Forex Trading Guide - Forex Investment Section

Welcome to Forex Trading Guide

Article

Your FOREX Trading Philosophy
Ron King

"Easy money" is the allure that captivates many beginning FOREX traders. FOREX websites offer "risk-free" trading, "high returns", "low investment." These claims have a grain of truth in them, but the reality of FOREX is a bit more complex.

Mistakes Of The Beginning Trader

There are 2 common mistakes that many beginner traders make: trading without a strategy and letting emotions rule their decisions. After opening a FOREX account it may be tempting to dive right in and start trading. Watching the movements of EUR/USD for example, you may feel that you are letting an opportunity pass you by if you don't enter the market immediately. You buy and watch the market move against you. You panic and sell, only to see the market recover.

This kind of undisciplined approach to FOREX is guaranteed to lose money. FOREX traders must have a rational trading strategy and not make trading decisions in the heat of the moment.

Understanding Market Movements

To make rational trading decisions, the FOREX trader must be well educated in market movements. He must be able to apply technical studies to charts and plot out entry and exit points. He must take advantage of the various types of orders to minimize his risk and maximize his profit.

The first step in becoming a successful FOREX trader is to understand the market and the forces behind it. Who trades FOREX and why? This will allow you to identify successful trading strategies and use them.

Accountability

There are 5 major groups of investors who participate in FOREX: governments, banks, corporations, investment funds, and traders. Each group has its own objectives, but 1 thing all groups except traders have in common is external control. Every organization has rules and guidelines for trading currencies and can be held accountable for their trading decisions. Individual traders, on the other hand, are accountable only to themselves.

Large organizations and educated traders approach the FOREX with strategies, and if you hope to succeed as a FOREX trader you must follow suit.

Money Management

Money management is an integral part of any trading strategy. Besides knowing which currencies to trade and how to recognize entry and exit signals, the successful trader has to manage his resources and integrate money management into his trading plan. There are various strategies for money management. Many rely on the calculation of core equity -- your starting balance minus the money used in open positions.

Core Equity And Limited Risk

When entering a position try to limit your risk to 1% to 3% of each trade. This means that if you are trading a standard FOREX lot of $100,000 you should limit your risk to $1,000 to $3,000. You do this with a stop loss order 100 pips (1 pip = $10) above or below your entry position.

As your core equity rises or falls, adjust the dollar amount of your risk. With a starting balance of $10,000 and 1 open position, your core equity is $9000. If you wish to add a second open position, your core equity would fall to $8000 and you should limit your risk to $900. Risk in a third position should be limited to $800.

Greater Profit, Greater Risk

You should also raise your risk level as your core equity rises. After $5,000 profit, your core equity is now $15,000. You could raise your risk to $1,500 per transaction. Alternatively, you could risk more from the profit than from the original starting balance. Some traders may risk up to 5% against their realized profits ($5,000 on a $100,000 lot) for greater profit potential.

These are the kinds of strategic tactics that allow a beginner to get a foothold on profitable trading in FOREX.

About the Author

Visit FOREX Trading to learn more. Ron King is a full-time researcher, writer, and web developer. Copyright 2005 Ron King. This article may be reprinted if the resource box is left intact.

Forex Investment News

forex investment

NEW YORK (Reuters) - Barclays Capital said Tuesday it had fully integrated the U.S. foreign exchange and commodities businesses of collapsed investment bank Lehman Brothers to trade under the Barclays Capital name. Foreign exchange sales and trading ...

Read more

---

Barclays Capital absorbs Lehman forex, commods ops - Reuters India

WASHINGTON, Oct 11 (Reuters) - Government-owned wealth funds and the countries that accept their investments agreed on Saturday to a set of principles aimed at ensuring that both sides play by the rules. These wealth funds, worth more than $2 ...

Read more

---

Wealth funds, recipients adopt investing principles - FXStreet.com

WASHINGTON -(Dow Jones)- An official at the Japanese Ministry of Finance said Saturday that Finance Minister Shoichi Nakagawa proposed the International Monetary Fund utilize the nation's foreign currency reserves if necessary. The funds would likely ...

Read more

---

Japan MOF: Min Asks IMF To Use Japan Forex Reserves If Needed - FXStreet.com

TOKYO, Oct 10 (Reuters) - The safe-haven yen jumped on Friday, hitting a three-year high against the euro as the panic gripping investors deepened on fears that the global financial system is faltering. Japan's Nikkei share average plunged nearly 12 ...

Read more

---

FOREX-Yen jumps as spreading market panic slams stocks - Forbes

TOKYO, Sept 10 (Reuters) - The safe-haven yen jumped on Friday, hitting a three-year high against the euro as the panic mode gripping investors deepened on fears that the global financial system is faltering. Japan's Nikkei share average plunged ...

Read more

---

FOREX-Yen soars as stocks plunge, crisis panic worsens - CNBC

Equities markets are recording blanket losses at the moment and with short selling banned this can only be bad news for investors. XForex suggests that foreign currency trading (forex) offers a more rewarding alternative. Toronto, Ontario (XFOREX ...

Read more

---

Equities Markets Looking Uncertain? Now is the Time to Consider FX ... - 24-7PressRelease.com

The United States' financial turbulence and the subsequent turmoil in the developed world is expected to hit Bangladesh economy mildly but would hit the confidence in the prevailing economic system hard. The International Monetary Fund has described ...

Read more

---

Wall Street collapse: Bangladesh may be affected - New Nation

TOKYO, Oct 6 (Reuters) - The euro fell to a 13-month low against the dollar on Monday as investors shifted their focus to banking problems in Europe after leaders of Europe's four biggest economies decided against a coordinated bank bailout. German ...

Read more

---

FOREX-Euro hits 13-month low vs dollar on bank fears - Forbes

A pastor with a new generation church (names withheld) , has been interrogated by the Economic and Financial Crimes Commission (EFCC) for allegedly obtaining the sum of N3million from another member of the church in a fraudulent foreign exchange ...

Read more

---

Forex: EFCC Quizzes Pastor - This Day Online

KNOXVILLE, Tenn. (AP) - A Knoxville investment group has been sued for return of all investments and profits from its participation in a Chattanooga-based Ponzi scheme. Bankruptcy trustee Grey Steed is demanding Knox Forex Group, a limited liability ...

Read more

---