TRADING SESSIONS

Three Trading Sessions
Forex trading is divided into three main sessions that overlap throughout the day as different markets open and close. These sessions are the Asian/Tokyo session, the European/London session, and finally the North American/New York session. Even though Tokyo, London and New York are the big three financial players, there are many other countries contributing, both in terms of liquidity and also by extending opening hours beyond those of the cities which have become synonymous with each session. For instance, as already mentioned New-Zealand is open hours before Tokyo gears up for trading, but the Asian session also includes other important global players such as Australia, Singapore and China.
Asia
During the Asian session important economic data from the region is released, so traders are watching closely for developments that will have knock-on effects on the European and North American regions throughout the rest of the trading day. As the third most traded currency in the world the yen is by far the biggest player during the Asian session. According to the preliminary findings of the BIS Triennial Central Bank Survey, the yen accounted for around 23% of daily turnover in April of 2013. During this session you can expect a great deal of activity on USD/JPY, EUR/JPY and AUD/JPY.
Europe
At the midpoint of the Asian trading day European markets start coming online. The European session is important to traders because it coincides with the second half of the Asian trading day and the first half of the North American trading day. Positioned as it is between these two other major financial centres, and with the euro being the second most traded currency globally (33.4% of daily turnover by the last BIS count), the European session benefits from being in the very thick of it as far as trading activity is concerned. Liquidity and market activity are at their highest during the European session and even though London is the biggest player here, other large European financial centres, such as Germany and France, are also very important and begin trading in advance of London’s opening. Economic data from the Eurozone, as well as from the United Kingdom and Switzerland cause the biggest movements in price action to come from EUR/USD, GBP/USD and USD/CHF, as well from the EUR/GBP and EUR/CHF cross pairs.
North America

The North American session coincides with afternoon in the European session. The fact that the markets using the first and second most traded currencies are live at the same time (USD was on one side of 87% of all trades in April of 2013) and that most key economic indicators from the United States are released in the morning, causes this period to be by far the most active in terms of trade volumes and price movements. At midday the European markets start winding down; this can result in some final flurries of activity which have been known cause surprises. In the afternoon trading activity can be a little subdued as the American continent finds itself trading on its own, however volatility can be generated by several economic indicators that are routinely released in the afternoon as well as public addresses by FOMC members. Obviously New York is the main player here but activity from the Canadian and South American market shouldn’t be overlooked. In fact the Mexican Peso was one of 2013’s big surprises in the triennial BIS survey. It saw a large increase in market share compared to the other emerging market currencies to become one of the top ten most actively traded currencies, with a global market share of 2.5%. Trading wraps up at 5p.m Eastern time in New York and the markets will remain dormant until Wellington re-opens for business bright and early on Monday morning.

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CHARTS

Chart Types

There are three main chart types that you can choose between when monitoring the price action of an asset. These are: line charts, bar charts and candlestick charts. Generally there are up to four key pieces of information provided by a price chart.
The Art of the Chart

1. The opening price of the asset.
2. The closing price of the asset.
3. The highest price registered in each period.
4. The lowest price registered in each period.
Let’s discuss and compare the information that the three chart types listed above are able to provide at a glance. Line charts: Line charts use a simple line to represent the upward and downward movement of an asset’s price. Line charts are the simplest of the three to understand, but are only equipped to provide you with an asset’s closing price. Their jagged lines are created by plotting a single point at the closing price of each period, and then drawing a line between it and the next period’s closing price. You will see the end of this line waver as the price changes, only to be plotted as a fixed point when the period has closed. When this happens the line is extended from the last fixed point and will begin to fluctuate until the next close.
Bar charts: The bar charts used on most charting platforms are also known as Western line charts or OLHC charts (short for Open, Low, High, Close). These charts are basically a Western re-working of the Japanese candlestick charts, which we will look at next. Just like candlestick charts they provide you with all four pieces of data listed above. Bar charts are composed of a vertical line and two smaller horizontal lines, one connecting to the vertical line from the left and one from the right side. Each vertical line provides you with the price range the asset moved through in the period of time you are charting at. The bottom of the line represents the lowest point that the price fell to, and the top of the line represents the highest point the price reached. Also, the horizontal line on the left informs you of the asset’s opening price for that period and the horizontal line on the right informs you of the asset’s closing price for the period.
Candlestick charts: Candlestick charts originated in 17th century Japan where they were employed by traders to track changing rice prices. Candlestick charts are the most popular chart type among traders for the simple reason that they are very information dense, efficiently providing you with a great deal of information in a very intuitive and eye-catching way. Each candlestick represents a unit of time at the period being charted. They are composed of a main part, called the ‘real body’, as well as upper and lower ‘shadows’, also known as ‘wicks’. Each candlestick represents the price action that took place within one unit of time frame you are charting at. So at the minute duration each candlestick represents a minute of trading activity, at the monthly duration each candlestick represents a month of trading activity, and so on. Unlike the other chart types we have looked at candlesticks are coloured differently depending on whether they represent a rising or a falling price. If the opening price is higher than the closing price then the body of the candlestick is filled in, in this way traders can easily discern trends as they emerge. The shadows, or wicks, are lines that extend upwards and downwards from the top and bottom of the real body, these represent the highest and lowest prices that were reached within the given time frame.

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The Art of the Chart

Learning how to use price charts is an indispensable part of Forex trading. There are a few wizened old Forex masters out there who claim not to use charts at all when taking positions, their trading activities are so deeply entrenched in the fundamental trends that charting plays little or no role for them. However, for most Forex traders the use of charts is essential, so it’s of the utmost importance that you get to grips with how they work and how to use them early on. Price charts are graphs that track the changing values of assets in real time. You will ordinarily find a list of the available assets on the left, and a chart of the one you are currently viewing centre screen. FxPro offers trading facilities on two main platforms; MT4 and cTrader. Both have very similar charting functions and indeed most platforms will offer you the same set of basic options. Charting is an huge subject in its own right, but for now you will be introduced to a few basic concepts that will give you an understanding of why charts are important and how they work. We will delve into the subject in more detail when we look at technical analysis later on in the course.
Chart Durations When monitoring an asset’s price you can specify the duration at which changes in price are being registered on the chart. These durations can be anywhere between a single minute all the way up to a month. So if, for instance, you are charting at the monthly duration, every change in the chart will represent a month’s worth of data. This will naturally obscure all of the price moves which occur within the month. Similarly, charting at the hourly duration won’t provide you with any of the changes in price that take place at any period of time shorter than one hour. This is why the shape of the chart changes so radically at different time frames; you are effectively viewing the same data at different resolutions. Regardless of the time frame you select, all of the trading data is being recorded down to the minute,
so you can go back at any point and see exactly what took place at the shorter durations. Open your trading platform and chart a currency pair at the monthly duration. Change this to weekly, then daily, and gradually move all the way down to the 1 minute duration. Notice how much the shape changes? This is what happens when you narrow in to reveal more and more information about what is happening at the shorter time frames. The time frame you choose will be largely dependent on your trading style. If you are opening and closing multiple positions within a single day then obviously a daily chart will not provide you with sufficient data to make educated choices. Similarly if you are taking long term positions which you intend hold for weeks, charting at the one minute time frame won’t provide you with any useful information regarding the deeper trends that are at work. Picking a suitable time frame, and indeed learning to switch between them to gain a wider, or more localised perspective, will become more important as you begin to develop your own trading system.

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Forex Trading Terms

Bid and Ask
The two different prices that you see quoted on your trading platform for each currency pair are the respective Bid and Ask (or Sell and Buy) prices available for that pair, the difference between these two prices is known as the spread. The Bid is the price on the left, this is the price at which you can sell a given currency pair and is the lower of the two prices listed. The Ask is the price on the right, it’s the price at which you can buy a given currency pair and is the higher of the two prices listed.
Essentially the Bid price tells you the most that buyers are prepared to pay for a currency, and the Ask price tells you the least that sellers are prepared to accept to sell a currency. All currency transactions involve a Bid/Ask spread. FxPro receives Bid and Ask quotes from our own liquidity providers, and by making different banks compete for your trades we select the most competitive Bid and Ask prices available to us and forward them to you. We make our commissions either by slightly marking up the spread if you trade on our MT4 platform, or by charging a set commission for opening and closing positions if you trade on our cTrader platform. A transparent broker’s revenue should only come from these sources.
Pips and Ticks When viewing currency prices on your trading platform you’ll notice that they are displayed to more decimal places than you may be used to. Most of us are accustomed to calculating our country’s currency to two decimal places. This is because as mediums of everyday exchange most currencies have 100 fractional units. There are one hundred pennies to the pound, one hundred cents to the dollar etc. On the Forex markets changing currency values are calculated by smaller increments. A pip is the name of the smallest increment that currency values can fluctuate by. For most currencies the pip is the fourth decimal place, in the case of the Japanese yen it is the second decimal place. FxPro calculates currencies to five decimal places on most pairs and to three decimal places on the Japanese yen. The ability to price pairs to an extra tenth of a pip allows us to more accurately reflect market conditions, which means that you get a narrower spread than when prices are just rounded up or down to four (or indeed two) decimal places. There is no convention for the naming of this fifth decimal place, some call it a fractional pip, some refer to it as pip decimal precision, and others have affectionately called it a pipette. Pips should not be confused with ticks. While a pip is the smallest increment by which a currency can change in value, a tick is the increment by which it actually does change in value. So say a currency pair’s value changes 3 times between 13:01 and 13:02, these fluctuations can be as small as a single pip but they can also be larger. It could, for instance, jump 3 pips in value from 1.33912 to 1.33942, then drop by a single pip to 1.33932, and then jump by another four pips to 1.33972. The actual moves it makes, irrespective of the number of pips that each move is worth, are called ticks. Even though ticks are what you will observe as you monitor a live chart of a currency, pips are what will make the difference to your trading account balance. This is why it is so important that you understand them. Pips are important for a couple of reasons. Broker spreads are quoted in pips, so a 1.2 pip spread means that there is a difference of 1.2 pips between the Bid and Ask prices on a given currency pair. Also, as a trader, your profits and losses are governed by how many pips the pair you have invested in rises or falls before you Buy or Sell. Once you have opened a position each pip up or down will be worth a certain amount of money to you, depending, of course, on the volume of your position and how much leverage you are using. Successful currency trading can be boiled down to a very simple formula. Make pips; keep pips; repeat. As you will find out when you begin practicing with your demo account this formula is much easier expressed than it is realised.
Volume, leverage and margin Trade volumes, leverage and margin are also common points of confusion for many beginners. Let’s begin with volume. Volume: refers to the actual size of a trade and is ordinarily calculated in lots. In Forex a lot represents 100,000 units of a currency, in other words one lot of EUR/USD is a position worth 100,000 euros. Over the past few years mini and micro lots have also been made available to traders; a mini-lot is worth 10,000 units and a micro-lot is worth 1000 units of the currency being bought or sold.
Depending on the platform you are using this can be represented differently. On the MT4 platform your trade execution window has a section labelled ‘Volume’, from here you can select the size of the position you are to open. 1.0 is one lot, 0.1 is a one mini-lot and 0.01 is one micro-lot. So, for example, a trade volume of 0.4 on EUR/USD is a position worth 40,000, euros. On the cTrader platform volumes are labelled in a more familiar way, with options to enter trades anywhere from 10k (thousand) to 100m (million) being available as long as you have adequate margin in your account. Let’s move on to leverage. Leverage: enables you to command positions that exceed the value of your initial investment. Any time you borrow money or use a financial instrument such as a CFD to make an investment that exceeds the value of your capital, you are using leverage. In trading leverage is expressed as a ratio. FxPro offers its clients leverage from 1:1 (no leverage) to 500:1 (500 times the amount invested). So, say you want to buy 100,000 euros (1 lot) and have your account leveraged 100:1, then you will only need to have 1000 euros (or the equivalent depending on the currency your account is denominated in) as margin to guarantee the position. Now on to margin. Margin: can be thought of as a deposit that is required when using leverage. Each time you open a leveraged position a certain amount of your account balance is secured as margin. The exact amount is dependent on the size of the position and the leverage which is being used. Margin is there to guarantee the position you have opened in case it goes against you. Just as each pip up or down in an open trade will be reflected in your account balance, it can also eat into your margin should it turn against you. Your free margin is the amount you have in your trading account which is not currently being used to guarantee any positions; this amount can be used to guarantee the opening of further trades. Your equity is your trading account balance plus or minus the profits or losses from any open positions you have. Your margin level is calculated as a percentage and is the ratio of your equity to used margin. When this figure drops to 100% it means that all of your trading account balance is being employed as margin and no further positions may be opened. Keeping your margin level as high above 100% as possible is important, especially for traders who invest on longer time frames. A high margin level means that you don’t have to worry about a trade temporarily turning against you because you have more than enough in your trading account balance to weather the storm. If you are confident in the position you have taken and regard the market’s move against it as temporary, you can afford to ride it out and wait for the trend you have invested in to reassert itself. As mentioned earlier, the reasons that Forex trading used to be much less accessible to individual investors are related to volumes and leverage. Before mini- and micro-lots the minimum trade volume was 1 lot, factor in that leverage also used to be very limited, and it becomes apparent that opening the smallest possible Forex position only a decade ago required a substantial amount of capital. This is not the case today. Today an educated trader with a solid grasp of risk management can trade on the world’s currency markets, and be successful, with a relatively small initial investment.

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Major Currency Pairs

EUR/USD (Euro-zone/ United States)
USD/JPY (United States/ Japan)
GBP/USD (United Kingdom/ United States)
USD/CHF (United States/ Switzerland)

Pairs that do not feature the US dollar as either base or quote are known as the cross pairs, or crosses. The main crosses consist of any of the major currencies listed above (except, of course, USD) crossed with each other (the most common cross pairs are those which feature the euro, pound sterling, or yen).

One thing to keep in mind is that the euro is always the base currency in any pair. It’s easy enough to reverse an exchange rate though, if you need to. So, for instance, if you want to find out the value of USD/EUR (how many euros it takes to purchase one US dollar) all you have to do is divide 1 by the EUR/USD exchange rate (1/1.33 = 0.75). In this example one US dollar can be purchased with 75 euro cents.

In addition to the majors and the crosses there are also the exotic pairs. Exotics consist of a major crossed with a lesser traded currency such as one belonging to an emerging market. Exotic pairs are less liquid and can cost more to trade due to them having wider spreads.

Buying and selling

Most beginners will quickly gain an understanding of how exchange rates work, but then they log into their broker’s trading platform for the first time and are greeted by two prices, as well as the option to buy or sell, and their heads start to spin. It may be a little confusing at first but it’s really not as complicated as it seems.

In Forex trading you have the option to buy or sell the base currency in the pair. How exactly do you sell something that you don’t actually own in the first place? Well you borrow it from your broker. So if you want to sell, or short, 1 lot (or 100,000) of EUR/USD, then you essentially have to borrow it from your broker before being able to sell it (it’s not quite a loan but we’ll look at this ‘borrowing’ in further detail when we focus on how CFDs work). Doing this means that you are expecting EUR/USD to drop in value so that you can then buy it back cheaper at a later time, returning those 100,000 units to your broker, and keeping the profit you made for yourself.

Major Currency Pairs

EUR/USD (Euro-zone/ United States)

USD/JPY (United States/ Japan)

GBP/USD (United Kingdom/ United States)

USD/CHF (United States/ Switzerland)

Buying and selling

Most beginners will quickly gain an understanding of how exchange rates work, but then they log into their broker’s trading platform for the first time and are greeted by two prices, as well as the option to buy or sell, and their heads start to spin. It may be a little confusing at first but it’s really not as complicated as it seems.

In Forex trading you have the option to buy or sell the base currency in the pair. How exactly do you sell something that you don’t actually own in the first place? Well you borrow it from your broker. So if you want to sell, or short, 1 lot (or 100,000) of EUR/USD, then you essentially have to borrow it from your broker before being able to sell it (it’s not quite a loan but we’ll look at this ‘borrowing’ in further detail when we focus on how CFDs work). Doing this means that you are expecting EUR/USD to drop in value so that you can then buy it back cheaper at a later time, returning those 100,000 units to your broker, and keeping the profit you made for yourself.

As confusing as this may initially sound, don’t be daunted by the option to sell and the two different prices you are quoted. All currency trades involve both buying and selling; closing a position you have opened requires you to perform the exact opposite action you took when you opened the trade. So if you clicked ‘Buy’ and bought 1 lot of a currency, then later you when click ‘Close Order’ you are effectively selling back those 100,000 euros you bought at the new price, keeping the profit or taking the hit depending on what the pair is valued at when you sell. Naturally, it follows that closing a short position, as we saw in the example of selling EUR/USD above, involves buying back the same amount of the currency that you initially sold to open the position. When this balance is restored and you no-longer have any open positions you are said to be square, or flat. If you went long, then squaring-up requires you to sell the same amount of the currency you initially bought. If you shorted, then squaring-up involves you buying back the same amount of the currency you initially sold.

Also keep in mind that since every currency you buy is a pair of currencies, every position you take involves buying one and selling the other. This is not something you have to think about when you decide to click Buy or Sell, but to go long on a pair involves simultaneously buying the base and selling quote, conversely shorting involves selling the base and buying the quote (more on this later in the course).

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Forex Basics

Easy to grasp, difficult to master
Forex and FX are interchangeable abbreviations for Foreign Exchange, which is a term used to refer to the global currency markets. As complex as these markets are, currencies are probably the easiest of all the asset classes for beginners to get to grips with. Even people who have never traded before will have a basic understanding of what currency trading involves. After all, everyone is familiar with using their national currency, and many have had the experience of converting this currency into another one of a different value when travelling. This, in a nutshell, is what currency trading is all about. Currencies differ in value and these differences are constantly changing; buying an undervalued currency as it begins to rise yields profits, selling an over-valued currency as it begins to fall also yields profits. Conversely, selling in the former example and buying in the latter will cause you to incur losses. Simple enough, right? Yes, but learning to discern the influences that cause these fluctuations, and being able to act upon them in a timely and consistently profitable way, that’s the real challenge of trading Forex.
Exchange rates explained
Exchange rates are the relative values between currencies that belong to different countries or economic regions. When you are presented with an exchange rate, say for EUR/USD, you are being quoted the value of one currency in relation to the other (in this case the euro against the US dollar). This is why you see two currencies in an exchange rate quote but only one figure; the value of one is determined by how much of it you can buy with the other. It makes no sense to think in terms of absolute values when it comes to currencies as their values are interdependent. This is one of the main differences between trading Forex and trading equities or commodities.
The first currency in every pair is called the base currency, this is the one that you are being given the value of. It is also the one on which you are performing the action of either buying or selling when trading Forex. The second currency in the pair is the quote or counter currency, the figure quoted in an exchange rate is denominated in this currency. Essentially when you see an exchange rate you are being informed what the base currency is worth in terms of the quote currency. So when looking at an exchange rate for EUR/USD you are being quoted what the euro is worth in US dollars, or more accurately how many US dollars are required to purchase 1 euro.
So a EUR/USD exchange rate of 1.33 means that 1 euro is worth 1 dollar and 33 cents, or that $1.33 is required to purchase 1 euro. Currencies are always quoted in this way, were it not for this convention 1 euro would just be worth 1 euro, and that would tell us nothing about anything.
When EUR/USD rises, this means that the euro is growing stronger and/or the dollar is getting weaker. As a Forex trader you can position yourself in different ways, taking advantage of any eventuality. You can buy, or go long on EUR/USD when you think the euro is likely to rise, or when the US dollar is likely to fall. You can also sell, or short EUR/USD when you foresee that the euro is due to drop in value, or when you think the US dollar is about to rise.
A closer look at currency pairs
All currencies are given a three letter abbreviation known as that currency’s ISO code, in most cases the first two letters refer to the country, and the third letter refers to the name of the currency in question.
Forex Basics
6 FxPro Trading Academy
The most commonly traded currencies are known as the majors. These are: The US dollar (USD), the euro (EUR), the Japanese yen (JPY), the Great British pound (GBP), the Swiss franc (CHF), the Canadian dollar (CAD), the Australian dollar (AUD) and the New Zealand dollar (NZD).
The major pairs all involve USD being paired with each of the other major currencies listed above

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Forex As An The Asset Class

Forex as an asset class
Historically currencies were not regarded as an asset class, but rather as a medium of exchange facilitating the trade of other assets. Now with a daily turnover of $5.4 trillion, of which Spot transactions account for more than $2 trillion, it’s fair to say that a great deal of Forex’s daily turnover is speculative in nature, meaning that today an increasing percentage of traders and investors treat foreign exchange as an asset class in its own right.
Increasingly level playing field
This applies to all trading instruments, but especially to online Forex. The same technologies that have made online Forex trading possible have also made information freely available. Nowadays resources that were once only available to large financial institutions are open to everyone. In addition to this, the speed at which information travels across the globe has meant that a trader monitoring their open positions from home can react just as swiftly as a professional trading from the very thick of it in London, New York, or Tokyo. Knowledge is indeed power, and today’s information technology provides it in abundance. Especially considering how incredibly complex the Forex markets are, and the myriad of influences which they are subject to, both macro and micro-economic, online traders are now better positioned than they have ever been in the past to take advantage of information and use it to manage their capital intelligently.

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Basic Forex Elements

High leverage
Leverage is, of course, a double-edged sword, and we will get into this in further detail later on in the course. Nevertheless the current state of play reflects what traders have been demanding of their brokers, and one of these demands has been for ever-increasing leverage ratios. Compared to other instruments where leverage is limited, Forex boasts the highest leverage in retail trading. It is now commonplace for traders with modest trading account balances to leverage their capital up to 500:1 and command far larger positions than they ever would have been able to in the past. Also, it should be noted that interest is not charged on leverage in Forex. This is because, in essence, you are not buying or selling, but rather agreeing to do so at a future date. This means that in Forex leverage is not borrowed capital as it is in stock trading, which does involve paying interest on the capital used to leverage your positions (more on this later).

Negative balance protection
One of the criticisms levelled at Forex brokers, is that by offering highly leveraged trading accounts they expose their clients to the risk of losing more than they invested in the first place. This is not so. While using leverage carries with it the risk of exacerbating losses in the same way as it provides the potential of amplifying returns, it is now standard practice for all reputable brokers to offer their clients negative balance protection. What this means is your trading account will never fall below zero. You will receive margin calls if your margin level drops below a certain percentage of your equity, depending on the platform you are trading on. Should it continue to drop your broker will begin automatically closing any open positions you have so as to protect you from incurring losses beyond the capital you have in your account.

No suspensions or de-listings
Unlike stocks the foreign exchange markets are live 24/5, irrespective of the underlying market conditions. This means that no-matter what is happening you as a trader can take the appropriate position and potentially profit. Stock trading can be suspended during times of high market volatility in order to curb dramatic changes in price, only to reopen with a gap between closing and opening prices. Also if a company fails to meet an exchange’s regulations and financial criteria it can be delisted entirely from the exchange it is traded on, which can be catastrophic for an investor holding shares in it. In contrast the foreign exchange markets suffer from no such issues; currencies are always available for trading, 24 hours a day, 5 days a week.

Instant execution
The online Forex industry has had to be very technically resourceful in order to address the fact that Forex is an entirely decentralized market, meaning that trades are not made over an exchange. The way traders, brokers and the inter-bank network are dispersed across the globe has required the development of advanced trading platforms that can provide traders with up to the second price quotes in a constantly changing environment, and to facilitate transactions between parties that can be separated by entire continents.
These technological advances have led to Forex traders enjoying better trade execution speeds than almost any other form of online trading.


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Why Trade Forex?

High liquidity and price stability

Forex is hands down the largest market in the world. The preliminary report from the Bank of International Settlements (BIS) for April of 2013 has foreign exchange turnover at a record-breaking 5.4 trillion US dollars per day. This figure dwarfs the daily turnover of all the world’s equity markets combined. What this means for you as a prospective trader is that Forex markets are highly liquid; currencies can easily be bought and sold in large quantities without prices being substantially affected. This in-turn means increased price stability. Also, the fact that currencies are traded in pairs, their value being determined by one currency’s value in relation to another’s, means that the value of currency pairs tend to stay within a certain established trading range most of the time. This is unlike stock markets which have been known to be vulnerable to all-out crashes in certain conditions.

24 hour trading
Unlike stocks, bonds and options, Forex markets are open around the clock between Monday and Friday. Each trading day is actually comprised of three trading days rolled into one because the Asian, European, and American markets overlap as they open and close throughout the day. As a result you do not have to wait for markets to open, they are always open, leaving you free to trade whenever you like.

Profit in both upward and downward trending markets
Forex traders buy, or go long, when they expect a currency pair to rise in value, and sell, or go short, when they expect a currency pair to drop in value. However, since currencies are always quoted in pairs, every position you take involves being long on one currency and short on the other. So when buying EUR/USD, for example, you are long on the first currency in the pair and short on the second. This means that as a Forex trader you are easily able to position yourself in a way that allows you to profit, regardless of the state of the underlying market. This is not the case for all investment vehicles. Stocks are a perfect case in point because even though the facility does exist for investors to short stocks, shorting a stock is more complicated, involves taking on more risk, and in some cases additional fees, than when buying or going long.

Low entry and transaction costs
The sheer number of market participants and stiff competition between brokers has led to low entry and transaction costs compared to other financial instruments. This is a relatively recent phenomenon; traditionally Forex markets were only open to institutional investors and very wealthy individuals. This was because the minimum lot sizes and margin requirements from the banks were high. As the retail sector has grown, brokers who aggregate the positions of smaller investors and forward them to the markets have come onto the scene.

Lot sizes and margin requirements have shrunk so much over the past decade or so that you can now open a Forex account and start trading with as little as $500 US dollars. Also, with more and more retail brokers competing for your trades, spreads have narrowed and commissions have dropped drastically over the past few years. This has led to online Forex being one of the most cost-effective trading vehicles available to retail traders.

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Trading Forex-Buying And Selling

Now that you have acquainted yourself with some of Forex terms, the next thing is to learn how to trade: buying and selling. This is how it work: in trading Forex, when you buy one currency, you need to sell another currency in exchange. If you anticipate that the price of the base currency will go up in comparison with the counter currency, then you can choose a buy position (go long). You can close this position by selling when the higher price is reached. If instead, you think the price of the base currency will go down as compared to the counter currency, then you would sell and enter into a short position. The idea is to cover your position by buying back at a lower price.

Order Types

When a Forex trader wants to enter into a position immediately they place a market order. The downside to market orders is that the markets are moving fast and your order may not get filled at the price you wanted. The difference between prices is called slippage.

Alternatively, if you are concerned about getting the right price, and are willing to wait and enter the market when your conditions are met, then you would place a pending order.

There are several kinds of pending orders in Forex trading:

Buy Entry – This order is placed when you believe the price will begin to rise after first dropping to a certain level. This order is executed when the asking price becomes equal to the pending order.

Sell Entry – This order is placed when you believe that the price will begin to fall after reaching a certain level. This order is executed when the bid price is equal to the pending order.

Buy Stop – This order is placed when you believe that the price will continue to rise after it breaks above a certain level. This order is executed then the ask price becomes equal to the pending order.

Sell Stop – This order is placed when you believe that the price will continue to fall after it breaks below a certain level. This order is executed when the bid price is equal to the pending order.

Stops

A stop loss (or a stop) is an additional type of pending order designed to stop your losses by automatically closing your position if the price moves in a direction different from what you expected.

If you are buying a long position, then you would set your stop somewhere beneath your entry to protect yourself from a sudden drop. If you are selling a short position, then your stop would be placed somewhere above it, just in case there is an unexpected rally.

A stop can also follow the price once it moves in your favor, in which case it is known as a trailing stop. A stop under a long position automatically closes if it is touched by the bid price and a stop placed over a short position is executed when it is touched by the ask price.

Take Profit

Another order which can close your position automatically is called a Take Profit order (TP). In the same way that a stop is intended to protect your position if something unexpected happens, a Take Profit order ensures that your position is closed if your target price is reached when you are not available, or in a fast moving market where the price may touch the target too quickly for you to react. It is generally a good idea to have both a stop and a target when entering new positions.

A target is normally set above the current price if you are in a long position and below the current price if you are in a short position. For long positions, the Take Profit order would be executed when the bid price becomes equal to the amount you set. For short positions, the ask price must equal the take profit amount.

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To your success 

PIPS, LOTS AND LIVERAGE

Our yesterday post was about Forex; today we are going to look at some of the terms you will likely come across while trading in Forex market: you need to acquaint yourself with these terms, to be able to apply them as they show up. Some of these are the terminologies that aids a successful trade in the Forex market. Understanding these terms will give you a great advantage in trading and will help you a great deal to avoid losses while trading. Forex trading is filled with trading concepts and terms. Here we have gathered some of the most common Forex terms and their meanings for you. The first is:

Pips

Pip stands for percentage interest point and is the generally accepted smallest unit showing the variation in the prices of financial instruments. It is usually equal to 0.0001, but the currency market coverage of all courses of the Japanese yen is equal to 0.01.

The exact value of an individual pip depends on the currency being traded. For example, the Euro is measured out to four decimal places, thus each pip equals 1/100th of a cent. That’s not to say that each pip is worth 1/100th of a cent in Profit – to calculate this, we need to introduce two other terms, lots and leverage.

Lots

The Lot is the smallest standardized and "indivisible" amount of an asset, which is authorized for trading in financial and commodity markets.

Banks and other liquidity providers trade currency in lots. A standard lot is 100,000 (100K) units of the currency being traded, while a mini lot is 10,000 (10K) in the Forex market.

Leverage

Leverage allows Forex traders to control more currency in a trade than they have deposited in their trading account. This is where the real power of Forex trading lies. Trading with the leverage system wisely can work in your favor, and bring you big profits.

If your margin is 1%, this means that the leverage is 1:100, i.e. you need only have 10 euros in your account so you can buy 1,000 Euro on the currency market. Thus, it would only take 100 units to control 1 mini lot (10K) in the fx market or 1000 units to control 1 standard lot (100K).

For example, if you buy 1 mini lot of the EUR/USD currency pair, then your account equity would increase or decrease by $1 for each pip of movement. If you buy 1 standard lot, then your account would increase or decrease $10 with each pip of price movement. Example 1: if the EUR/USD pair increases by 10 pips (10×$1) from 1.5000 to 1.5010 with mini lots, then this is a $10 increase. Example 2: if the EUR/USD pair increases by 10 pips (10×$10) from 1.5000 to 1.5010 with standard lots, then this is a $100 increase.

Trading on Margin

The Margin is the difference between your capital used as collateral and the amount that you can trade. This is the amount of collateral required by Forex traders to maintain their open positions on the Forex market. Unlike stocks and commodities, there are no margin calls in Forex. If an account falls below the margin requirements, then all open positions are automatically closed.

For example, if an fx trader buys one mini lot of the EUR/USD pair for 1.50 at 1:100 leverage, then they will need $150 of their account in margin to maintain that open position. If the price moves against the Forex trader by one pip, then they will need $151 and if the price moves against the fx trader by 10 pips, then they will need $160.

If, on the other hand, a Forex trader buys 1 standard lot of the EUR/USD pair for 1.50 at 1:100 leverage, then they will need $1500 of their account in margin to maintain that open position. If the price moves against the fx trader by one pip, then they will need $1510. Or if the price moves against them by 10 pips, then they will need $1600.


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Forex Trading-A Trending Online Business

Forex is one of the trending online business to venture into if you want want to do work from home business; this is not without risk, but the risk can be minimized if you understand the basics of trading Forex. Forex is about exchange between currencies of your choice. these are basic information you need to equip yourself with to succeed in Forex trading. 

   

Forex traders often use a variety of economic data to determine where a given country’s economy and currency may be headed next. This data may include: Gross Domestic Product (GDP), imports, exports, employment, unemployment, growth, debt and many other factors. Collectively, these factors are often referred to as the fundamentals. Therefore, fundamental analysis refers to the analysis of any data, as well as the actual price patterns of the currency itself. The price patterns frequently impact on the value of the currency on the Forex market.

Supply and Demand

The value of currencies responds to changes in supply and demand. For example if the demand for US Dollars rises, so will the value of the Dollar (USD). Likewise if there are too many Dollars available on the market their value will drop along with the demand.

Forex Currency Pairs

Currencies on Forex are traded in pairs – one currency’s value either drops or rises in comparison to another. Currencies are represented by a three-letter abbreviation such as: USD, JPY or EUR. In the currency pair the first currency is called the base currency and the trailing is called the quote currency. The price at any given moment shows how much of the quote currency is needed to equal one unit of the leading or base currency.

For example:
When the EUR/USD pair is priced at 1.5000, this means that it takes 1.5 US Dollars to exchange for 1 Euro. If the Euro rises in value, then the EUR/USD price will also rise as more US Dollars are needed to buy each Euro. Likewise, if the Euro drops in value, then the price of the EUR/USD pair will also drop as fewer US Dollars are now required to equal each Euro.

The value of the leading or base Forex currency is not the only factor in determining the value of a particular currency pair. Any change in the value of the trailing or quote currency also affects this relationship.

So, in the same example, if the US Dollar now rises in value, then the EUR/USD pair would drop as fewer Dollars are now needed to buy each Euro. If the US Dollar drops in value, then the EUR/USD price would rise, as more US Dollars are now required to equal each Euro.

Interest Rates

Another key factor that influences the value of a given currency is the constantly changing interest rate. Interest rates are determined by the central bank of a particular country.

For example:
If the Federal Reserve (Fed) in the United States lowers its interest rate, then the value of the US Dollar usually drops, causing the EUR/USD pair to rise. If the Fed raises interest rates, then the US Dollar will typically go up as well, causing the EUR/USD to drop.

Central banks are always caught in a delicate balancing act. If a country’s currency gets too strong, its exports become too expensive and other countries may look elsewhere.

Higher interest rates also tend to attract more foreign investments, which is why the currency of that country frequently goes up with the interest rates. Meanwhile, cheaper interest rates tend to stimulate lending inside the country and therefore economic growth.

Please feel free to post your comments or ask questions; I will be glad to give you the necessary support you require.

Top 20+ Legitimate Work from Home Business Opportunities

Ajaero Tony Martins

Home Based

Are you an unemployed college graduate, a stay-at-home mom or nursing mother? Are you in need of legitimate work from home business ideas and opportunities you can start? If yes, then this article was specially written for you.
If you are an unemployed college graduate or a full-time housewife, then working from home is a good option for you to make extra money or even earn full time income. With the recent advancement in technology and the massive migration of business and corporate organizations from in-house recruitment to low cost outsourcing, the work from home opportunities will only get bigger and more lucrative.
In fact, most companies now prefer to work with home based independent contractors; rather than hire full time employees because it is a great way to reduce operating expenses. Today, we have self made home based millionaire entrepreneurs and self employed people.
Now instead of sitting at home and complaining about the increasing unemployment rate in the country (sorry but I think conventional employment is a dying trend), you can use your skills to make money from home. There are many home-based businesses that you can start that require little to no capital.

But you will need a personal computer and a good internet connection, since many of these businesses are internet-based. So without wasting your time, below are the top 20+ best home based businesses you can choose from.

Top 20+ Legitimate Work from Home Business ideas and Opportunities

1.  Freelance writing
If you are a very good writer, then you can make money with your writing skills by writing for clients both online and offline. There’s a constant demand by clients for blog posts, website content, sales copies, press releases, newsletters, and other forms of text. Similarly individuals and businesses sometimes need to hire ghostwriters for their letters of recommendation, business plans, and business proposals. So, you have got a huge market to serve.
2.  Data entry
There are many data entry positions on the web. Data entry simply entails handling data for clients such as copying and pasting, uploading, and transferring files. These tasks are usually very tedious and most business professionals are too busy to handle them. So, they would rather employ people to help them.

3.  Translation
If you are fluent in two or more languages, you can help clients translate text from one language to another. You will find many open translation jobs on freelance outsourcing sites like Elance.com and Freelancer.com.
4.  Video creation
Videos are fast becoming the most widely adopted means of information dissemination over the web. Because videos increase search engine visibility, individuals and organizations now upload videos as a way of promoting their businesses and increasing brand awareness. So, if you have a good digital camera and you are good at converting PowerPoint and flash files to video format, this business idea is for you.
5.  Affiliate marketing

Affiliate marketing is one of the most lucrative online businesses. This is how it works: you advertise and review other people’s products and services, and you get a commission on each sale you make. The more you sell, the more profit you make.
6.  Babysitting
Obviously, this is for females. If you love babies and you enjoy taking care of them, then you can make money by helping busy mothers around you look after their babies when they are off to work or some other places. If this sounds like a business you can do, then here’s an in-depth guide on how to start a babysitting business.
7.  Tutoring
Do you know that you can make money teaching English language online? Well, I guess you don’t know. If you are very knowledgeable in a particular field or skill (such as playing the piano), then you can make a fortune by tutoring others. Similarly, if you are good at teaching academic subjects, approach mothers whose kids are in school and offer to help their kids improve on their academic performances.
8.  Laundry services
Even though people want to look good at all times, they rarely have enough time for laundry. You can make a lot of cash by starting a laundry business because you have a market around you regardless of your location.
9. Writing for magazines
Newspapers and magazines readily pay high rates for great articles and stories. If you are able to create such pieces regularly, you will make a fortune. You can start by pitching your ideas to the editor of your local newspaper.
10.  Graphic design
If you are very creative with pictures and colors, you can make money by working as a graphics designer.  Website banners, company logos, and book covers are designed by professional graphic designers.
11.  PC / Mobile phone repair
If you are a gifted in handling and repairing electronic devices, you can undergo training to become a PC or mobile phone repair specialist. Repairing PCs or mobile phones is a very lucrative business because almost everyone has a PC and a Smartphone, and these devices pick up major or minor faults at times.
12.  Website design
If you are a very creative designer with some basic HTML skills, you can train to become a website designer. Individuals and organizations are frequently in need of website designers and developers to help them design and tweak their websites.
13.  Online store
You can make a lot from money by setting up your own online store and promoting it. Though promoting this business and attracting customers can be very tedious, it is always very rewarding in the end.
14.  Cartoonist
If you are a very good artist, you can make money by drawing interesting cartoons and comics for newspapers and magazines. This job requires some creativity on your part, and if you have it, you will be a hotcake.
15.  Selling used products
Most of the time, people will readily sell their used products for very ridiculous prices because they no longer need them. However, some other people who need these used items are usually willing to pay more for them because they need the items. You can make a fortune by buying used products that people no longer need and reselling them to others who need them.
16.  Social media manager
Celebrities and organizations are using social media to interact with their fans and customers. And they are getting great results. But they are too busy to keep their social media profiles alive. So, they are ready to pay social media managers to help them manage their accounts.
17.  Virtual assistants
Busy business owners and professionals rarely have time to handle tasks such as reading and replying emails, preparing speeches and reports, transferring files, and so on. You can make money off of these individuals by helping them handle these tasks. Interestingly, you can work as a virtual assistant for someone even without meeting your client in person.
18.  Search Engine Optimization
Everyone with an internet presence wants to improve their search engine visibility. And they are ready to pay huge amounts just to ensure that their websites or blogs rank high in search engine listings for their target keywords. So, you can make money by rendering SEO services.
19.  Professional blogging
Starting a blog is another proven way to make money. But keep in mind that the profits won’t come until after several months, depending on how much effort you put into promoting your blog. So, if you have some knowledge that you want to share with others, or you have some interests that you will like to discuss with an audience, starting a blog is your best bet.
20.  App development
The app industry is fast becoming one of the most lucrative markets in the tech world. Developers make up to 6-figures depending on the number of apps they develop and how useful people find those apps. If you are very good at coding and programming, you can make a fortune by developing apps.