2. High LiquidityLiquidity is the ability of an asset to be converted into cash quickly and without any price discount. In forex this means we can move large amounts of money into and out of foreign currency with minimal price movement. 3. Low Transaction CostIn forex, typically the cost for a transaction is built into the price. It is called the spread. The spread is the difference between the buying and selling price. 4. LeverageForex Brokers allow traders to trade the market using leverage. Leverage is the ability to trade more money on the market than what is actually in the trader's account. If you were to trade at 50:1 leverage, you could trade $50 on the market for every $1 that was in your account. This means you could control a trade of $50,000 using only $1000 of capital. AdvantagesThe advantage of trading on margin is that you can make a high percentage of gains compared to your account balance. For instance, let’s assume that you have a $1000 account balance and you are not trading on margin. You initiate a $1000 trade that nets you 100 pips. In a $1000 trade, each pip is worth 10 cents. The profit from your trade would be $10 or a 1 percent gain. If you were to use that same $1000 to make a 50 to 1 margin trade giving you a trade value of $50,000, the same 100 pips would net you $500 or a 50 percent gain. 5. Profit Potential from Rising and Falling PricesThe forex market has no restrictions for directional trading. This means, if you think a currency pair is going to increase in value; you can buy it, or go long. Similarly, if you think it could decrease in value you can sell it, or go short. THE BASIC OF FOREX CHART
Chart Basics Learning how to read a forex chart is considered to be somewhat of a science. They look complicated at first glance. Forex charts can look drastically different depending on what options you want to use. Charts usually have settings for the display style of the price and the time frame that you want to view. Time frames can be anywhere from 1 second to 10 years, depending on the charting system. Price can usually be displayed as a candlestick
a line
or bar.
Chart TypesCharts have typically have several different display modes for displaying the price. One method that price can be displayed is called Japanese candlesticks. Candlestick charts are the most commonly used display method for showing the price on a forex chart. There are theories about using candlestick patterns to predict the price. Price can also be displayed as a line. Line charts are a good way to simplify the display of the price. The line chart will show you the closing price for each period. Another way to display the price is by using a bar chart. The bar chart is similar to the candlestick chart. A bar chart will show you where the price opened, the high and low, and where the price closed. Risk Disclaimer “Trading in the Forex market is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. Nothing in this presentation is a recommendation to buy or sell currencies and FXcharles is not liable for any loss or damage.”
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Currency ProfilesThe world has many currencies. In order to trade them efficiently, you need to understand a little bit about them. AUSTRALIAN DOLLAR Definition: Currency Name: Australian Dollar CAD - CANADIAN DOLLAR
Definition: CAD stands for Canadian Dollar, the currency of Canada.
Also Known As: The Canadian Dollar is commonly referred to as "the loonie". This is because the 1 dollar Canadian coin has a picture of a commonly known Canadian loonie bird on it.
CHART TIMEFRAMES
When using charts to make trading decisions, you can choose between different spans of time when it comes to your chart. Charting systems can offer timeframes ranging from tick by tick to monthly bars. Monitoring multiple timeframes can give you a greater perspective on the personality of a currency pair. The smaller timeframes such as 5 minute and 15 minute are best suited for daytraders looking to scalp for quick pips. They are also good for swing traders looking for an opportune moment to make an entry. The 1hr chart is for swing traders and long term traders looking for the momentary trend. The 1hr chart is well known for it’s reliability on short term changes in momentum. The 4hr chart is for long term traders. The 4hr chart is most useful for traders wishing to trade the daily chart that want to make a carefully timed entry. The daily chart is best used for setting up long term positions on a currency pair. Each of the different timeframes can give you clues to the personality of a trading pair. You can find out whether the pair tends to move steady during it’s trends, or if it tends to stall often. You can find out if it’s volatile during daily sessions, but steady over the week. Viewing a currency pair in multiple timeframes can help you find good entry and exit points, depending on the strategy that you want to use. Daytrading a currency can make a lot of sense for traders looking to take maximum advantage of daily volatility, but keeping the daily trend in mind can help daytraders focus on the bigger picture. The Bottom LineForex trading attracts many different types of traders with many different types of systems. If you want to trade a currency pair, it’s best to become as familiar with it as possible. Viewing the currency pair in multiple timeframes is part of the process of learning it’s personality. Understanding the currency pair’s personality can help you in your success with trading it. Risk Disclaimer “Trading in the Forex market is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. Nothing in this presentation is a recommendation to buy or sell currencies and FXcharles is not liable for any loss or damage.” |
