What is Forex and how profit from it

One of my colleagues introduced me in to forex trading. Honestly, I didn’t do much trade. A couple of trades and a net loss later, I now realize that Forex trading is no different from stock trading, it requires a lot of time devotion to make a profit.
Unfortunately, I haven’t actually found any mechanism that can earn me money without putting hard work, except passive income, off-course. You can either earn decent money with hard work in your day job or you can earn serious money with same hard work in a riskier business like trading, stocks or forex.
Any kind of trading requires you to have higher risk appetite to weather potential losses. Forex trading is no different.
Forex Trading is trading of currencies from different countries. For example, in UK the currency used is British pound or GBP, in USA it’s USD. You can trade these two currencies by buying the GBP while simultaneously selling US Dollar. This is called going long on the GBP/USD pair.

So, we are talking about two entities for a single trade, unlike in stock trading where we trade only one type of stock. That’s the fundamental difference between the two. You do not decide on the future of a single entity rather, you decide on the future of exchange rate between two currencies.
In the example above, you’ll make a profit if GBP gains with respect to dollar. Naturally, you don’t have to keep track of a lot of businesses, you only need to track political/economic condition of a few countries to put correct trade calls.
but that doesn’t make forex trading any simpler, as it’s simpler for everyone else  in the trade. To make matters more simple, 80% of Forex trades involve USD, so, American socio-economic and political environment knowledge is a must to make profit in Forex trading and covers 80% of the tracking requirement.
By amount of money involved in trade, forex trade is by far the largest medium of trading. Few times more than the total amount of stock trades, surprised? I was! Because, I didn’t know about Forex trading much. Never heard anyone making profit from it.
Forex trade is still not a household trading medium. You and I haven’t really started with forex trading in big way. Big banks, large businesses and currency dealers are major players in this market. And they trade with large amount of money, running in to billions of dollars.
You can learn more on this subject by attending Forex training courses or, thorough online-classes.

How can you trade Forex?

Forex trading is typically done through a broker. As a forex trader you can choose a currency pair to trade, USD/CAD, EUR/USD, JPY/USD, etc. you should select the pair you think would see change in exchange rate. You can view the live exchange rates here.
At the time of writing this article GBP/USD ratio is 1.5980, If I buy this pair now, I want the ratio to go up. I will make a loss till the ratio stays lower than my buying price.
Like in every trade, short-term fluctuations are all speculations. sometimes local governments cheap in to buy foreign currency due to domestic demand, that raises the ratio in favor of the currency in demand. In the long-term the movement fall in line of the countries’ economies.
To get started you need to open an account with one of the forex brokers. A typical broker supports almost all currency pairs. They come with user interface to buy/sell currencies. You can place your order from your computer. Your broker  then passes on your order to international bank markets. (Interbank Market) to fill in your position.
You will be surprised to see a lot of brokers offering no-commission trading, whats the catch?
They actually will force you to buy your position at a higher price than the ongoing selling price. so don’t be fooled by the claimed honesty of your broker. Don’t get attracted to the zero commission trade offers.
You can start your online brokerage account with a very nominal balance. And, you can trade for 24 hours. No more sneaking in to the stock market in between your meetings and calls. You can trade from your home in the evening if you wish.
Almost all brokers allow margin trading, which is heck of a risk for me, but for a seasoned forex trader, margin trading is essential for making a living.

Warning – According to statistics, 90% of traders make a loss, profiting the broker in the end. To be one of the 10% profit takers, you need to put in a lot of effort in understanding and monitoring the market on regular basis. If you are comfortable, go ahead a start forex trading.
In the long-term forex investor generally makes money.
Forex trading is not for people in debt, people with budget and people with low-income. If you are one of them, stay away!

How to Make 1000 Dollars in One Month Or Less

Instructions

1. • 1
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     ***Think Long Term***
     Making money online is a slow process. If you're in a rush, buy a lottery ticket and keep your fingers crossed. But if you manage to be patient, you can build up a substantial income.
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     Online income starts as a trickle...perhaps just a few cents, or a dollar, for a month's work. But it grows to a few dollars a month, then $50 a month, then $100, and with dedication (and again, patience), a thousand a month will be in sight.
     
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     ***Start at eHow***
     About half of my online income I get right here at eHow.
     If you can write decently, you can write a How-To article. And if you can write How-To articles, you should be doing it right here, and starting to earn money. eHow is the easiest and surest way I know to begin earning an online income.
     With practice, each article you write can earn about ten cents a day. Doesn't sound like much, but that's $3 a month for each article. Write 100 articles, and you've got $300 a month coming in. You're already well on your way to a thousand a month.
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How to Get Started Trading on FOREX

Trading currencies on FOREX exchange market is not very complicated thing. Your own wish and basic knowledge determine a lot.

So we recommend at first to enroll introductory workshops (free of charge) and to complete training in training centres of TeleTRADE, or online.

What are the technical aspects of trading?

The technical aspects of sale/purchase transaction are completed ridiculously easy. You need only a computer, PPC or mobile device provided with Internet access, then you press a number of buttons and- after a pair of seconds the transaction will have been completed.
Registering transaction profit is carried out in very similar way. You can also set profit fixing order for the price you determine in advance (Take-Profit) and the order that strictly limits risk for this operation (Stop-Loss) on default. Therefore, you can monitor your transaction meanwhile in many cases you need not follow continuously price movement or even leave the transaction open at night when you sleep.
The international exchange market operates day and night, so you have a lot of additional opportunities to make money. But –if you have no open sale/purchase transactions and you would like to have a break in trading for a while, for example- you are going to travel or simply to have a rest –take it easy: you need not worry. The currency amount deposited on your account remains the same, notwithstanding any market fluctuations.
You can also make use of the opportunity (as you wish) to buy or to sell for the price you have determined in advance as well as use other useful opportunities.

What Do You Need in Order to Start Trading?

First of all, you Open a Trading Account.
To carry out successful trading you should improve and develop your skills using demo-account (an accurate copy of really existing trading account, but has no money deposit).
"Open Free Demo Account"
In addition to thorough guidelines directly provided in the Trading Terminal you should read a popular paper describing the recommended procedure and the way of the program use literally step by step.
You can also not to trade in your own, but make use of such services as ”Personal Trader” and ”Synchronous Trading”, if you are short of time or of opportunities to learn and to trade in your own. The mentioned services provide you opportunities to make efficient investments to the exchange market FOREX trusting your means to experienced managers -professionals.
You may replenish FOREX account or withdraw money from that account using almost every bank by means of bank cards Visa or MasterCard through such payment systems as Webmoney or Moneybookers as well as through paying terminals to pay services and accounts.

How to Earn with FOREX

Money is made on FOREX due to exchange rate difference. So you have to be patient enough and to wait until one currency goes up, and the other goes down.

You can gain with equal success not only buying currency that price goes up, but also selling currency that price is about to go down. By the way, you do not have to start buying the currency, which price is going down in the near future. The bank-partner of TeleTRADE immediately provides for the amount of currency you just need. It is one the FOREX exchange market advantages. If you complete your deal by the end of the day, the currency amount is provided for you free of charge. In the event you consider that to extend the deal is more advantageous for you, you may take advantages of the minimum rates (so called swap). After all, FOREX has never had crisis experience: if one currency go down, the other ones definitely go up.
Euro, dollar, pound, yen as well as all other currencies float every day. So to gain profit on FOREX in efficient way you are to be able to draw in due time conclusions for short –term going-up or going-down of currency. As a rule, traders make a forecast of price movements for the near few hours or for a pair of days as maximum term. And they make use of such short-term forecasts for conclusion of profitable deals. Everybody who ponds the question how I could make money on exchange market does not need to know how much the currency costs after a month or by the end of the year. BY the way, to make a forecast for month is much more complicated than for the nearest day. Nevertheless, long-term strategies also assist in gaining considerable profit provided that a sensible approach is applied.

How Much Can I Earn?

What are the intrinsic reasons the profit amount depends on?
If a trading system is prudent enough, that is to say, it strives to achieve steadily profitability meanwhile adheres proper circumspection and rigid risk limitation system, the average profitability in group of successful traders, according to experience gained, and may vary from 10% to 80–100% per month. There is an extended scatter, because ”two months are not ever the same”. And so, you could have 1–2 excess-profitability months a year, a bit more minimum profitability months, and the most part are average-profitability (profitability more than 10%, but less than 50%).
What is the principal cause to process such a considerable resulting scatter? First of all, strong and simultaneously advantageous situations can occur more than once a day. But, another time, you have to wait for one-two deals for a week. In addition, both the range and speed of price going up or down can considerably differ. For example, a deal concluded at the best price and at the most appropriate time moment as well as according to all rules of trading can produce 500 dollars in one market situation, and 2000 dollars in the other one. Therefore, if trader’s approach for trading is invariable, the final results are determined by market situations in some way.
What About Heavier Trading?
Can I increase amount of my profit? And what is the right way to do it? Even though not everything does, but a great deal depends on traders. Certainly, the profit gained depends on the deposit amount. If your account deposit is not very big, you have to apply the most secure trading tactics and miss many prospective deals. If your account deposit is bigger, you can carry out the most reliable deals in considerable amounts, and allocate minimum currency amount for the deals of average- reliability level. That approach allows you to rise up the bar for profit. And, of course, limitations of tolerated risk amount also affect the results. Trader itself sets such limitations depending on its deposit amount and its personal financial situation. If trader manages investor’s account, as a rule, the investor sets limitations for the trader.

AUDJPY: The Cake is Baked

Well, the RBA just decided not to increase rates.

Recently, China decided to tighten up capital requirements for lenders.

Also, there has been talk of taxing or otherwise restricting carry trade activities.

Lest we forget, recent news in Australia is mixed.

The US market has been skittish.

Emerging markets have been very skittish.

So, what am I trying to say?

I'm thinking the cake is baked. You might want to let the dust settle from the RBA decision -- but I think we have become overly pessimistic. We are so pessimistic that all the bad news and presumptions of bad news should soon be baked into the price of the AUDJPY.

All we need now are some upside surprises...

UPDATE: It's thursday morning and we are having a nice panic day apparently due to a less than stellar jobs report. I think the panic is unnecessary but I do understand the lynchpin that is being attacked here. If jobs don't come back then how can the economy recover? However, I think they have it backwards, as we do see spending continue to recover, which should after a lag lead to jobs. Obviously, the market can stay irrational far longer than you can remain solvent, so don't jump in just because you have a long term belief (as I do).

I guess the cake is baking, but not yet ready to come out of the oven.

AUDJPY: Profit Is My Density

No, that's not a typo. It's a rip-off of a line from the Back To The Future movie. Anyway, this post is another in the series of theoretical considerations with respect to various robot building strategies.

In this scenario let's consider fixing our maximum total position size across a specific price range. For example, perhaps we are willing to purchase 10000 units per 1000 pips (remember, I'm generally talking about small account sizes). For Oanda traders this will run you up to about $175.00 in margin.

If you want to limit your overall positions to 10% of your account capital then you'll have to ante up $1750.00 to play in that 1000 pip range. Obviously, a large account value will either give you a larger playing field or a higher density of positions if you don't expand the playing field.

Are you still with me?

I know, at this point things are pretty boring. In fact, we're looking at a simple grid that we can play every time price passes through our space. However, this gets a bit spicier if we can find a way to optimize the open and close activities.

For example, what if we can compress our position openings towards the low end of a short term movement? Similarly, what if we can compress our position closings towards the higher end of price movements within our price space?

If you have good ideas for these processes, then you are set!

My thought is to adjust the probability of closing profitable positions based on the amount of profit a position embodies. For example, perhaps a position with a 10 pip profit has a 1% chance of being closed while a 20 pip profit has a 5% chance of being closed -- per bar. What would this do to the expected profit per position? Are some probability formulas able to provide much better returns?

Remember, we're talking about trading a maximum density of positions while prices move through our trading space. We know our total position, our total risk, and simply want to allow our winners to run as much as we can based on historical price movement patterns. Basically, we know that prices range for a while and then take off up or down. It's the multi-day upward movement that we want to catch... letting go of positions slowly during smaller moves until we can eventually latch onto a bigger move.

I'm probably about 85% into building a new robot based on this concept. I like the measured aspect of this on the risk side. I like the less definable profitability expectation -- it's beyond my math skills at any rate -- which is suggestive of an ability to preferentially capture larger profits. I also like that it should continue to eek out smaller profits if the price decides to languish in a smaller range for some period of time.

Maybe I'll be able to fire this up on Monday.

Trader Interrupted

Once again, apologies for letting my blog languish.

Since I last posted Oanda has introduced an MT4 client. While this is good news for robot programming it's unfortunate that you have to trade in minimum amounts of 1000 units -- at least if you are trading using the MT4 client.

This has put my theoretical robot strategies out of reach on Oanda's MT4 platform as they depend on small incremental trading strategies. However, reading back a few posts, I think I should resurrect the "profit is my density" concept when I get the chance.  Back testing is free...

Anyhow, hoping to post more and more often too.

Robot Thoughts

It's getting easier to look at a chart and figure out what to do. For example, recently I've been using bollinger bands on the D1 and trading infrequently when something presents itself.

It's more difficult to turn this intuition into an algorithm and quantify it. I suppose I need to come up with clever ways to localize a local bottoming or topping event and then characterize the shape of it.

What I am relatively good at is finding moments of extreme extension. Unless a major new trend is about to occur these can indicate reasonable entry points. For example, if the price is getting "far" away from a moving average and price action is respecting a boundary or throwing a good candlestick event then a robot can take action based on well defined situation.

There are also "warnings" available. If the price is moving very fast then what is considered a good entry point may be a lot riskier. This type of thing can be examined across multiple time frames to detect a larger scale event while trading on lower time periods.

The latest thought and robot experiment is to collect these little nuggets of interpretation. Accumulate the "value" of a list of reasons that it looks like a good time to trade and compare to the "value" of those reasons that a trade should not be entered.

To illustrate, let's assume our robot is "thinking" about entering a long trade on the USDJPY pair:

• Bid price is 8 pips below the m15 moving average (+ 0.08)
• Bid price is touching the lower h1 bollinger band (+ 0.10)
• Bid price is within one pip of middle h4 bollinger band (+ 0.05)

At the same time we have some hazards:

• The h1 bollinger band was recently pinched
• The previous m15 candle dropped 25 pips

Well, never mind then, a nefarious "something" is happening that the robot should have the sense to realize it doesn't understand. Wait for a clearer situation.

Perhaps many robots would be better than people expected if they were able to look for more reasons not to enter a trade?