Forex Training: What to Look for in a Forex Training Program

Should new Forex traders take Forex trading courses or join a Forex training program? Definitely yes; by now you have probably heard that only 5% of traders achieve consistent profitable results when trading the Forex market. The main reason for this is the lack of education. Don’t get me wrong here, taking a Forex training program or a Forex trading course won’t guarantee profitable results, nothing can, but choosing the right Forex training program or Forex trading course will definitely put the odds in your favor.

Before spending any amount of money on any Forex trading course or Forex training program there are some important aspects you need to take in consideration. There are many training programs available, but not every one of them suits the needs of every trader.

The first thing you should be looking in a Forex training program is the content of the material. Unfortunately, most courses or training programs focus or spend most of the time on basic concepts. Though these basic concepts are important, spending most of the course on them won’t help the trader to make consistent results.

The following subjects are what I consider the most important aspects of trading and every training program or trading course should address:

Forex trading basics. Review basic concepts such as: margin, type of orders, a little background, bid/ask, rollover, etc. You need to make sure you understand every single concept to perfection.

Main drawbacks of Forex traders. Being aware of the common mistakes made by Forex traders and knowing how to handle them will prevent new traders from making those mistakes.

Technical and fundamental analysis. These are the two main approaches adopted by Forex traders. Knowing how to properly apply each concept will definitely put the odds in your favor.

The three pillars of Forex trading. I consider that these three subjects have the most impact on every trader trading account.

Forex trading system development. Having the right system is a must if you want to have consistent profitable results. Having a system that doesn’t fit you will cause a series of problems that will make your trading account vanish away (second guessing the system, not following your system, etc.)

Money management. This is considered by many successful traders to be the most important single aspect of trading. Money management helps to increase your profits geometrically and at the same time limit your losses (i.e. a good risk reward ratio of about 2:1 will make you money in a Forex trading system that is right only 38% of the time.)

Trading psychology. Being aware and knowing hot to handle the psychological barriers that affect every trader decision will put the odds in your favor.

Other important aspects every training program should include are: Developing habits for success (such as discipline patience, taking responsibility of every action, commitment, etc.,) understanding and taking our trading as a business, risk and trade management.

FOREX Education – Getting the RIGHT Education to Win

If you want to win at FOREX trading you need the right education. The fact is 95% of novice traders lose all their equity quickly, that’s not because they don’t work hard or can’t win - they simply put their efforts in the wrong area.

Let’s look at how to achieve currency trading success by learning forex trading the right way.

Use the Internet

You can get all the Forex education you need for free on the net, you simply have to look in the right areas, which we will explain in more detail in a moment.

A fatal mistake

Is to think you can buy success from a guru or mentor on the net.

Most of the information sold is junk or available free anyway.

Many traders are duped by attractive advertising copy, claiming that you can make huge regular profits by buying an e-book for $100 or so, but the reality is:

If the information was so good it would not be sold; these vendors would simply trade for themselves and the fact is they don’t.

They make money from selling you forex education NOT trading and their forex trading systems simply don't work.

If you can find a trader with a real time track record of profits, their information may be worthwhile, but trust me, there are not many who can provide this.

The best way is to do it on your own and you can get it all the Forex Education you need for free.

Working smart not hard

Trading is very different to many other ventures in life, in that the effort you put in has no relation to the money you make.

You get paid for getting market direction right not how much effort you put in.

You should as beginner either start with long term trend following strategy or try swing trading – NEVER attempt day trading.

Forex day trading simply doesn’t work, as the data is to short to be reliable and is meaningless.

More novice traders start with forex day trading than any other method and they lose – don’t fall into this trap.

Long term trend following suits the patient trader, while forex swing trading suits the trader who likes to trade a bit more and is less patient.

Basics

To start get an understanding of support of resistance and technical analysis.

Next, you need to integrate a few indicators to confirm price momentum into support and resistance levels and see the odds of them holding.

Below find some indicators that are great for triggering forex trading signals and determing price momentum:

Stochastics, Relative Strength Index (RSI), Average Directional Movement (ADX)

Below find some indicators to determine help you spot support and resistance (in addition to trendlines) and determine targets and strength of the trend.

Bollinger Bands, MACD and moving averages.

If you learn about all the above indicators, support and resistance and also how a breakout strategy works, you will have ALL the forex education you need.

Forex Education – Want to Buy Advice? 2 Tips To Help You Get The Best Education

Forex education is vital if you want to succeed but most traders simply have no idea what is good advice and believe advertising copy, but you need to go beyond the copy to get good advice.

Most what you need to know is FREE on the net. Let’s look at where to get the best advice to forward your forex education.

Tip 1 - Look For Proof

Don’t buy an e-book from a vendor on the net unless they present a real time track record that they have made money with their system.

There are many e-books sold that use great copy or lies, to appeal to naive investors don’t fall for this – If they have made no money don’t buy their product – period.

Most of the systems sold by vendors are junk or you can get the information free on the net anyway – more of that later. Now another important point!

Beware of the hypothetical track record this is meaningless.

Their done in hindsight knowing the closing prices so of course it’s going to make money but you don’t trade backwards in real life – you trade forwards and that’s much more difficult!

Instead of buying overpriced e-books with no evidence of success, go to your bookstore and pick up books from traders who have walked the walk rather than simply talk the talk.

Here you can learn from the real pro’s (we have done a top list check out our other articles) and there are some great bargains to be had.

Tip 2 Take advantages of FREE Sources

You can learn forex trading for free and get a forex trading strategy without spending any money.

If you are novice trader you will probably want to trade with forex charts and use technical analysis.

Just look up the phrase and you will find all you need.

The simplest way to trade is using “support and resistance” and a “breakout methodology” so search those two phrases as well.

You will need some “momentum indicators” to confirm you’re trading signals so look them up and in particular “Relative Strength Index” and “stochastics”.

That will give you a simple powerful method to trade with and give you a forex system based on sound logic.

THE BEST FOREX EDUCATION

Is easy to get if you follow the above two tips – All the basics are free and you can get a few good books from the great traders to inspire you and help you – you need spend no more than $100 maximum and you will learn forex trading the right way and get the best forex education.

Finally, leave the e-books with their over hyped copy and no proof to the other 95% of forex traders who lose.

That’s it good luck and good trading.

Trading Signals: Do You Need Them?

In forex trading, many of the transactions you perform are dependent on market trends and how the market behaves. This is why in order to survive and make use of your presence in the forex trading market, trading signals are exchanged. These signals help investors, traders and brokers to observe the market, assess its performance and make sound decisions.

What are forex trading signals?

Forex trading signals are tips and recommendations about whether to buy or sell or liquidate given by a third party. This party could be your broker, trader, analyst, brokerage company, etc. The signal can be a single indicator or a group of indicators, including breakouts, envelope patterns, stochastic lines, Fibonacci levels, oscillators, currency pairs that are almost at moving averages and support and resistance levels, among others. Forex trading signals can vary depending on the source and they also follow certain market patterns and trends, depending on the demand and supply of the world's major currencies.

Since there are many indicators to watch out for, it is important for many investors to rely on more experienced forex brokers for reliable trading signals. Of course, the more seasoned investors can always try to get a feel of the market by themselves just by watching the trends, but there are so many indicators that it's sometimes a lot easier to rely on trading signal services. Besides, trading signal providers have to perform detailed study of the markets and make technical analyses of whatever operating forces come into play, something that many investors don't have the time for.

Where are trading signals derived from?

The currency chart is one of the sources for technical studies and market analysis that lead to trading signals. They include:

Simple Moving Average (SMA) – when the moving average line is surpassed by currency prices, this is a buy signal. If the price goes below the average line, it's a sell signal.

Moving Average Convergence Divergence (MACD) – uses a single line to indicate a buy or sell signal, depending on whether the line is above or below the average line.

Bollinger Bands – these point to possible market changes. When Bollinger bands tighten, you can expect prices to change sharply.

Volume – a high volume may signal a new trend. A low volume means uncertain times ahead for investors.

There are other indicators such as momentum and volatility that are often used to help reinforce trading signals obtained from many other sources. If you study them in relation to one another, you'll have a pretty much reliable information source on the behavior of the market.

What kind of currencies is being offered by trading signal services? Most forex signal services offer trading signals on USD/JPY, EUR/USD, USD/CHF and GBP/USD. However, there are also services that provide specialization in other minor currency pairs.

Forex Trading System Basics

Foreign exchange is playing an increasingly larger role in today's economic sphere. The foreign exchange market is essentially a forum for the purchase and sale of foreign currencies. This growing popularity is in large part thanks to the internet, where foreign exchange is mushrooming in size every day. One of the great features that the web provides foreign exchange traders with is the histories of most companies. This information is key for investors to have in order to make wise moves on the market. Other tools available are web shopping and search functions.

Foreign exchange, true to its name, involves companies from around the world. Traders buy all sorts of assets that belong to companies, regardless of the companies location geographically. Foreign exchange systems allow one to conduct these transactions on a global level. Wherever the system and the companies exist, one can participate in the worldwide foreign exchange trading. Examples of such countries in Asia, North America, Europe and Africa. One does not have to have any formal connection to a country in order to invest in it. Residence in a country is immaterial to your opportunity to participate in its foreign exchange trading system.

The internationality of the system is a major part of its unique appeal. Traders are completely free to invest their assets in whichever locality they desire.In general, the rules of the trading game and the typical results one can expect from foreign exchange trading systems are identical regardless of whether you trade with an internet based system or not. However, a web based system has many advantages over any competitors, as it allows swift and efficient transactions.

A good way to increase your wealth is to invest your assets with the help of a broker. When you work with a broker to handle your investments, make sure that you have a trustful relationship with that person. No matter what type of trading system you use or assets you invest, trusting your partners is a key to successful investing. Transactions should only be carried out with individual and companies that seem loyal and honest to you. You can usually tell if you are dealing with a straightforward enterprise if they express openness and availability to answer your needs. Look for an entity that caters to global clients and speak with some of the clients.

Forex market advantages

There are many benefits and advantages to trading Forex. Here are just a few reasons why so many people are choosing this market as a profitable business opportunity:

1. Powerful forex leverage

In Forex trading, a small margin deposit can control a much larger total contract value. Leverage gives the trader the ability to make extraordinary profits and at the same time keep risk capital to a minimum.

2. Liquidity

Because the Forex Market is so large, it is also extremely liquid. This means that with a click of a mouse you can instantaneously buy and sell at will. You are never 'stuck' in a trade. You can even set the online trading platform to automatically close your position at your desired profit level (limit order), and/or close a trade if a trade is going against you (stop order).

3. Forex trading online is instant.

The FX market is fast. Orders are executed, filled and confirmed usually within 1-2 seconds. Since this is all done electronically with no humans involved, there is little to slow it down!

4. Zero forex commissions

Because you access the market directly through electronic online forex trading you pay zero commissions or exchange fees.

5. Limited risk

Your risk is strictly limited. You can never lose more than you have in your forex account. This means you can never have a negative equity balance. You can also define and limit your risk with stop-loss orders, which are guaranteed by stocks on all forex orders up to $1 million in size.

6. Guaranteed prices and Instantaneous Fills

You get instantaneous execution and total price certainty on all orders up to $1 million in size. This allows you to trade forex with confidence off real-time, two-way quotes. And this price guarantee applies to stop-loss and limit orders as well.

7. 24-hour market

Forex is a 24-hour-a-day market that literally follows the sun around the world, from the U.S. to Australia and New Zealand to Hong Kong, the Far East, Europe and then back again to the U.S. The huge number and diversity of forex investors involved make it difficult even for governments to control the direction of the forex market. The unmatched liquidity, and around-the-clock global activity make forex the ideal market to trade.

8. Free 'demo' accounts, news, charts and analysis

Most Online Forex firms offer free 'Demo' accounts to practice trading, along with breaking Forex news and charting services. These are very valuable resources for traders who would like to hone their trading skills with 'virtual' money before opening a live trading account.

9. 'Mini' trading

One might think that getting started as a currency trader would cost a lot of money. The fact is, it doesn't. Some Forex firms now offer 'mini' trading accounts with a minimum account deposit of only $200 with no commission trading. This makes Forex much more accessible to the average individual, without large, start-up capital.

Forex quotes

We know that the FX market is the largest in the world and that your broker or institution that you are trading with is collecting quotes from a centralized feed or individual quotes comprising of interbank rates.

So how are these forex quotes made up? Well, as we previously mentioned currencies are traded in pairs and are each assigned a symbol. For the Japanese Yen it is JPY, for the Pounds Sterling it is GBP, for Euro it is EUR and for the Swiss Frank it is CHF. So, EUR/USD would be Euro-Dollar pair. GBP/USD would be pounds Sterling-Dollar pair and USD/CHF would be Dollar-Swiss Franc pair and so on.

You will always see the USD quoted first with few exceptions such as Pounds Sterling, Euro Dollar, Australia Dollar and New Zealand Dollar. The first currency quoted is called the base currency.

When you see forex quotes you will actually see two numbers. The first number is called the bid and the second number is called the offer (sometimes called the ASK).

If we use the EUR/USD as an example you might see 0.9950/0.9955 the first number 0.9950 is the bid price and is the price traders are prepared to buy Euros against the USD Dollar. The second number 0.9955 is the offer price and is the price traders are prepared to sell the Euro against the US Dollar.

These quotes are sometimes abbreviated to the last two digits of the currency such as 50/55. Each broker has its own convention and some will quote the full number and others will show only the last two.

You will also notice that there is a difference between the bid and the offer price and that is called the spread. For the four major currencies the spread is normally 5 give or take a pip.

To carry on from the symbol conventions and using our previous EUR quote of 0.9950 bid, that means that 1 Euro = 0.9950 US Dollars. In another example if we used the USD/CAD 1.4500 that would mean that 1 US Dollar = 1.4500 Canadian Dollars.

The most common increment of currencies is the PIP.

Currencies in the FOREX market are traded on a price interest point (pip) system. Each currency pair has its own pip value.

Since we have a currency PAIR such as EUR/USD, we need a way to talk about its price value. Whenever you see a FOREX price quote, you will see something listed along the lines of the following:

USD/JPY: 112.46 - Seconds later - 112.51

The first part before the first dash refers to the bid price. In other words it's what you obtain in JPY when you sell USD. In example above, the bid price is 112.46. The second component, which comes after both dashes and usually occurs minutes or seconds later, is used to obtain the ask price, this is what you have to pay in JPY if you buy USD.

In this example, the ask price is 112.51. The difference between the bid and the ask price is called the spread. In the example above, the spread is .05 or 5 pips.

USD/JPY: 123.50

When you see a Forex currency pair price quote, like the one above, just remember that that last digit of the price (after the decimal point) is referred to as the pip. So if you see a quote (118.50) and then a qu.ote in one minute of (118.51), then you should automatically know that the price rose by 1 pip.

Similarly, if you see a price quote of 118.58 and then after 5 minutes it's 118.50, the price dropped by 8 pips. The pip is always the last decimal place of the currency price quote.

In the FOREX market your main objective is to capture as many profitable pips as possible!

In the "Majors", this would include USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the other currency quoted in the pair such as JPY.

In the example above, a quote of USD/JPY 123.50 means that one U.S. dollar is equal to 123.50 Japanese yen.

When the U.S. dollar is the base unit and a currency quote goes up, it means the dollar has appreciated (become stronger) in value and the other currency has deppreciated (become weaker). If the USD/JPY quote increases to 124.01, the dollar is now much stronger than the JPY because with that same $1 USD you will be able to buy more yen than you could earlier.

Of course there are exceptions to this rule and these are the British pound (GBP), the Australian dollar (AUD) and the Euro (EUR). In these cases, you might see a quote such as GBP/USD 1.4366, indicating that one British pound equals 1.4366 U.S. dollars. These currency pairs are like this because they are stronger than the USD in value.

With these three currency pairs, where the U.S. dollar is not the base rate, a rising quote means that the USD is weakening, because it now takes more U.S. dollars to equal one pound, euro or Australian dollar.

To sum up this point, if a currency quote goes up then it increases the value of the base currency. A lower quote means that the base currency is weakening.

There are some currency pairs that do not involve the U.S. dollar. These currencies are called cross currencies, but the idea is exactly the same. For example, a quote of GBP/JPY 210.95 signifies that one GBP is equal to 210.95 Japanese yen.

Nearly all the brokers you will deal with will work all this out for you. They may have slightly different conventions, but it is all done automatically. It is good however for you to know how they work it out. In the next section we will be discussing how these seemingly insignificant amounts can add up.

In summary, currency traders must become familiar also with the way currencies are quoted. The first currency in the pair is considered the base currency; and the second is the counter or quote currency. Most of the time, U.S. dollar is considered the base currency, and quotes are expressed in units of US$1 per counter currency (for example, USD/JPY or USD/CAD). The only exceptions to this convention are quotes in relation to the euro, the pound sterling and the Australian dollar - these three are quoted as dollars per foreign currency.

Forex quotes always include a bid and an ask price. The bid is the price at which the market maker is willing to buy the base currency in exchange for the counter currency. The ask price is the price at which the market maker is willing to sell the base currency in exchange for the counter currency. The difference between the bid and the ask prices is referred to as the spread.

The cost of establishing a position is determined by the spread, and prices are always quoted using five numbers (for example, 134.85), the final digit of which is referred to as a point or a pip.

Forex currency

here are 7 most traded currencies in forex market.

Currencies are traded in dollar amounts called "lots". One lot is equal to $1,000, which controls $100,000 in currency. This is what is known as the "margin". You can control $100,000 worth of currency for only 1,000 dollars. This is what is called "High Leverage".

Currencies are always traded in pairs in the FOREX.

Here are some of the common symbols used in the Forex:

• USD - The US Dollar
• EUR - The currency of the European Union "EURO"
• GBP - The British Pound
• JPN - The Japanese Yen
• CHF - The Swiss Franc
• AUD - The Australian Dollar
• CAD - The Canadian Dollar

A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible.

Some of the common PAIRS are:

EUR/USD Euro / US Dollar
"Euro"

USD/JPY US Dollar / Japanese Yen
"Dollar Yen"

GBP/USD British Pound / US Dollar
"Cable"

USD/CAD US Dollar / Canadian Dollar
"Dollar Canada"

AUD/USD Australian Dollar/US Dollar
"Aussie Dollar"

USD/CHF US Dollar / Swiss Franc
"Swissy"

EUR/JPY Euro / Japanese Yen
"Euro Yen"

Although forex currency pairs can be quoted with either currency as the base currency, there are generally recognized standards of which currency will be identified as the base currency in any given pair.

The Euro is the dominant base currency against all other global currencies. Thus, currencies paired with the EUR will always be identified with the EUR acronym first in the sequence. The British Pound is next in the hierarchy of currency name domination and usually USD after that. (Aside from the EUR and GBP, the only case where the USD is not the base currency of a pair is with the Australian & New Zealand dollars).

Every foreign exchange transaction is an exchange between two currencies, each denoted by a unique three-letter code. Currency pairings are expressed as two codes usually separated by a division symbol (e.g. GBP/USD), the first representing the “base currency” and the other the “secondary currency”. The base currency is the one that you are buying or selling.

The exchange rate is the price of one currency in terms of another. For example GBP/USD = 1.5545 denotes that one unit of sterling (the base currency) can be exchanged for 1.5545 US dollars (the secondary currency).

Pairings with the US dollar are known as the “majors”. The “big four” majors are:

• EUR/USD: euro/US dollar
• GBP/USD: sterling/US dollar (known as “cable”)
• USD/JPY: US dollar /Japanese yen
• USD/CHF: US dollar/Swiss franc

Pairings of non-U.S. Dollar currencies from the aforementioned major pairings are known as crosses.

EUR/GBP	EUR/JPY	GBP/CAD	GBP/CHF	AUD/CAD	CHF/JPY
EUR/CHF	EUR/AUD	GBP/JPY	AUD/JPY	AUD/NZD	CHF/NZD

Exotic pairings involve currencies not included in the eight major currencies. There are hundreds of currencies around the world, most of which are not easily traded on the open market. There are a few exotics some speculators will venture into; however, the spreads on these currencies tend to be very wide and the degree of risk makes them generally unattractive to most traders.

The seven categories of forex currencies:

Top currency

This rarified rank is reserved only for the most esteemed of international currencies - those whose use dominates for most if not all types of cross-border purposes and whose popularity is more or less universal, not limited to any particular geographic region. During the era of territorial money, just two currencies could truly be said to have qualified for this exalted status: Britain's pound sterling before World War I and the U.S. dollar after World War II.

Patrician currency

Just below the top rank we find currencies whose use for various cross-border purposes, while substantial, is something less than dominant and/or whose popularity, while widespread, is something less than universal. Obviously included in this category today would be the euro, as natural successor to the DM; most observers would still also include the yen, despite some recent loss of popularity. Both are patricians among the world's currencies.

Elite currency

In this category belong currencies of sufficient attractiveness to qualify for some degree of international use but of insufficient weight to carry much direct influence beyond their own national frontiers. Here we find the more peripheral of the international currencies, a list that today would include inter alia Britain's pound (no longer a Top Currency or even Patrician Currency), the Swiss franc, and the Australian dollar.

Plebian currency

One step further down from the elite category are Plebian Currencies - more modest monies of very limited international use. Here we find the currencies of the smaller industrial states, such as Norway or Sweden, along with some middle-income emerging-market economies (e.g., Israel, South Korea, and Taiwan) and the wealthier oil-exporters (e.g., Kuwait, Saudi Arabia, and the United Arab Emirates).

Internally, Plebian Currencies retain a more or less exclusive claim to all the traditional functions of money, but externally they carry little weight (like the plebs, or common folk, of ancient Rome). They tend to attract little cross-border use except perhaps for a certain amount of trade invoicing.

Permeated currency

Included in this category are monies whose competitiveness is effectively compromised even at home, through currency substitution. Although nominal monetary sovereignty continues to reside with the issuing government, foreign currency supersedes the domestic alternative as a store of value, accentuating the local money's degree of inferiority.

Permeated Currencies confront what amounts to a competitive invasion from abroad. Judging from available evidence, it appears that the range of Permeated Currencies today is in fact quite broad, encompassing perhaps a majority of the economies of the developing world, particularly in Latin America, the former Soviet bloc, and Southeast Asia.

Quasi-currency

One step further down are currencies that are superseded not only as a store of value but, to a significant extent, as a unit of account and medium of exchange, as well. Quasi-Currencies are monies that retain nominal sovereignty but are largely rejected in practice for most purposes. Their domain is more juridical than empirical. Available evidence suggests that some approximation of this intensified degree of inferiority has indeed been reached in a number of fragile economies around the globe, including the likes of Azerbaijan, Bolivia, Cambodia, Laos, and Peru.

Pseudo-currency

Finally, we come to the bottom rank of the pyramid, where currencies exist in name only - Pseudo-Currencies. The most obvious examples of Pseudo-Currencies are token monies like the Panamanian balboa, found in countries where a stronger foreign currency such as the dollar is the preferred legal tender.

Forex history

Forex dates back to ancient times, when traders first began exchanging coins from different countries and groups. However, the foreign exchange industry itself is the newest of the financial markets.

In the last hundred years, the foreign exchange market has undergone some dramatic transformations. In 1944, the postwar foreign exchange system was established as a result of a multinational conference held at Bretton Woods, New Hampshire. That system remained intact until the early 1970’s.

At this conference, representatives from 45 nations met together to discuss the future exchange system. The conference resulted in the formation of the International Monetary Fund (IMF). It also produced an agreement that fixed currencies in an exchange-rate system would tolerate one percent currency fluctuations to gold values, or to the U.S. Dollar, which was established previously as the “gold standard.” The system of connecting the currency’s value to gold or the U.S. Dollar was called pegging.

In 1967, a Chicago bank refused a college professor by the name of Milton Friedman a loan in pound sterling because he had intended to use the funds to short the British currency. Friedman, who had perceived sterling to be priced too high against the dollar, wanted to sell the currency, then later buy it back to repay the bank after the currency declined, thus pocketing a quick profit. The bank's refusal to grant the loan was due to the Bretton Woods Agreement, established twenty years earlier, which fixed national currencies against the dollar, and set the dollar at a rate of $35 per ounce of gold.

The history of the FOREX Market as it exists today begins before 1971 when the FOREX market departed from The Bretton Woods Accord to reflect a radical change in Universal fixed exchange rates. After World War Two, the Bretton Woods Accord was introduced to the FOREX market to stabilize the devastated world economy.

The Agreement was finally abandoned in 1971 and the US dollar would no longer be convertible into gold.

After the Bretton Woods Accord came the Smithsonian agreement in December of 1971. This agreement was similar to the Bretton Woods Accord but allowed for greater fluctuation band for the currencies. In 1972, the European community tried to move away from their dependency on the dollar. The European Joint Float was established by West Germany, France, Italy, the Netherlands, Belgium and Luxemburg. This agreement was similar to the Bretton Woods Accord, but allowed a greater range of fluctuation in the currency values.

Both agreements made mistakes similar to the Bretton Woods Accord and, by 1973, collapsed. The collapse of the Smithsonian agreement and the European Joint Float in 1973 signified the official switch to the free-floating system. This occurred by default as there were no new agreements to take their place. Governments were now free to peg their currencies, semi-peg or allow them to freely float. In 1978, the free-floating system was officially mandated.

Europe tried, in a final effort to gain independence from the dollar, by creating the European Monetary System in July of 1978. This, like all of the earlier agreements, failed in 1993.

Important milestones in the history of Forex

The Gold Standard

Money was invented when barter was no longer an adequate means of trade, seeing that actual goods could quickly lose value, were subject to value discrepancies, and could many times not easily be divided (Morris, 4). Money, on the other hand, could function as a medium of exchange, a unit of accounting, and a store of value (Ethier, 402). The original form of money was typically something that had value in itself, such a precious metal. The metal itself, usually gold or silver (Eichengreen, 9), was valuable, both because of its scarcity and its inherent usefulness.

By the nineteenth century, both coins and paper money were in popular use. Under the famous "Gold Standard," currencies were not directly valued in terms of each other. Instead, each currency had a certain, the rate at which the currency could be exchanged for gold. This in turn produced an effective exchange rate between any two currencies.

In 1900, for example, the mint parity for the U.S. dollar was $20.67, while that of the British pound was 3 pounds, 17 shillings, 10½ pence. To exchange U.S. dollars for British pounds, one would divide $20.67 by 3.17.10½, which produces $4.86 per pound after adjusting for the fact that U.S. gold coins had a somewhat greater gold content than did British coins (Aliber, 34).

Paper money could then be used in place of the precious metal. A citizen could carry paper money while the central bank would, in which more money left the country than came in, there would be less U.S. dollars in circulation.

Because central banks have large control over the interest rates, the rates at which banks borrow and lend money, they soon found that they did not have to passively wait for gold flows to be restored. In a trade deficit scenario, with gold supplies leaving the country, a central bank could raise interest rates which would make domestic savings more attractive.

Floating Exchanges Systems

Under a floating exchange system, on the other hand, currencies are not valued in terms of gold - they are valued in terms of other currencies.

In the early 20th century, two world wars brought about social upheavals, rapid inflation, and the destruction of the setting which made the gold standard operable. Between the wars, many countries elected to temporarily abandon the gold standard and opt for floating exchange systems until their economies returned to the point at which in light of the fact that, if a currency drifted too far outside its band and could not be contained by central bank intervention, the country was allowed to adjust its peg by setting a new exchange price.

There were three aspects of the system that were in conflict: constant exchange rates, autonomous domestic economic policies, and increasing international capital mobility. The existence of Bretton Woods did not stop states from using domestic economic policy (manipulating interest rates, for example, as under the gold standard) for domestic reasons, whatever their long-term effects on the exchange rate. Capital mobility simply makes the effects of domestic economic policies on the exchange rate happen sooner than they otherwise would.

With the instability brought about by the Vietnam War, central banks finally began to convert their dollars to gold. To halt the loss of gold, in 1971 Nixon "closed the gold window" by refusing to provide gold to foreign dollar holders (Eichengreen, 133). In 1974 the Bretton Woods System of adjustable pegs was officially abandoned and the Jamaica Agreement basically allowed the presence of any exchange system a country chooses (Aliber, 52).

Exchange Systems Today

There are several exchange systems a country can currently choose from. A free floating exchange system, as mentioned earlier, would simply allow the market to determine the price of a currency. Trade surpluses and deficits, domestic investments versus foreign investments, and domestic taxation policies, to name a few factors affecting the exchange rate, would all be allowed to occur whatever their effects on the currency.

A pegged exchange rate, on the other hand, would function exactly as the gold standard did a century beforehand, except that a country would its currency to the price of another currency, usually the U.S. dollar. If there is a balance of payments deficit, for example the central bank will buy the appropriate amount of the domestic currency in exchange for its foreign currency reserves, thereby returning the price of the currency to its peg but at the same time depleting the size of its reserves.

Some countries practice by, while remaining officially free-floating, sometimes intervening in their currency rates in order to suite domestic interests - increasing (revaluing) their exchange rate before an oil shipment, for example (Luca, 17). Other countries, for example Brazil before its turn to a free floating system, peg their currencies to the U.S. dollar or some other currency but allow the rate to float within a certain band similar to the Bretton Woods adjustable peg system.

The FOREX Market, often considered to be the playground of governmental institutions operating under the agency of central banks, expanded its horizons in recent years to include corporations, hedge funds, and speculators and most recently with the dot com boom and the expansion of the world wide web, now the private investors have been afforded the lucrative opportunity to be a part of the action.

The appeal of The FOREX Market is one of non-stop, twenty four hour a day trading for the five business days of the week. The first tentative steps towards a global economy have created a fast moving liquid market facilitating a wide variety of transaction options. Combine this with the ability to make money in both winning and losing markets and you will see why The FOREX Market is considered by some to be the fastest developing most lucrative business opportunity open to the savvy investor who has the skill, intelligence, acumen and backing to create substantial profits.

The FOREX Market provides a number of ways for investors to get in on the global high stakes action. From the spot market to spread betting, options, contracts for difference and futures, these are just some of the ways FOREX can turn a modest portfolio with moderate potential, into a heavy hitting enterprise totaling far in excess of what it once was. The BIS or Bank of International Settlements estimated in a recent survey that over $1,200,000,000.00 is exchanged everyday on The FOREX Market. Currently industry analysts think the market is not living up to its 1978 potential of $1,490,000,000.00 and still view this as an attainable goal for the FOREX Market of the future.

Forex Trading Tips

Why do hundreds of thousands online traders and investors trade the forex market every day, and how do they make money doing it?

This two-part report clearly and simply details essential tips on how to avoid typical pitfalls and start making more money in your forex trading.

Trade pairs, not currencies - Like any relationship, you have to know both sides. Success or failure in forex trading depends upon being right about both currencies and how they impact one another, not just one.

Knowledge is Power - When starting out trading forex online, it is essential that you understand the basics of this market if you want to make the most of your investments.
The main forex influencer is global news and events. For example, say an ECB statement is released on European interest rates which typically will cause a flurry of activity. Most newcomers react violently to news like this and close their positions and subsequently miss out on some of the best trading opportunities by waiting until the market calms down. The potential in the forex market is in the volatility, not in its tranquility.
Unambitious trading - Many new traders will place very tight orders in order to take very small profits. This is not a sustainable approach because although you may be profitable in the short run (if you are lucky), you risk losing in the longer term as you have to recover the difference between the bid and the ask price before you can make any profit and this is much more difficult when you make small trades than when you make larger ones.
Over-cautious trading - Like the trader who tries to take small incremental profits all the time, the trader who places tight stop losses with a retail forex broker is doomed. As we stated above, you have to give your position a fair chance to demonstrate its ability to produce. If you don't place reasonable stop losses that allow your trade to do so, you will always end up undercutting yourself and losing a small piece of your deposit with every trade.
Independence - If you are new to forex, you will either decide to trade your own money or to have a broker trade it for you. So far, so good. But your risk of losing increases exponentially if you either of these two things:

Interfere with what your broker is doing on your behalf (as his strategy might require a long gestation period);

Seek advice from too many sources - multiple input will only result in multiple losses. Take a position, ride with it and then analyse the outcome - by yourself, for yourself.
Tiny margins - Margin trading is one of the biggest advantages in trading forex as it allows you to trade amounts far larger than the total of your deposits. However, it can also be dangerous to novice traders as it can appeal to the greed factor that destroys many forex traders. The best guideline is to increase your leverage in line with your experience and success.
No strategy - The aim of making money is not a trading strategy. A strategy is your map for how you plan to make money. Your strategy details the approach you are going to take, which currencies you are going to trade and how you will manage your risk. Without a strategy, you may become one of the 90% of new traders that lose their money.
Trading Off-Peak Hours - Professional FX traders, option traders, and hedge funds posses a huge advantage over small retail traders during off-peak hours (between 2200 CET and 1000 CET) as they can hedge their positions and move them around when there is far small trade volume is going through (meaning their risk is smaller). The best advice for trading during off peak hours is simple - don't.

The only way is up/down - When the market is on its way up, the market is on its way up. When the market is going down, the market is going down. That's it. There are many systems which analyse past trends, but none that can accurately predict the future. But if you acknowledge to yourself that all that is happening at any time is that the market is simply moving, you'll be amazed at how hard it is to blame anyone else.
Trade on the news - Most of the really big market moves occur around news time. Trading volume is high and the moves are significant; this means there is no better time to trade than when news is released. This is when the big players adjust their positions and prices change resulting in a serious currency flow.

Exiting Trades - If you place a trade and it's not working out for you, get out. Don't compound your mistake by staying in and hoping for a reversal. If you're in a winning trade, don't talk yourself out of the position because you're bored or want to relieve stress; stress is a natural part of trading; get used to it.
Don't trade too short-term - If you are aiming to make less than 20 points profit, don't undertake the trade. The spread you are trading on will make the odds against you far too high.

Don't be smart - The most successful traders I know keep their trading simple. They don't analyse all day or research historical trends and track web logs and their results are excellent.
Tops and Bottoms - There are no real "bargains" in trading foreign exchange. Trade in the direction the price is going in and you're results will be almost guaranteed to improve.
Ignoring the technicals- Understanding whether the market is over-extended long or short is a key indicator of price action. Spikes occur in the market when it is moving all one way.
Emotional Trading - Without that all-important strategy, you're trades essentially are thoughts only and thoughts are emotions and a very poor foundation for trading. When most of us are upset and emotional, we don't tend to make the wisest decisions. Don't let your emotions sway you.

Confidence - Confidence comes from successful trading. If you lose money early in your trading career it's very difficult to regain it; the trick is not to go off half-cocked; learn the business before you trade. Remember, knowledge is power.
The second and final part of this report clearly and simply details more essential tips on how to avoid the pitfalls and start making more money in your forex trading.
Take it like a man - If you decide to ride a loss, you are simply displaying stupidity and cowardice. It takes guts to accept your loss and wait for tomorrow to try again. Sticking to a bad position ruins lots of traders - permanently. Try to remember that the market often behaves illogically, so don't get commit to any one trade; it's just a trade. One good trade will not make you a trading success; it's ongoing regular performance over months and years that makes a good trader.

Focus - Fantasising about possible profits and then "spending" them before you have realised them is no good. Focus on your current position(s) and place reasonable stop losses at the time you do the trade. Then sit back and enjoy the ride - you have no real control from now on, the market will do what it wants to do.
Don't trust demos - Demo trading often causes new traders to learn bad habits. These bad habits, which can be very dangerous in the long run, come about because you are playing with virtual money. Once you know how your broker's system works, start trading small amounts and only take the risk you can afford to win or lose.

Stick to the strategy - When you make money on a well thought-out strategic trade, don't go and lose half of it next time on a fancy; stick to your strategy and invest profits on the next trade that matches your long-term goals.

Trade today - Most successful day traders are highly focused on what's happening in the short-term, not what may happen over the next month. If you're trading with 40 to 60-point stops focus on what's happening today as the market will probably move too quickly to consider the long-term future. However, the long-term trends are not unimportant; they will not always help you though if you're trading intraday.
The clues are in the details - The bottom line on your account balance doesn't tell the whole story. Consider individual trade details; analyse your losses and the telling losing streaks. Generally, traders that make money without suffering significant daily losses have the best chance of sustaining positive performance in the long term.
Simulated Results - Be very careful and wary about infamous "black box" systems. These so-called trading signal systems do not often explain exactly how the trade signals they generate are produced. Typically, these systems only show their track record of extraordinary results - historical results. Successfully predicting future trade scenarios is altogether more complex. The high-speed algorithmic capabilities of these systems provide significant retrospective trading systems, not ones which will help you trade effectively in the future.
Get to know one cross at a time - Each currency pair is unique, and has a unique way of moving in the marketplace. The forces which cause the pair to move up and down are individual to each cross, so study them and learn from your experience and apply your learning to one cross at a time.

Risk Reward - If you put a 20 point stop and a 50 point profit your chances of winning are probably about 1-3 against you. In fact, given the spread you're trading on, it's more likely to be 1-4. Play the odds the market gives you.
Trading for Wrong Reasons - Don't trade if you are bored, unsure or reacting on a whim. The reason that you are bored in the first place is probably because there is no trade to make in the first place. If you are unsure, it's probably because you can't see the trade to make, so don't make one.

Zen Trading- Even when you have taken a position in the markets, you should try and think as you would if you hadn't taken one. This level of detachment is essential if you want to retain your clarity of mind and avoid succumbing to emotional impulses and therefore increasing the likelihood of incurring losses. To achieve this, you need to cultivate a calm and relaxed outlook. Trade in brief periods of no more than a few hours at a time and accept that once the trade has been made, it's out of your hands.
Determination - Once you have decided to place a trade, stick to it and let it run its course. This means that if your stop loss is close to being triggered, let it trigger. If you move your stop midway through a trade's life, you are more than likely to suffer worse moves against you. Your determination must be show itself when you acknowledge that you got it wrong, so get out.

Short-term Moving Average Crossovers - This is one of the most dangerous trade scenarios for non professional traders. When the short-term moving average crosses the longer-term moving average it only means that the average price in the short run is equal to the average price in the longer run. This is neither a bullish nor bearish indication, so don't fall into the trap of believing it is one.

Stochastic - Another dangerous scenario. When it first signals an exhausted condition that's when the big spike in the "exhausted" currency cross tends to occur. My advice is to buy on the first sign of an overbought cross and then sell on the first sign of an oversold one. This approach means that you'll be with the trend and have successfully identified a positive move that still has some way to go. So if percentage K and percentage D are both crossing 80, then buy! (This is the same on sell side, where you sell at 20).
One cross is all that counts - EURUSD seems to be trading higher, so you buy GBPUSD because it appears not to have moved yet. This is dangerous. Focus on one cross at a time - if EURUSD looks good to you, then just buy EURUSD.

Wrong Broker - A lot of FOREX brokers are in business only to make money from yours. Read forums, blogs and chats around the net to get an unbiased opinion before you choose your broker.

Too bullish - Trading statistics show that 90% of most traders will fail at some point. Being too bullish about your trading aptitude can be fatal to your long-term success. You can always learn more about trading the markets, even if you are currently successful in your trades. Stay modest, and keep your eyes open for new ideas and bad habits you might be falling in to.
Interpret forex news yourself - Learn to read the source documents of forex news and events - don't rely on the interpretations of news media or others.
John Gainesonline trading, currency trading, financial service
A veteran of online trading, John Gaines offers the financial services industry his perspectives and expertise on a variety of trading systems and financial instruments, including forex, CFDs, futures, options and stocks.
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