Introduction to FX Trading

Hello readers and welcome to the prime feature of Winning Ways In Forex.

The Mission & Vision statement driving this column is to make the balanced knowledge of Forex Trading widespread and easily accessible in our country such that Nigeria will become a profitable forex trading community with over 1 million active traders in the year 2015 with over 100,000 of these making profit of at least $10,000 annually.

The approach we are going to adopt in this column is the use of simple methodologies to explain what may seem like difficult terms/concepts of forex.

Forex trading, for the well trained is one of the most profitable home based business in the world today. The daily annual turnover of this “business without borders” is currently estimated at $4trilion traders, more than 40 times bigger than the transactions in New York Stock Exchange(NYSE) which is the largest stock exchange in the world.

In this column, we will teach forex trading from the foundation to the ground level and then begin to build the super structures that will empower you to become an Advanced Profitable Forex Trader.

Requirements For Trading Forex

For you to trade forex, you must

*Have a computer with internet access. The minimum acceptable speed should be 115kbps as anything below this will not make for good trading. More importantly your Internet Service Provider(ISP) must provide more than fair quality of service for you to do well. Poor quality of service will affect your trading psychology….and as the Mantra goes ”psychology is almost everything in forex”
*Good Training and Mentoring. This is the foundation upon which you will build every other structure if you are going to do well in forex trading. The components of the type of education and continuous updates you get are central to your success in forex trading. Market patterns are sort of seasonal and if you don’t understand the different shades of market moves, great money making opportunities will come and go and it will beat your recognition.
*Open a forex trading account with a reputable forex broker. Before going live, you are expected to have done demo trading for a minimum of 4weeks.More on this in subsequent feature.
*You need to open a foreign currency domiciliary account with an efficient bank for the purpose of transferring and remitting funds from your trading platform/broker.

A PEEP INTO THE MARKET

Forex currencies are traded in pairs, e. g EUR/USD, GBP/USD, USD/CAD, etc. The first currency in the pair is called the base currency and the second currency is called the counter currency. The market quote for any currency pair is usually 2 different values known as the bid(sell) and the ask(bid) rates. The first price in the quote is the selling(bid) price and the second quote is the ask(buy) price. The difference between these 2 values is referred to as the spread and this is the commission your forex broker takes from your account anytime you trade irrespective of your market outcome, whether you lose or win!

If for instance you buy 0.1 lot EUR/USD at 1.5759/1.5762.Your Open Trade in your trading platform will show that you entered the market at 1.5762 and the platform will start reading your market at 1. 5759 with an opening Profit/Loss of -$4.

Conversely, if you sell 0.1 lot USD/CHF at 1.0345/1.0348, your open trade in your platform will show that you entered the market at 1.0345 and the platform will start reading your market at 1.0348 with an opening P/L of -$4.

HOW TO REPRESENT PRICE MOVEMENTS IN THE MARKET

Price movements in the market are represented using graphically using lines, bar charts, renko and candlesticks. The most popular means of representing price action in the FX Market is the use of Japanese candlesticks, made even more popular by Legendary Trader and Trainer Steve Nison. This means of representing market price action towers head and shoulders above other means of market representation since “candlesticks are pregnant” and a good understanding of the various types of candlesticks along with other parameters is the passport to great profits in forex trading. Candlesticks are representative of price action over a specified timeframe, it may be a 5minutes, 10minutes, 15minutes, 30minutes,1hour, daily etc.

When the opening price is lower than the closing price for a specified timeframe, that is a bullish price action and the standard convention for representing such is a white or green candlestick. It also indicates that the base currency is gaining strength against the counter currency and the buyers are winning, ie the market is in a buy mode.

When the opening price is higher than the closing price for a specified time frame, this is a bearish price action and the standard convention for representing such is a red or black candlestick. It also indicates that the base currency is losing strength against the counter currency and that means the market is in a sell mode.



Source by Dr Marvelson Ima Obasogie

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