BLACK COCKTALE

Foreign exchange trading was once just something that people had to do when traveling to other countries. They would exchange some of their home countries currency for another and endure the current currency exchange rate.

These days, when you hear someone refer to foreign exchange trading, they are usually referring to a type of investment trading that has now become common. Traders can now speculate on the fluctuating values of currencies between two countries. It's done for sport and profit.

Keep in mind that forex trading is a "trading" arena, generally not for investors. It's very fast and highly leveraged. Your first objective in the beginning will be to de-leverage and not trade at 100:1 leverage. 

Investors use leverage to profit from the fluctuations in exchange rates between two different countries. The leverage that is achievable in the forex market is one of the highest that investors can obtain. Leverage is a loan that is provided to an investor by the broker that is handling his or her forex account

You can download NinjaTrader for free and get forex and futures data feed for free also another option is the GTB forex trading demo. They will let you try it out for several months before depositing any money, and you can trade the simulator and develop a trading plan and try it out, see how you do before investing your money. They also have the lowest margin rates to trade most futures. 

 

Here are some of the most common currency pairs: 

1.EUR/USD - Euro/U.S. Dollar 

2.GBP/USD - Great British Pound/U.S. Dollar 

3.USD/CHF –- U.S. Dollar/Swiss Franc 

4.USD/JPY –- U.S. Dollar/Japanese Yen 

5.USD/CAD –- U.S. Dollar/Canadian Dollar 

6.AUD/USD - Australian Dollar/U.S. Dollar 

7.EUR/GBP - Euro/Great British Pound 

8.EUR/JPY - Euro/Japanese Yen 

9.EUR/CHF - Euro/Swiss Franc 

10.GBP/CHF - Great British Pound/Swiss Franc 

11.GBP/JPY - Great British Pound/Japanese Yen 

12.CHF/JPY - Swiss Franc/Japanese Yen 

13.NZD/USD - New Zealand Dollar/US Dollar 

14.EUR/CAD - Euro/Canadian Dollar 

15.AUD/CAD - Australian Dollar/Canadian Dollar 

16.AUD/JPY - Australian Dollar/Japanese Yen 

17.EUR/AUD - Euro/Australian Dollar 

NOTE: Of the above 17 currency pairs, six of them are deemed the “major currency pairs” in the FOREX market because they account for about 80 percent of FOREX transactions: 

1.EUR/USD - Euro/U.S. Dollar 

2.GBP/USD - Great British Pound/U.S. Dollar 

3.USD/CHF –- U.S. Dollar/Swiss Franc 

4.USD/JPY –- U.S. Dollar/Japanese Yen 

5.USD/CAD –- U.S. Dollar/Canadian Dollar 

6.AUD/USD - Australian Dollar/U.S. Dollar 

As you can see, there is a currency on the left and one on the right. The one on the left is referred to as the base, and the one listed on the right is known as the cross. The format, once again, is as follows. BASE/CROSS, or EUR/USD. The EUR is the BASE and the USD is the CROSS. 

TERMINOLOGY: 

•PIPS- Price Interest Point. This is the smallest unit price for any Foreign Currency. 

•LOT- A lot of currency is one denomination for a trade (100K or mini account). This is similar to purchasing one stock or one contract in the futures market. 

•LONG to buy 

•SHORT to sell 

•BID-The price at which you sell 

•ASK-The price at which you buy 

Price Interest Point - (PIP) 

Profits are made in the FOREX by gaining PIPS. A pip is the last digit from the decimal point. This value is 1/100th of a cent. You may now be asking yourself, how do I make money off of 1/100th of a cent? The answer is leverage. The FOREX market is highly leveraged and should be respected. That said, it can also provide for a tremendous return on your investment. The average leverage in the FOREX is 100 to 1. Basically this indicates that for every dollar you invest in a trade you are controlling $100 of value. 

Calculated PIP 

Calculated PIP – shows the Price Interest Point (PIP) value for the selected currency pair based upon your trading account margin. For example, a standard 1 percent margin trading account controlling $100,000 in currency would show the EUR/USD with a PIP value of 10. 

PIP VALUE-Fixed or Floating 

FIXED- When the USD is the cross currency (right side of the pair), the PIP value is fixed at $10 in a 100k account. 

FOATING- When the USD is the base currency (left side of the pair), the PIP value is based upon the exchange rate of the cross currency (i.e., USD/CAD.). Also, the PIP value is floating when the pair consists of foreign currencies (i.e., EUR/ GBP). 

LOT 

A lot is the normal unit of trading in the FOREX market. Trades are made in lot increments, similar to share increments in the stock market. 

Standard (or 100k) FOREX account- has a 100:1 leverage ratio 

1 LOT= $1,000 investment= ratio leveraged 100 to 1, which = $100,000 in buying power. 

Mini FOREX account- has a 200:1 leverage ratio 

1 LOT= $50 investment= ratio leveraged 200 to 1, which = $10,000 in buying power. 

TRADING HOURS (EST) 

•Trades 24 hours a day, 6 days a week. The market is open from Sunday at 5pm EST to Friday at 4pm EST. 

On my time (CST), Forex trading begins Sunday evening in Sydney (open 5:00pm – 1:00am), and moves around the globe as the business day begins in each financial center, first to Tokyo (7:00pm – 4:00am), [then Europe (12:00am – 9:00am)], then London (2:00am – 11:00am), and finally Canada and New York (7:00am – 4:00pm).

Although the ability to earn significant profits by using leverage is substantial, leverage can also work against investors. For example, if the currency underlying one of your trades moves in the opposite direction of what you believed would happen, leverage will greatly amplify the potential losses. To avoid such a catastrophe, forex traders usually implement a strict trading style that includes the use of stop and limit orders.

Practice on a forex trading demo first, and start small when you start using real money. Always allow yourself to be wrong and learn how to move on from it when it happens. 

I hope you've it helped?