Learn How to to trade on Forex market


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The world’s largest market is the foreign exchange market which processes an estimate of 5 to 6 trillion dollars a day. Does it sound interesting? If yes, why don’t you take the risk of Forex trading and earn huge incomes generated through it. Before that Learn How to invest in Forex trading. http://bit.ly/15oQp9M

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Learn How to to trade on Forex market

  1. 1. Forex Tutorials
  2. 2. Welcome to the lucrative world of Forex trading. This is Globally decentralized financial market for trading currencies round the world round the clock. A particular quantity(lot) of one currency pair is purchased/sold in the speculation on changes in the value of them. It conjectures the relative gap in the values of different currencies by comparing them.
  3. 3. The modern foreign exchange market began forming during the 1970s after three decades of government restrictions on foreign exchange transactions. The Forex Market, was considered to be the playground of large institutions, hedge funds, extremely wealthy individuals, governmental institutions operating under central banks,
  4. 4. Due to the development of the internet over the last few years, small(retail) investors can now take advantage of this market, at large. Present situation of Forex: • Huge trading volume • Average daily turnover : $4 trillion • High liquidity • Geographical dispersion round the globe • Continuous operation: 24 X 5 • Use of leverage to enhance profit and loss margins • Investors can respond to currency fluctuations caused by Economic, Political And Social Events at the time they occur, without having to wait for respective exchange to open
  5. 5. • It gained popularity due to its fast paced movements and its high returns. • Number of ways for investors to get in: o Spot o Swaps o Spread Betting o Options o Futures o Forwards o Contracts For Difference Modest portfolios with high potential
  6. 6. Symbol Currency Country USD ($) Dollar USA EUR (€) Euro Eurozone Members JPY (¥) Yen Japan GBP (£) Pound Great Britain CHF Franc Switzerland AUD Australian Dollar Australia NZD New Zealand Dollar New Zealand Main Currency Symbols
  7. 7. The US dollar is by far the most traded currency in the world – with almost 85% of all reported transactions. The euro comes next, followed by the yen, and then the pound. For this reason the rates of all currencies against the dollar are referred to as major rates (USD/JPY) and the rest are cross rates (e.g. EUR/JPY).
  8. 8. Forex exchange traders would typically look at the currencies available and buy the strongest currency while selling the weakest. So, for example, if after reading the news, you thought the euro was strong and the US dollar was weak, you could buy the euro while selling the dollar. Because you are comparing one currency to another, Forex is always quoted in Pairs. Therefore, an example of a EUR/USD quote would be 1.4650. This means that one euro is worth 1.4650 US dollars at that moment in time. If this rate fell to 1.4422, then this would mean the euro is getting weaker and the US dollar is getting stronger. Within a Forex pair, the first currency is referred to as the Base Currency and the second currency is referred to as the Quote Currency. When you buy or sell a currency pair, you are performing an action on the base currency.
  9. 9. Pip Stock indices have "points", however Forex has pips. The smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places. Every fourth decimal point that the currency pair moves is 1 pip of movement. For example, if GBP/USD was to move in price from 1.6339 to 1.6340, this would be a movement of 1 pip, and if it moved from 1.6339 to 1.6329, then this is a movement of 10 pips. The monetary value of one pip can vary according to the size of your trade and the base currency you are trading in.
  10. 10. Forex Leverage One of the advantages of Forex trading is that you can trade more than your initial deposit. This is called Leverage. Leverage of 50:1 allows you to trade with $10,000 in the market by having a deposit of $200. This means that you can take advantage of the smallest movements by controlling more money than your initial deposit, allows you to maximize your potential profits. Leverage Amount Traded Required Margin 100:1 $100,000 $1000 200:1 $100,000 $500 500:1 $100,000 $200
  11. 11. Lot The standard unit size of a transaction. Typically, one standard lot is equal to 100,000 units of the base currency, 10,000 units if it's a mini, or 1,000 units if it's a micro. Mini Lot Size No. of Units 0.01 1,000 0.1 10,000 1.0 100,000 Max Lot Size No. of Units 8.0 800,000
  12. 12. Long Position Long position is buying the lot of currency pair Example: If You decide to buy the euro against the dollar and the quote is 1.4422/1.4423, and you buy 1 Standard Lot of the same at 1.4423 The value of your position is 100,000 x 1.4423 = $144,230.00 To open the position you have to deposit (margin) of just 1% of the position in your account. Your deposit is therefore 1% of $144,230.00 = $1442.30 Leverage Percentage Deposit 100:1 1% 200:1 0.5% 500:1 0.2%
  13. 13. Short Position Short position is selling the lot of currency pair Example: Suppose, a few hours later in the previous example, EUR/USD has risen to 1.4639/1.4640 and you decide to book your profit by selling the same 1 lot at 1.4639 Long Position: 1 Std. Lot = 100,000 x 1.4423 = $144,230.00 Short Position: 1 Std. Lot = 100,000 x 1.4639 = $146,390.00 Note: you can Open a position either by Long/Short transaction, but when you book your profits with the same transaction/deal, you have to Close that transaction
  14. 14. Spread Spread is the difference between the Bid price and the Ask price. Depending on the currency pairs & type of trading account, the spread will vary. Bid Price: The price at which a trader is willing to buy the currency price Ask Price: The price at with an investor, trader or institution is willing to sell the currency price.
  15. 15. Profit Calculation Once a position is opened, the value of each PIP varies depending on your position size. Example: € 10,000*1.4363(ask price) = $14,363 € 10,000*1.4364(ask price) = $14,364 $00,001 = Each pip is worth $1 € 50,000*1.4363(ask price) = $71,815 € 50,000*1.4364(ask price) = $71,820 $00,005 = Each pip is worth $5 Note: This calculation will always give you the value of each PIP in the secondary currency.
  16. 16. Simple formulas 1) (Deal size)/10,000 = value of each PIP (in the secondary currency) (This formula is only for currencies with 4 digits after the decimal point) Example: EUR/USD € 10,000/10,000 = $1 per PIP 2) (Deal size)/ 100 = value of each PIP (in the secondary currency) (This formula is only for currencies with 2 digits after the decimal point) Example: USD/JPY $10,000/100 = ¥100 per PIP Note: Calculations can be adjusted to the desired currency accordingly.
  17. 17. PIP values that are not in USD can be easily converted to the currency requested by using the relevant pair. Example: Step 1) USD/JPY Bid price = 114.23 Ask price = 114.29 Step 2) USD/JPY $10,000/100 = ¥100 Step 3) PIP value/ Bid price = value of PIP in desired rate ¥100 /114.23 = $0.8754 It is always advisable to calculate your potential profits and losses before taking the trade.
  18. 18. Margin: A margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of their counterparty (most often their broker or an exchange). Types of margins: Initial Margin: It is the amount required to be collateralized in order to open a position. It is expressed as a percentage of the total value of a position and it changes in real time with the changes of the position's price. Maintenance Margin: It is the minimum amount to be collateralized in order to keep an open position until the position is closed. This is also known as Daily Margin. Margin Call When the margin posted in the margin account is below the minimum margin requirement, the broker or exchange issues a margin call. The investors now either have to increase the margin that they have deposited or close out their position. They can do this by selling the instrument.
  19. 19. Rollover: It is the interest, paid or earned by the trader for holding a position overnight. The interest rates vary depending on the currency pair. This is also known as swapping. If the interest rate on the currency you bought is higher than the interest rate of the currency you sold, then you will earn rollover. If the interest rate on the currency you bought is lower than the interest rate on the currency you sold, then you will pay rollover. Scalping: This is a trading strategy that attempts to make many profits on small price changes in financial instruments in a single day. Traders who implement this strategy are known as scalpers. The main goal is to open a position & close it soon on little changes in the prices for making small profits. Traders who implement this strategy place 10 or 100 trades in a single day in the belief that small moves in currency price are easier to catch than large ones.
  20. 20. Stop Loss: A stop-loss is an order to buy or sell an instrument, once the price of the stock reaches a specified price chosen by the trader, known as the stop price. When the stop price is reached, a stop loss order becomes a market order, it will automatically close a losing position before your account balance is depleted. A stop loss order is a way to protect trader from runaway losses in the worst- case scenario. Example: If you open a position of 1 standard(1.0) lot in GBP/USD at $1.50 but wished not to lose more than $250 on this single trade, you would set your stop loss 25 pips below the price at which you entered the trade, i.e. $1.4975. Note: Amount of loss depends upon the size of the deal
  21. 21. Take Profit: Take profit orders are the opposite of a stop loss. The take profit is a price at which you would like to close your previously opened position at a price more profitable to book a profit, above or below the current price of the currency, in the event the rate moves in a favourable direction. More specifically, if you long a currency pair position and believe the price will rise to a certain level, but are unsure what it will do beyond that level, place a take-profit order at that point will automatically close out your position allowing you to lock in profit. Example: Buy $100 worth of yen at 107.4 yen per dollar = 100*107.40 = 10,740 yen. Place a take-profit order at 108.80. Price then rises from 107.40 to 108.80 Take-profit order automatically executed to sell $100 and buy 10,880 yen. Profit of 140 yen realized.
  22. 22. Fundamental Analysis Technical Analysis
  23. 23. Economical Political Social Fundamental analysis is the analysis of economic, social, and political forces that affect the supply, demand and prices of currency. It includes the changes in the rates of inflation, unemployment, saving & investment patterns, GDP, Political ideology & stability, interest rates. All these factors determine the strength (intrinsic value) of a particular currency. The traders should keep a vigil on the changes in these indicators and analyze their impact on the currency prices.
  24. 24. Technical analysis is the analysis of price movements by plotting the data on a chart. The past price trends are identified with the tools of technical analysis to forecast future price levels. This is a method of evaluating currency by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.
  25. 25. Types of charts Line Chart Bar Chart Charts: A price chart is a sequence of prices drawn over a specific time frame. Technical analysts and investors use charts to analyze the wide range of currencies in order to forecast future price movements. Any currency with price data over a period of time can be studied with the help of a chart. Charts can be shown in a variety of time scales like: hourly, daily, weekly & monthly charts.
  26. 26. Candle Stick Chart: Originating from Japan, a candle stick chart is made up of separate blocks or candles. Each block (candle) represents a time interval, e.g. 5min, 1hour, 1day, 1month, 1year, etc. If the closing price is higher than the opening price, within the selected time interval, then the block's colour is green; otherwise it's red. The thin line coming out of the top of each block indicates the highest price of the time period, and the line coming out of the bottom indicates the lowest price of the time period. These thin lines are called shadows or tails. The body of the candle will vary according to the intraday volatility.
  27. 27. Trend line: A trend line is formed diagonally between two or more Price Pivot Points. They are commonly used to judge Entry and Exit Investment Timing while trading. It can also be referred to a Dutch line as it was first used in Holland. A trend line is a bounding line for the price movement of a currency pair, also used to confirm the price trend. It is drawn over pivot highs or under pivot lows to show the prevailing direction & speed of price movement. Trend lines are a visual representation of support and resistance in any time frame.
  28. 28. Pivot Point: A pivot point is a price level of significance. This is a predictive technical indicator of market movement derived by calculating the numerical average of a particular stock's high, low and closing prices from prior trading period. If the market, in the following period, trades above the pivot point it is usually evaluated as a Bullish sentiment, whereas trading below the pivot point is seen as Bearish.
  29. 29. A support level is a price level where the price tends to find support as it is going down. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely to continue dropping until it finds another support level. A resistance level is the opposite of a support level. It is where the price tends to find resistance as it is going up. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely that it will continue rising until it finds another resistance level. Price support and resistance levels are key trading tools in any market. It is customary to calculate additional levels of support and resistance, below and above the pivot point, respectively, by subtracting or adding price differentials calculated from previous trading ranges of the market. In pivot point analysis, three levels are commonly recognized below and above the pivot point.
  30. 30. where, P = Pivot Point H = High Price L = Low Price R = Resistance Level S = Support Level
  31. 31. A support trend line is formed when a currency’s price decreases and then rebounds at a pivot point that aligns with at least two previous support pivot points. A resistance trend line is formed when a currency’s price increases and then rebounds at a pivot point that aligns with at least two previous resistance pivot points.
  32. 32. Other Information: Candle length shows no. of movements (volatility) in particular time period. Stick length shows the highest & lowest price hit by the particular currency pair in particular time period. Candle stick will change to the next one after completing the particular time period. In calculation of pivot point, Closing Price is the Current Market Price.
  33. 33. Bar Chart: The chart is made up of a series of vertical lines that represent each data point. This vertical line represents the high and low for the trading period, along with the closing & opening price.
  34. 34. Line Chart: This is the most basic form of charts because it represents only the closing prices by connecting them over a set period of time. Line charts do not provide visual information of high, low and opening prices. Nevertheless, the closing price is often considered to be the most important price in stock data compared to the high and low for the day and this is why it is the only value used in line charts.
  35. 35. Fibonacci Study
  36. 36. Moving Average: The Moving Average indicator is one of the oldest and the most often used indicator in technical analysis. It is used to identify and indicate the changes in trend of prices for a given period of time. A moving average is an average of a shifting data. Example: A 10-day moving average is calculated by adding closing prices for the last 10 periods being measured and dividing by 10. The term "moving" is used as only the last 10 days are used in the measurement. That is why the data body is averaged shifted forward with every next trading day. Formula for the Simple Moving Average (SMA): MA = ∑ P / n where P - price of i-bar; n - MA period.
  37. 37. Relative Strength Index: Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. RSI oscillates between zero and 100. This is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. It is calculated using the following formula: RSI = 100 - 100/(1 + RS*) *Where RS = Average of x days' up closes / Average of x days' down closes. An asset is deemed to be overbought once the RSI approaches the 70 level, implying that it may be getting overvalued and is a good candidate for a pullback. Likewise, if the RSI approaches 30, it is an indication that the asset may be getting oversold and therefore likely to become undervalued.
  38. 38. Elliot Waves: The Elliott Wave Principle is a detailed description of how groups of people behave. It reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific and measurable patterns. in the financial markets, where changing investor psychology is recorded in the form of price movements. Elliott Wave Principle measures investor psychology, which is the real engine behind the currency markets. When people are optimistic about the future of a given issue, they bid the price up and vice-versa. The whole theory is classified into two parts: • Impulsive Waves: The impulse pattern consists of 5 waves. The five waves are in both directions, up & down. (Labelled 1-5) • Corrective Waves: The corrective pattern consists of 3 waves. (Labelled A-C)
  39. 39. Fibonacci Study: Fibonacci Study is not intended to provide the primary indications for timing the entry and exit of a stock; however, they are useful for estimating areas of support and resistance. Fibonacci study is divided in 4 parts: 1. Fibonacci Retracement 2. Fibonacci Arcs 3. Fibonacci Fans 4. Fibonacci Time Zones Many people use Fibonacci studies in the combinations of other technical indicators to obtain a more accurate forecast. Like fibonacci studies are often used with Elliott Waves to predict the extent of the retracements after different waves.
  40. 40. NordFX provides you with a trading platform customized to meet your trading experience and volume activity. For trading, you 1st need to download Meta Trader 4 on your system by complying the following steps: Open NordFX website Click on trading platform Choose the platform you want to trade on Click on download Complete downloading procedure
  41. 41. Open Demo A/c: Login Procedure: Open MT 4 File Open An A/c Fill Details Finish Open MT4 File Login Fill Details Change Server Login
  42. 42. Trade Currency Pair F9 Order window Buy/sell Ok Servers: Open a Deal: Real 1 • Micro Real 2 • Standard Real 3 • Welcome Real 4 • Zulu
  43. 43. Close the Deal: In order to gain from the Forex market, one must be constant with her/his trading rules. Building strategies are essential for success. Begin trading on your demo account while gradually opening live positions simultaneously. Once more confident, enjoy the trends while seeing your portfolio grow. Double click on profit side of particular deal Order window Click on close
  44. 44. Get More Info on Forex Trading: http://bit.ly/15oQp9M