the nature of the trading game, it brings you a lot closer towards trading success because your mental reality of trading is more aligned with the actual reality of trading.

Summary of Finding Trading Success
Understanding the reality of trading will make or break you as a trader. Understanding market structure, price action behavior and having expectations in line with how the markets are will determine how successful you will be as a trader.

Making 5% - 10% a month on a consistent basis, with a large account, is something more realistic and achievable than trying to make 30% to 40% a month, all things considered.

Plus, as you will realize the longer you play the trading game, every single successful trader has gone through their journey of losing, losing, losing and more losing in their early years. It reaches a point where they get fed up with everything and truly question themselves if they are ever going to be successful.

That’s when they start to truly question the nature of the trading game, and seek to understand trading beyond just trading systems, the latest techniques and tactics to find themselves as a trader.

And when they do, sometimes, it’s only that little single idea or adjustment in their trading perspective that suddenly propels them to trading profits on a consistent basis.

Which brings up the next point. Trading is a continual game of managing self-expectations, ongoing education and constant research to improve your trading edge. If you truly want to succeed as a trader, you’ve got to ask yourself what’s the price you’re willing to pay in terms of mental sweat equity, emotional re-alignment with trading expectations and screen time.

Not every trader will break through that barrier. Will you be one of them?

Forex Day Trading: The 5EMAs Forex Trading System Summary

I ’ve been trading the 5EMAs Forex Trading System over the past 7 weeks, testing it out in various market conditions and getting to understand the logic behind this system.

Does the 5EMAs Forex Trading System work?
In a word, yes.

You would still have to practice and put in the necessary screen time to effectively use the 5EMAs system, but the basic principles on which its based on are sound.

If you are trading, or thinking of trading the 5EMAs Forex Trading System, here are some pointers you might find really useful:

1. Focus On 1 - 2 Currencies At Most

By focusing on only 1 - 2 currencies, you are learning the “personality” of that currency. With 1 - 2 currencies as your trading vehicle, you also get the benefits of:

Reducing the chances of “over-trading”
You get the feel of how that particular currency reacts to news announcements
You get to see how the “story” of that currency unfolds over time.
When you first start trading your core currency, you’re essentially starting your journey in the middle of an already existing story. By following that currency, you start to get in tune with it, and understand the psychology and actions of the players in that particular market.

Over time, you will start to develop that feel for the currency and “know” how good a particular trade set-up is. So even though a trade might set-up according to the basic rules, because you have been following it for some time you know whether you should stand aside, or apply further analysis before taking the trade.

2. Have A Set Time To Interact With The Markets



You are going to interact with the forex markets on a regular basis. Exactly because it’s a 24 hour market, you will need to determine your trading hours and stick to them.

Have a consistent trading time set aside to day trade, and choose a currency that best reflects the highest activity with your chosen time zone. It doesn’t make sense to choose a currency that has the lowest activity during your trading hours.

It’ll be best if your trading hours coincide with the currencies “market open” hours. For example, if you are staying in London, you may want to focus on the EURUSD and/or GBPUSD. If you are in Asia, you might want to focus on the USDJPY instead.

Trading in a consistent time zone helps you not only to understand how the currency behaves during those hours, but it helps you build a life around your trading routine. You get to develop a trading habit, and you have time to prepare before your trading office “opens”, as well as conduct a review of your trading day after your trading office “closes”.

3. Take Time To Prepare Before Your Trading Day Starts

Once you have determined your trading hours, give yourself an hour to prepare yourself. Some things you can do in your trading preparation:

Review your trading strategy and objectives.
By reviewing what you want to accomplish in your trading, it helps to keep your mind focused on what you want to do for the day. It also helps to keep you aligned with your long term goals, and reduces the emotional impact on the days when things just don’t seem to go your way.

Review your trading plan.
What are the set-ups you are going to trade today? What are the criteria that determines a good trading set-up versus a gamble?

For example, reviewing the 5EMAs Trading System Rules and set-ups helps to refresh my conscious mind before the trading day begins, and it accelerates the learning curve as well.

Reviewing your trading plan before you start helps to refresh your trading rules and systems in your mind, so you know exactly what you are doing in the markets.

It would be best to do all this without your trading platform open, because the mind does tend to wander and get distracted by the moving prices. You would defeat the entire purpose of preparing before your trading office opens, if you get distracted before you get into your trading zone.

3. Wrap Up Your Trading Day

Wrap up your trading day by conducting a review of:

Your thoughts, emotions and actions taken
The things happening in your trading environment that might have affected your trading
The trades that you took (if you can capture graphs and charts with your notes, even better)
Observations you had about yourself, about the markets, etc
Lessons that you have learnt for the day
By keeping a trading journal, you are helping yourself improve as a trader. As events occur and build up over time, the human mind can sometimes adjust memories in the light of hindsight. Keeping a trading journal allows you to maintain accurate memories, emotions and thoughts as they happened in the past.

This way, you can really be honest with yourself with regards of how you have developed or improved as a trader.

Summary For Forex Day Trading With The 5EMAs System
I won’t be posting my results up on the site anymore. Mostly because I’ll be using my time and energy to continue developing my personal trading strategy and systems.

You’ll find that as you trade, you might find useful ideas and techniques that can be incorporated into your personal trading strategy and systems. For example, while I have my personal strategy and systems, I learnt a couple of new observations about the forex markets from the Advanced 5EMAs Forex Trading System manual that I’ll be adding to my arsenal of set-ups.

It’ll be highly unlikely that you’d trade a system out of the box for extended periods of time. Eventually, you will want to adapt and modify it as you build your understanding of additional insights and tools, until you are comfortable psychologically and emotionally with your own system.

You’ll probably realize that eventually, successful traders develop their own strategies and systems that suit them. But where do all these building blocks come from?

Other traders and their trading systems, of course.

The Simple Steps To Forex Trading Success

The Simple Steps To Forex Trading Success

On this site, you will find information that helps you create the right foundations on which to build your trading skills and knowledge. You will learn Forex Trading Basics that will enable you to pull profits from the markets consistently and have fun at the same time!

Have you gone through numerous trading courses? Feel like trading success is there, just outside the reach of your straining fingertips? Don’t know how or what to do to take yourself to the next level of trading mastery?

Relax…

This site has been created to help you get through that invisible barrier and move on towards forex trading success.

Understand the Truth about Trading

All successful traders have gone through a journey of self-discovery, understanding the markets, taking and managing their risks, and continual education. And after that journey, as if in reward for their patience and perseverance, they get rewarded with knowledge of that “secret” they needed for themselves.

And suddenly, in a single moment, it will dawn on you what the secret of truly successful traders is. You will realize that it’s been sitting there right in front of you all this time, but it’s as though somehow you were blinded to seeing this truth.

When you are ready, that those same words you’ve read a thousand times over, probably in over a hundred places, suddenly becomes so clear you don’t understand why you couldn’t see them before. And that’s when your trading ability leaps to the next level!

CPI at 0.3%, Jobless Claims at 330k, Oil Inventories Grow

The release of the not so good news from the U.S. economy caused a wave of bullish dollar speculation on Forex with the increased risk aversion sentiments among traders. Going back from stocks to bonds wasn't prevented even by the fear of another possible cut rate before the year's end. EUR/USD fell from almost 1.4700 to the powerful psychological support level of 1.4600.

Bureau of Labor Statistics published its consumer inflation data - CPI increased only by 0.2% in October, whereas 0.3% growth was mostly anticipated. U.S. Department of Labor gave its numbers for the previous week's initial jobless claims - 339,000 - 14,000 higher than expected.

Crude oil inventories report finally gave a positive sentiment for the dollar bullish traders - there was a 2.8 million barrels growth last week. A good sign after some major decreases, which spiked oil prices to $100/barrel and depreciated dollar against other currencies.

Unexpectedly, Philadelphia Fed General Business Conditions Index increased significantly in November compared to October - constituting 8.2 against 6.8 in October with even more pessimistic forecasts for November.

Australia Intervened in Forex Markets

Australia Intervened in Forex Markets

According to recently-released documents, the Central Bank of Australia intervened on behalf of its currency in August, marking the first such intervention in over six years. Surprisingly, its purpose in intervening was to lift up its currency, rather than hold it down, which is the reason most central banks intervene. Apparently, the global credit crunch that flared up over the summer, generated tremendous volatility in forex markets. As a result, many carry traders- for whom volatility is anathema- quickly unwound long positions in the high-yielding currencies Australia and New Zealand, causing them to plummet. However, both currencies have since resumed their appreciation, which means any future intervention will likely be aimed at holding the Australian Dollar down. Bloomberg News reports:

The Australian dollar underwent "a particularly sharp depreciation in mid-August as the increase in global risk aversion arising from the credit-market crunch triggered an unwinding of carry trades."

The Game of Forex

The Game of Forex

Trading Speculating on the price of one currency in relation to another (also called trading the Forex Trading spot market) is like betting on a game; in the Forex market, the game is between the bulls, who want to pull prices up, and the bears, who want to pull prices down. The most successful trader in forex trading will not put himself in the middle of that game just as you or I would not go onto the field in the middle of a professional football game (unless, of course, you happen to be a professional football player). Instead, the successful trader will stand above the game for the best view and the best chance to bet on the team with the winning play. With over one and a half trillion dollars traded each day in the Forex market, it is highly unlikely that any individual trader like you or I would be able to influence the outcome of the game between the bulls and the bears - so we do not try; instead, we try to take our best, informed, educated guess at who will win a given play, and we bet on it - we speculate.
The fact that we are not actually able to influence the outcome of the Forex trading game, that we are simply speculating - betting - on it, is very important to remember, because it means that what matters to us is not so much who has a better quarterback, or whose coach makes better plays. Instead, what matters is what other people think.Which team are other traders going to bet on? The bulls may be superior in a certain play but if everyone bets that the bears will win, then . .. the bears win.
So trading the Forex is not nearly as much about picking the strongest currency, identifying which country's particular economic, social, and political situations make its currency the best buy that day. Trading the Forex market is about foreseeing which currency the crowd will pick, picking it before they do, and being right.
You want to be able to predict where the herd is going, but you don't want to get trampled by it in the process. That's why judgment-based indicators (charts) and mathematics-based indicators (technical indicators) can work so well in the Forex trading market if you do it right - because you are not betting on which currency is stronger, but on which currency the crowd will think is stronger and, in turn, bet on themselves. The Forex trading indicators we'll talk about in this book don't lead to winning trades 100% of the time. But they do lead to winning trades more often than not.
That's because people are predictable. Based on history, which does tend to repeat itself when people are involved, we can make well-informed, and educated guesses about which team the crowd will pick based the crowd's past picks in similar situations. So, in essence, trading the Forex spot market is much more about speculating on people's behavior than on the strength of one currency relative to another.
In the Forex market, a bull refers to increasing prices, where the forex trading period's close is higher than its open. This means that in that trading period the bulls won the tug-of-war: they succeeded in getting the market to close at a higher price than it opened. A bear is the opposite; it refers to decreasing prices, where the tradingperiod's close is lower than the open. In a bearish period, the bears succeeded in getting the market to close at a lower price than the open.
There is not, unfortunately, any way to guarantee that your trades will be profitable 100% of the time. In fact, they won't. Even the most experienced, disciplined traders take losses. The difference between experienced, disciplined traders and reckless novice traders is that the disciplined, experienced traders trade based on sound equity management principles so that in every trade they are managing their potential loss (the risk) in forex trading. While no one can show you a way to make profitable trades 100% of the time, you can greatly increase the probability that many of your trades will be profitable.
You increase the probability that you will profit overall by educating yourself. Learn to read charts. Learn to use chartbased indicators and technical indicators to know when to enter and exit the market. If you educate yourself on the ways to maximize the probability that you will profit, and if you follow the lessons you have learned, then you will profit on more trades than you lose on.

Why opt for Forex trading?

Why opt for Forex trading?


With more than $1.5 trillion USD being traded daily, the foreign exchange market has managed to become the world's largest financial market, over the last three decades. With the large minimum deal sizes and rigid financial requirements, the Forex market, till recently, was not explored by the common trader or individual investor. But now the average investors can also engage in Forex trading. Some of the advantages of Forex trading are as follows:


24 hours trading

Forex gives its traders a 24 hour trading opportunity. Being a Forex trader, you can trade 24 hours a day from Sunday 5:00 pm (ET) to Friday 4:30 pm. This gives traders an opportunity to trade according to their convenience, going by their own schedule and also a chance to react instantly to any breaking news of the markets.


High levels of liquidity

Also, acting as a huge attraction is the high liquidity. With almost 90% of all the currency transactions consisting of 7 major currency pairs, helps these currencies display price stability, smooth trends, narrow spreads and high levels of liquidity. This liquidity mainly comes from the banks which offer cash flow to companies, investors and market players.


No commission

With “free of commission” trading, Forex trade lets you keep 100% of your trading profits. This makes Forex trading even more attractive as a business opportunity, especially for those who want to deal on a regular basis.


Steady trading prospects

The market is constantly moving and since Forex trading involves buying and selling of currencies, so traders can easily operate in a rising or falling market. This is because, there are always trading prospects, whether a currency is rising or deteriorating in relation to another currency. So there is always profit potential in the Forex market, whether it’s a rising one or a falling one.


Along with these major advantages, the Forex market also has some other merits such as, Forex trading gives its traders, an opportunity to bigger profits as returns on their invested money. Also, since the market is open 24 hours a day, 5.5 days a week, it gives the investors can make their deals anytime they want to.


With such superior speed of the market, and fine liquidity, even the largest of transactions are conducted within a few seconds. You can study the Advantages and Disadvantages of Forex Trading as well on our website

How to earn in Forex?

Forex, where the commodity to be traded is currency, and not stocks and shares, is a trading market which gives its investors, returns in the form of the relative value of one currency exchanged against another. Forex trading is therefore, always dealt in currency pairs with the major currency pairs being Euro/US Dollar (EUR/USD) and US Dollar/Japanese Yen (USD/JPY), to name a few.

And it is with concurrent buying and selling of currencies that the trader hopes to make a profit on favorable exchange rate fluctuations. Exchange rates are always fluctuating, going down as well as up, within seconds and the whole art of trading lies in perfectly foreseeing the trend of the variation between two currencies.

But, how do you make money in such a competitive and incessant Trade market?

Well, here is an example to illustrate how…
Supposing the current bid/ask price for EUR/USD is going by the rate of 1.5027/30, giving you the option to buy 1 euro with 1.5030 US dollars or sell 1 euro for 1.5027 US dollars. Now, if you feel that the Euro is underrated against the US dollar, you would opt on buying Euros, selling your dollars at the same time. So you buy 100,000 euros by paying 150,300 dollars. You can then start analyzing the market, waiting for the exchange rates to rise. One can also opt in for Spot Forex Trading due to its benefits

As predicted, the rates begin to rise and then you decide a favorable rate at which you plan to sell your Euros to get a hefty profit. Supposing the Euro rises to 1.5090/93. Now, to realize your profits, you sell 100,000 euros at the current rate of 1.5090, and receive $150,900. You bought 100k Euros at 1.5030, paying $150,300. You sold 100k Euros at 1.5090, receiving $150900. That's a difference of $600 or in other words, you successfully earned a profit of $600.

Change and fluctuation, in any trading market is quiet frequent and rapid, especially in the Forex market, where these recurrent changes are also influenced by various other world events and factors like oil prices, interest rates and economic conditions. But with all these rapid fluctuations going on, the main aim of any Forex investor still remains on making profit. Every trader is predicting and waiting for the value of the currencies to change in his favor. You can also learn more about the Positions in forex

Forex Trading Strategies

" How To Confidently Make Consistent Profits With These Forex Strategies"
Trade intra day forex for quick cash using forex day trading strategies for 30 minute or 1 hour charts.There hasn't been a single losing week. See opportunities before most traders see them.Our strategy also works on the gold and silver markets.
Swing trade for monthly spendable cash if you live a busy lifestyle.Our 4 hour forex trading strategy for swing trading allows you to walk away from your computer after you have placed a trade and do what you have to do.This strategy was designed for traders who can't spend much time watching forex charts.Click on our "Trade of the Week" page to see examples of last week's trades.

Become a confident trader. If you are sick and tired of watching your investments plummet while others make money,this could be the most important message your ever read.We are full time forex traders and we identify high profitability trading setups.Have your forex trading systems failed you lately? Join the group that make money consistently. If you’re a beginner and don’t know where to start, try these strategies first.

Maybe you’ve bought forex trading systems or methods before and your trading results still weren’t up to scratch. We have the solution you need. Why suffer with unproductive results? Our entry setups are easy to pick. We’re using well known indicators which are available in most free or fee based forex charts. "Try, try, try, and keep on trying is the rule that must be followed to become an expert in anything." W. Clement Stone

Our method is not 100% mechanical.There is some decision making involved. You can count on these tested strategies to select the right entries and exits.With repetition comes mastery.You will be able to see patterns and formations quickly. One of the most frustrating modes to be in is searching for years for a trading method that grows your trading account balance. You’ll lack confidence.

A forex trading method with a high winning percentage is rewarding psychologically, keeps your morale high and is enjoyable to trade. A string of profits will build your confidence. See our trade of the week page which is updated at the end of each trading week .If you are looking for a system with no losing trades, forget trading and find another business or hobby. Losses have to kept small and wins should be larger than losses.We have forward tested each strategy in real time.We started offering our CI System in 2003 but in 2007 we replaced it with improved strategies.
Your forex profits will increase ;

-because you will have an edge.

-because the strategies reduce fear and indecision.

-because you will be able to spot entry setups and end of moves before the crowd does. Avoid chasing the market so you don’t enter a trade too late and get “burnt”.

-because you will be able to “read’ the market better.

-because the strategies can be implemented without buying any costly software or subscribing to expensive data services.

-because you will exit successful trades before your profit evaporates.

-because you will know when to let your profits run.

-because you will learn how to use higher time frames to gauge how price will react on lower time frame charts.

How to Trade Forex?

Trading foreign exchange is exciting and potentially very profitable, but there are also significant risk factors. It is crucially important that you fully understand the implications of margin trading and the particular pitfalls and opportunities that foreign exchange trading offers. On these pages, we offer you a brief introduction to the FX markets as well as their participants and some strategies that you can apply. However, if you are ever in doubt about any aspect of a trade, you can always discuss the matter in-depth with one of our dealers. They are available 24 hours a day on the Saxo Bank internet trading system, SaxoTrader.

The benchmark of its service is efficient execution, concise analysis and expertise - all achieved whilst maintaining an attractive and competitive cost structure. Today, Saxo Bank offers one of Europe's premier all-round services for trading in derivative products and foreign exchange. We count amongst our employees numerous dealers and analysts, each of whom has many years experience and a wide and varied knowledge of the markets - gained both in our home countries and in international financial centres. When trading foreign exchange, futures and other derivative products, we offer 24-hour service, extensive daily analysis, individual access to our Research & Analysis department for specific queries, and immediate execution of trades through our international network of banks and brokers. All at a price considerably lower than that which most companies and private investors normally have access to.

The combination of our strong emphasis on customer service, our strategy and trading recommendations, our strategic and individual hedging programmes, along with the availability to our clients of the latest news and information builds a strong case for trading an individual account through Saxo Bank.

Terms of trading are agreed individually depending on the volume of your transactions, but are generally much lower in cost when compared to banks and brokers. Your margin deposit can be cash or government securities, bank guarantees etc. Large corporate or institutional clients may be offered trading facilities on the strength of their balance sheet. The minimum deposit accepted for an individual trading account depends on the account type. Trade confirmations and realtime acount overview are built into SaxoTrader, while further account information can be produced in accordance with your specific requirements

wht is a forex?

FOREX, an acronym for Foreign Exchange, is the largest financial market in the world. With an estimated $1.5 trillion in currencies traded daily, Forex provides income to millions of traders and large banks worldwide. The market is so large in volume that it would take the New York Stock Exchange, with a daily average of under $20 billion, almost three months to reach the amount traded in one day on the Foreign Exchange Market.Forex, unlike other financial markets, is not tied to an actual stock exchange. Currencies are traded directly through networks of banks and brokers via an electronic network or the telephone. The Foreign Exchange Market is, therefore, also referred to as an "Interbank" or "Over the Counter (OTC)" market.PurposeThe foreign exchange market is the mechanism by which currencies are valued relative to one another, and exchanged. An individual or institution buys one currency and sells another in a simultaneous transaction. Currency trading always occurs in pairs where one currency is sold for another and is represented in the following notation: EUR/USD or CHF/YEN. The exchange rate is determined through the interaction of market forces dealing with supply and demand.Traders generate profits, or losses, by speculating whether a currency will rise or fall in value in comparison to another currency. A trader would buy the currency which is anticipated to gain in value, or sell the currency which is anticipated to lose value against another currency. The value of a currency, in the simplest explanation, is a reflection of the condition of that country's economy with respect to other major economies. The Forex market does not rely on any one particular economy. Whether or not an economy is flourishing or falling into a recession, a trader can earn money by either buying or selling the currency. Reactive trading is the buying or selling of currencies in response to economic or political events, while speculative trading is based on a trader anticipating events.BackgroundHistorically, Forex has been dominated by inter-world investment and commercial banks, money portfolio managers, money brokers, large corporations, and very few private traders. Lately this trend has changed. With the advances in internet technology, plus the industry's unique leveraging options, more and more individual traders are getting involved in the market for the purposes of speculation. While other reasons for participating in the market include facilitating commercial transactions (whether it is an international corporation converting its profits, or hedging against future price drops), speculation for profit has become the most popular motive for Forex trading for both big and small participants 1.3 Aspects of Trading
Most trades on the forex market are a result of traders speculating price movements of certain currencies. Although, good instincts and speculation skills are invaluable to any trader, there are also other, more scientific factors that traders use to tell whether they will buy or sell a certain currency. These factors are very important aspects of trading on the market and are known as fundamental and technical analyses. A trader may utilize both technical and fundamental analyses before making any forex trades.
The Importance of Fundamental Analysis
These factors include economic and political events (i.e. elections, wars) that occur worldwide. Fundamentals include monetary and fiscal policy, government reports such as GDP, CPI, PPI, and measures such as the unemployment rate. A trader that bases his or her market decisions in response to these releases and events is using fundamental analysis. The value of a currency in the Forex market is essentially an indication of the state of one nation's economy in comparison to another nation's.
A nation's political condition, along with its inflation and interest rates, impact the price of the nation's currency. Traders that use fundamental analysis can speculate on currency price movements by paying attention to the world news, economic reports, and indicators issued by the government. By interpreting that data, traders can make better decisions on the market. It is important to note that it is the outlook of an event that impacts the Forex market, rather than the actual event itself. If the report or news matches expectations it should have already been priced in to the present market price. If a report or news item is unexpected, or is different from the anticipated results, then there will be a reaction by the currency markets to "price in" this new information. We explore fundamental analysis in greater detail in Lesson 6.
The Importance of Technical Analysis
Traders have a second tool to use in trading. Technical analysis, which has become extremely popular since its inception two decades ago, consists of using charts, trend lines, support and resistance levels, technical indicators and identifying patterns to study the market's behavior. Traders use these technical factors to identify buying and selling opportunities. Over long historical periods, currency behavior has produced trends and patterns that are identifiable. We explore the basics of technical analysis in Lesson 7.