3 Steps Trading basic Tips
Published on Sabtu, 01 Februari 2014
15.34 //
Forex Article,
Forex Tips
Part 1 of 3: Learning Forex Trading Basics
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1Understand basic forex terminology.
- The type of currency you are spending, or getting rid of, is the base currency. The currency that you are purchasing is called quote currency. In forex trading, you sell 1 type of currency to purchase another type.
- The exchange rate tells you how much you have to spend in quote currency to purchase base currency. For example, if you want to purchase some U.S. dollars using British pounds, you may see an exchange rate that looks like this: GBP/USD=1.589. This rate means that you'll spend 1.589 dollars for 1 British pound.
- A long position means that you want to buy the base currency and sell the quote currency. In our example above, you would want to sell U.S. dollars to purchase British pounds.
- A short position means that you want to buy quote currency and sell base currency. In other words, you would spend sell British pounds and purchase U.S. dollars.
- The bid price is the price at which your broker is willing to buy base currency in exchange for quote currency. The bid is the best price at which you are willing to sell your quote currency on the market.
- The ask price, or the offer price, is the price at which your broker will sell base currency in exchange for quote currency. The ask price is the best available price at which you are willing to buy from the market.
- A spread is the difference between the bid price and the ask price.
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2Read a forex quote. You'll see two numbers on a forex quote: the bid price on the left and the ask price on the right.
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3Decide what currency you want to buy and sell.
- Make predictions about the economy. If you believe that the U.S. economy will continue to weaken, which is bad for the U.S. dollar, then you probably want to sell dollars in exchange for a currency from a country where the economy is strong.
- Look at a country's trading position. If a country has many goods that are in demand, then the country will likely export many goods to make money. This trading advantage will boost the country's economy, thus boosting the value of its currency.
- Consider politics. If a country is having an election, then the country's currency will appreciate if the winner of the election has a fiscally responsible agenda. Also, if the government of a country loosens regulations for economic growth, the currency is likely to increase in value.
- Read economic reports. Reports on a country's GDP, for instance, or reports about other economic factors like employment and inflation, will have an effect on the value of the country's currency.
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4Learn how to calculate profits.
- A pip measures the change in value between 2 currencies. Usually, 1 pip equals 0.0001 of a change in value. For example, if your EUR/USD trade moves from 1.546 to 1.547, your currency value has increased by 10 pip.
- Multiply the number of pips that your account has changed by the exchange rate. This calculation will tell you how much your account has increased or decreased in value.
Part 2 of 3: Opening an Online Forex Brokerage Account
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1Research different brokerages. Take these factors into consideration when choosing your brokerage:
- Look for someone who has been in the industry for 10 years or more. Experience indicates that the company knows what it's doing and knows how to take care of clients.
- Check to see that the brokerage is regulated by a major oversight
body. If your broker voluntarily submits to government oversight, then
you can feel reassured about your broker's honesty and transparency.
Some oversight bodies include:
- United States: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
- United Kingdom: Financial Services Authority (FSA)
- Australia: Australian Securities and Investment Commission (ASIC)
- Switzerland: Swiss Federal Banking Commission (SFBC)
- Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
- France: Autorité des Marchés Financiers (AMF)
- See how many products the broker offers. If the broker also trades securities and commodities, for instance, then you know that the broker has a bigger client base and a wider business reach.
- Read reviews but be careful. Sometimes, unscrupulous brokers will go into review sites and write reviews to boost their reputations. Reviews can give you a flavor for a broker, but you should always take them with a grain of salt.
- Visit the broker's website. The website should look professional, and links should be active. If the website says something like "Coming Soon!" or otherwise looks unprofessional, then steer clear of that broker.
- Check on transaction costs for each trade. You should also check to see how much your bank will charge to wire money into your forex account.
- Focus on the essentials. You need good customer support, easy transactions and transparency. You should also gravitate toward brokers who have a good reputation.
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2Request information about opening an account. You can open a personal account or you can choose a managed account. With a personal account, you can execute your own trades. With a managed account, your broker will execute trades for you.
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3Fill out the appropriate paperwork. You can ask for the paperwork by mail or download it, usually in the form of a PDF file. Make sure to check the costs of transferring cash from your bank account into your brokerage account. The fees can cut into your profits.
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4Activate your account. Usually, the broker will send you an email containing a link to activate your account. Click the link and follow the instructions to get started with trading.
Professional traders already have the knowledge and experience to know which trading techniques and trading systems could be profitable and which trading techniques and trading systems should be avoided, but professional traders are not looking for a new trading technique or trading system (because they are already trading correctly). New traders do not have the knowledge and experience to know which trading techniques and trading systems could be profitable and which trading techniques and trading systems should be avoided, and new traders are exactly the traders who are looking for a new trading technique or trading system (and even worse new traders are often still looking for the holy grail of trading).
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