What Is A Forex Trading Strategy?

There are many different Forex trading strategies. However, there are some basics of reading a price chart that you need to know before you can move on to learning any one strategy in-depth. Let’s cover the basic building blocks of trading the Forex market from a technical analysis approach:

• Support and Resistance levels – How to identify and plot them

Support levels are created as a market turns higher. So, if a market is moving lower for example and it then changes direction and begins moving higher, it either has created a level of support or bounced off a previously existing level of support.

Resistance levels are created as a market turns lower. So, if a market is moving higher for example, and it then changed direction and beings moving lower, it either has created a level of resistance or bounced off a previously existing level of resistance:

Identifying and plotting support and resistance levels is by no means an exact science. Instead, it requires the use of the discerning human eye and a little bit of brain power…don’t be worried though, it’s really not that difficult to become proficient and confident in drawing support and resistance levels on your charts.

In the chart below, we can see the daily GBPUSD chart, with all the relevant support and resistance levels drawn in:

Now, one important point that I want you to know about support and resistance levels is that they are not concrete. Many traders seem to think support and resistance levels are concrete and that they should never trade a setup if there is a support or resistance level close by, this can result in them getting analysis paralysis and never entering a trade. While it is true that you need to take into consideration the key support and resistance levels in the market, you also need to look at the overall market condition. You see, in trending markets, support and resistance levels will often be broken by the trend momentum; so don’t be afraid of support and resistance levels, as they will often break. Instead, watch these levels for trading signals. You see, when a Forex trading signal like a price action setup forms at a key support or resistance level, it is a very high-probability even to take notice of.

• Trend trading

Trending markets offer us the best opportunity to profit, since the market is clearly moving in one general direction; we can use this information to our advantage by looking to enter the market in the direction of the trend.

An uptrend is marked by a series of higher highs and higher lows, and a downtrend is marked by a series of lower highs and lower lows. Note that trends do end, as we can see in the daily EURUSD chart below, the downtrend has come to an end recently after the pattern of lower highs and lower lows was broken…

I like to trade with the near-term daily trend by looking for high-probability price action strategies forming within the structure of the market trend. What I mean by this is essentially looking for price action setups forming near support as a market rotates lower in an uptrend and near resistance as a market rotates higher in a downtrend. Markets ebb and flow, and if you can learn to take advantage of trending markets, you will have a very good shot at becoming a profitable Forex trader:

• Counter-trend trading

Since trends do end, we can also take advantage of this information. However, counter-trend trading is inherently riskier and more difficult than trading with the trend, so it should only be attempted after you have fully mastered trading with the trend. Some of the things to look for in a good counter-trend signal is a price action pattern or setup forming at a very obvious and ‘key’ support or resistance level on the daily chart, see here:

• Range-bound market trading

When a market is in a trading range it means that it is consolidating between a level of support and resistance. We can use the fact that a market is bouncing between support and resistance to our advantage. As the market approaches the support or resistance boundary of the trading range, we have a high-probability entry level, since risk is clearly defined just above or below the resistance or support of the range. When trading price action in trading ranges, you can watch for obvious price action setups forming near the boundaries of the range, see here:

• Forex candlestick charts and patterns

We discussed Forex charts in Part 7, but as they are very important to the way that I trade and teach price action, I wanted to give them a little more time. I have previously written an excellent tutorial on Forex candlestick charts that you can check out here: Forex candlestick charts

It’s important to understand that candlestick patterns have certain terminology all to their self that you should become familiar with before you attempt to master a trading strategy like price action.

I have an excellent free tutorial on candlesticks that you can read here: Forex Japanese Candlestick Patterns

Here’s a cool video on trading with Forex candlesticks: Forex candlestick reversal bar trading strategy

• The myth of automated Forex trading systems

While we are talking about different ways of trading the Forex market, I want to touch on what I feel is a widely believed “myth” regarding automated robot and indicator-based trading systems…

You are probably going to come across many Forex website selling Forex software that they claim will fully mechanize the process of trading, so that all you have to do is click your mouse when the software tells you to and then rake in the profits. You need to constantly keep in mind the old saying “If it sounds too good to be true it probably is…” when you are learning to trade Forex. Like I said before, you are probably going to come across a lot of these robot websites if you have not already. You are best served by ignoring them all together.

You will probably see track records that they claim are “indisputable” evidence of the robots performance in the markets…what they don’t tell you is that this track record is simply a display of a “perfect” set of data that the software was back-tested on. The point is that trading software cannot work over the long-term because the market is constantly changing and as such, it takes the discerning discretion of the human brain to effectively trade the markets over the long-term. I am not saying that computer software has no place in trading, but it cannot be the only thing you rely on, and it certainly should not be used in attempt to fully-automate the trading process. The ability to read the raw price action of a market and grow and evolve with the ever-changing conditions of the market is how I personally trade and how I teach my students to trade.

Introduction to Forex Charting

This part of the course is going to give you a brief overview of the three primary types of charts that you will run across in your Forex trading journey. The chart type that I use, and that my members use, is candlestick charts, I feelforex candlestick charts do the best job at showing the price dynamics in a market, since their design helps you to visualize the “force”, or lack thereof, that a particular price movement exhibited. So, let’s go over the three main types of charts that you will likely see as you trade the markets:

• Line charts

Line charts are good at giving you a quick view of overall market trend as well as support and resistance levels. They are not really practical to trade off of because you can’t see the individual price bars, but if you want to see the trend of the market in a clear manner, you should check out the line charts of your favorite markets from time to time.

Line charts are made by connecting a line from the high price of one period to the high price of the next, low to low, open to open, or close to close. By far, line charts that show a connection from one closing price to the next are the most useful and the most widely used; this is because the closing price of a market is deemed the most important, since it determines who won the battle between the bulls and the bears for that time period. Let’s look at an example of a daily line chart of the EURUSD:

• Bar charts

A bar chart shows us a price bar for each period of time. So if you are looking at a daily chart you will see a price bar for each day, a 4 hour chart will show you one price bar for each 4 hour period of time…etc. An individual price bar gives us four pieces of information that we can use to help us make our trading decisions: The open, high, low, and close, you will sometimes see bar charts called OHLC charts (open, high, low, close charts), here’s an example of one price bar:

Here’s an example of the same EURUSD chart we used for the line chart example but as a bar chart:

• Candlestick charts

Candlestick charts show the same information as a bar chart but in a graphical format that is more fun to look at. Candlestick charts indicate the high and low of the given time period just as bar charts do, with a vertical line. The top vertical line is called the upper shadow while the bottom vertical line is called the lower shadow; you might also see the upper and lower shadows referred to as “wicks”. The main difference lies in how candlestick charts display the opening and closing price. The large block in the middle of the candlestick indicates the range between the opening and closing price. Traditionally this block is called the “real body”.

Generally if the real body is filled in, or darker in color the currency closed lower than it opened, and if the real body is left unfilled, or usually a lighter color, the currency closed higher than it opened. For example, if the real body is white or another light color, the top of the real body likely indicates the close price and the bottom of the real body indicates the open price. If the real body is black or another dark color, the top of the real body likely indicates the open price and the bottom indicates the close price (I used the word “likely” since you can make the real body whatever color you want). This will all become clear with an illustration:

Now, here’s the same EURUSD daily chart that I showed you in line and bar form, as a candlestick chart. Note that I have made the candles black and white, you can pick whatever colors you want, just make sure they are friendly to your eye but also that they convey bullish and bearishness to you. Bullish candles are the white ones (close higher than open) and bearish candles are the black ones (close lower than open):

Candlestick charts are the most popular of all three major chart forms, and as such, they are the type you will see most often as you trade, and they are also the type I recommend you use when you learn and trade with price action strategies. I use candlestick charts in my Forex trading course, and I recommended all my members use them when posting up charts in the members’ forum, because their visual pleasantness and simplicity make it easier for everyone to learn from.

What is Price Action Analysis?

My definition of Price Action Analysis: Price action analysis is the analysis of the price movement of a market over time. By learning to read the price action of a market, we can determine a market’s directional bias as well as trade from reoccurring price action patterns or price action setups that reflect changes or continuations in market sentiment.

In simpler terms: Price action analysis is the use of the natural or “raw” price movement of a market to analyze and trade it. This means, you are making all of your trading decisions based purely on the price bars on a “naked” or indicator-free price chart.

All economic variables create price movement which can be easily seen on a market’s price chart. Whether an economic variable is filtered down through a human trader or a computer trader, the movement that it creates in the market will be easily visible on a price chart. Therefore, instead of trying to analyze a million economic variables each day (this is impossible obviously), you can simply learn to trade from price action analysis because this style of trading allows you to easily analyze and make use of all market variables by simply reading and trading off of the price action created by said market variables.

• How do you apply price action analysis to the Forex market?

First, I want to say that price action analysis can be used to trade any financial market, since it simply makes use of the “core” price data of the market. However, my personal favorite market to trade is the Forex market, mainly due to its deep liquidity which makes it easy to enter and exit the market, and also because the Forex market tends to have better trending conditions as well as more volatility which makes for better directional trading and allows price action trading to really shine.

My own personal approach to trading and teaching price action trading is that you can trade effectively from a few time-tested price action setups. There really is no need to try and trade from 25 different price patterns, the Forex market moves in a relatively predictable fashion most of the time, so all we need is a handful of effective price action entry setups to give us a good chance at finding and entering high-probability trades.

The first thing you need to do to apply price action to the Forex market, is to strip your charts of all indicators and get a “clean” price chart with only the price bars in a color you like. I choose simple black and white or blue and red for my colors, but you can pick whichever colors you like (Part 7 will cover an introduction to charting). Here’s an example of my daily chart setup on the EURUSD:

Now, let’s look at an example of a clean and simple price chart next to a price chart covered with some of the most popular indicators that many traders use. I want you to look at these two charts and think about which one seems easier and more logical to trade off of:

From looking at the two charts above, you will probably agree that it seems a little silly to hide the natural price action of a market with messy and confusing indicators. All indicators are derived from price movement anyways, so if we have a solid method to trade based only on price movement (price action analysis), it only makes sense that we would use that instead of trying to analyze messy secondary data.

• What is a price action trading signal?

Next, let’s discuss how we can use price action analysis to find entries into the Forex market from a raw price chart. As a result of years of trading the markets I have boiled down all I have learned into my own unique method of trading with price action. This method consists of a handful of very specific price action entry triggers that can provide you with a high-probability entry into the market. Essentially, what we are looking for is reoccurring price patterns that tell us something about what the market might do in the near-future.

For purposes of brevity and out of respect for my paid members, I won’t give away all of my trading strategies and entry triggers here, but you can learn more about the trading strategies that I teach in my trading course. In the chart below, we are going to look at a particularly good price action signal for trading with trends; the inside bar strategy.

In the example chart below, we can see one price action trading signal that I like to use in trending markets; the inside bar setup:

• How to use price action analysis to determine a market’s trend

You will probably come across many different indicators designed to tell you what the trend of a market is. However, the most time-tested and trusted way for determining a market’s trend is simply to look at the daily charts and analyze the market’s price action. To identify a downtrend, we look for patterns of lower highs and lower lows, sometimes annotated by “LH and LL”. To identify an uptrend, we look for patterns of higher highs and higher lows, sometimes annotated by “HH and HL”.

In the example chart below, we can see examples of a downtrend, an uptrend and an uptrend changing to a downtrend:

• Where and when should you trade a price action signal?

In my trading course I focus heavily on teaching my members how to trade with “confluence”. When I say “trading with confluence” I am basically referring to looking for areas or levels in the market that are clearly significant. Confluence means when things come together or intersect. Thus, when we are looking to “trade with confluence” we are trying to put together an obvious price action signal with a significant level in the market. There are different factors of confluence that we can watch for, but in the chart below I am showing you price action setups that formed at key support and resistance levels in the market; support and resistance are each a factor of confluence. Note, I have shown you two more price action setups in the chart below; the pin bar strategy and the fakey trading signal.

In the example chart below, we are looking how to trade price action setups from confluent levels in the market:

In closing…

This lesson gave you a basic overview of what price action analysis is and how to use it in the markets. From here, you should proceed to the next part of this beginner’s course and continue learning about Forex and price action trading. As always, if you have any questions about trading just email me here, and if you want to learn more about how to trade with price action then checkout my price action trading course for more info.

What is Fundamental Analysis?

Fundamental Analysis

Fundamental analysis is the study of how global economic news and other news events affect financial markets. Fundamental analysis encompasses any news event, social force, economic announcement, Federal policy change, company earnings and news, and perhaps the most important piece of Fundamental data applicable to the Forex market, which is a country’s interest rates and interest rate policy.

The idea behind fundamental analysis is that if a country’s current or future economic picture is strong, their currency should strengthen. A strong economy attracts foreign investment and businesses, and this means foreigners must purchase a country’s currency to invest or start a business there. So, essentially, it all boils down to supply and demand; a country with a strong and growing economy will experience stronger demand for their currency, which will work to lessen supply and drive up the value of the currency.

For example, if the Australian economy is gaining strength, the Australian dollar will increase in value relative to other currencies. One main reason a country’s currency becomes more valuable as its economy grows and strengthens is because a country will typically raise interest rates to control growth and inflation. Higher interest rates are attractive to foreign investors and as a result they will need to buy Aussie dollars in order to invest in Australia, this of course will drive up the demand and price of the currency and lessen the supply of it.

Major economic events in Forex

Now, let’s quickly go over some of the most important economic events that drive Forex price movement. This is just to familiarize you with some more of the jargon that you will likely come across on your Forex journey, you don’t need to worry too much about these economic events besides being aware of the times they are released each month, which can be found each day in my Forex trade setups commentary.

Gross Domestic Product (GDP)

The GDP report is one of the most important of all economic indicators. It is the biggest measure of the overall state of the economy. The GDP number is released at 8:30 am EST on the last day of each quarter and it reflects the previous quarter’s activity. The GDP is the aggregate (total) monetary value of all the goods and services produced by the entire economy during the quarter being measured; this does not include international activity however. The growth rate of GDP is the important number to look for.

Trade Balance

Trade balance is a measure of the difference between imports and exports of tangible goods and services. The level of a country’s trade balance and changes in exports vs. imports is widely followed and an important indicator of a country’s overall economic strength. It’s better to have more exports than imports, as exports help grow a country’s economy and reflect the overall health of its manufacturing sector.

Consumer Price Index (CPI)

The CPI report is the most widely used measure of inflation. This report is released at 8:30 am EST around the 15th of each month and it reflects the previous month’s data. CPI measures the change in the cost of a bundle of consumer goods and services from month to month.

The Producer Price Index (PPI)

Along with the CPI, the PPI is one of the two most important measures of inflation. This report is released at 8:30 am EST during the second full week of each month and it reflects the previous month’s data. The producer price index measures the price of goods at the wholesale level. So to contrast with CPI, the PPI measures how much producers are receiving for the goods while CPI measures the cost paid by consumers for goods.

Employment Indicators

The most important employment announcement occurs on the first Friday of every month at 8:30 am EST. This announcement includes the unemployment rate; which is the percentage of the work force that is unemployed, the number of new jobs created, the average hours worked per week, and average hourly earnings. This report often results in significant market movement. You will often hear traders and analysts talking about “NFP”, this means Non-Farm Employment report, and it is perhaps the one report each month that has the greatest power to move the markets.

Durable Goods Orders

The durable goods orders report gives a measurement of how much people are spending on longer-term purchases, these are defined as products that are expected to last more than three years. The report is released at 8:30 am EST around the 26th of each month and is believed to provide some insight into the future of the manufacturing industry.

Retail Sales Index

The Retail Sales Index measures goods sold within the retail industry, from large chains to smaller local stores, it takes a sampling of a set of retail stores across the country. The Retail Sales Index is released at 8:30 am EST around the 12th of the month; it reflects data from the previous month. This report is often revised fairly significantly after the final numbers come out.

Housing Data

Housing data includes the number of new homes that a country began building that month as well as existing home sales. Residential construction activity is a major cause of economic stimulus for a country and so it’s widely followed by Forex participants. Existing home sales are a good measure of economic strength of a country as well; low existing home sales and low new home starts are typically a sign of a sluggish or weak economy.

Interest Rates

Interest rates are the main driver in Forex markets; all of the above mentioned economic indicators are closely watched by the Federal Open Market Committee in order to gauge the overall health of the economy. The Fed can use the tools at its disposable to lower, raise, or leave interest rates unchanged, depending on the evidence it has gathered on the health of the economy. So while interest rates are the main driver of Forex price action, all of the above economic indicators are also very important.

• Technical Analysis VS. Fundamental Analysis

Technical analysis and Fundamental analysis are the two main schools of thought in trading and investing in financial markets. Technical analysts look at the price movement of a market and use this information to make predictions about its future price direction. Fundamental analysts look at economic news, also known as fundamentals. Now, since nearly any global news event can have an impact on world financial markets, technically any news event can be economic news. This is an important point that I want to make which many fundamental analysts seem to ignore…

One of the main reasons why I and all of my members prefer to trade primarily with technical analysis is because there are literally millions of different variables in the world that can affect financial markets at any one time. Now, Forex is more affected by macro events like a country’s interest rate policy or GDP numbers, but other major news events like wars or natural disasters can also cause the Forex market to move. Thus, since I and many others believe that all of these world events are factored into price and readily visible by analyzing it, there is simply no reason to try and follow all the economic news events that occur each day, in order to trade the markets.

One of the main arguments that I have read that fundamental analysts have against technical analysts is that past price data cannot predict or help predict future price movement, and instead you must use future or impending news (fundamentals) to predict the price movement of a market. So, I thought it would be a good idea to give my response to these two arguments against technical analysis:

1) If fundamental analysts want to try and tell me that past price data is not important, then I would like them to explain to me why horizontal levels of support and resistance are clearly significant. I would also like to ask them how myself and many other price action traders can successfully trade the markets by learning to trade off of a handful of simple yet powerfully predictive price action signals:

Looking at the daily spot Gold chart above, we can clearly see that support and resistance levels are important to watch. Any Fundamental analyst, who wants to say that charts don’t matter, is simply wrong, and you will come to this conclusion on your own when you spend more time studying some price charts.

2) The next argument that Fundamental analysts use is that you can more accurately predict a market’s price movement by analyze impending forex news events. Well, anyone who has traded for any length of time knows that markets often and usually react opposite to what an impending news event implies. Are there times when the market moves in the direction implied by a news event? Yes, absolutely, but is it something you can build a trading strategy and trading plan around? No.

The reason is that markets operate on expectations of the future. This is actually an accepted fact of trading and investing, so it’s a little strange to me that some people still ignore technical analysis or don’t primarily focus on it when analyzing and trading the markets. Let me explain: if Non-farm payrolls is coming out (the most important economic report each month, released in the U.S.) and the market is expecting 100,000 more jobs added last month, the market will likely already have moved in anticipation of this number. So, if the actual number is 100,000 even, the market will probably move lower, instead of higher…since there were not MORE added jobs than expected. So, while 100,000 new jobs might be a good number, the fact that the actual report did not exceed expectations is bad for traders and investors (can you see how this junk gets confusing now? I almost confused myself writing this…).

AND NOW FOR MY FINAL POINT: Since all of the preceding expectations of a news release have already been carried out and are visible on the price chart, why not just analyze and learn to trade off the price action on the price chart?? What a novel idea! You see, even after the news is released we can still use technical analysis to trade the price movement, so really technical analysis is the clearest, most practical, and most useful way to analyze and trade the markets. Am I saying there is no room for Fundamental analysis in a Forex trader’s tool box? Absolutely not. But, what I am saying is that it should be viewed and used as a compliment to technical analysis and it should be used sparingly, when in doubt consult the charts and read the price action, only use Fundamentals to support your Technical view or out of pure curiosity, never rely solely on Fundamentals to predict or trade the markets.

What is Forex

Forex (also known as FX, FOReignEXchange) is an international (interbank) financial market for trading currencies. It is world (international) market and so it works round-the-clock (from Monday to Friday). That makes it more attractive in comparison to certain (national) foreign exchange markets, where trading is carried on only within working day. In addition Forex is a leader of total volume of daily transactions among financial markets. Today its daily turnover is more than $4 bln, analytics predict $10 bln increase by the year 2020.

Such a huge volume (Forex market volume in daytime exceeds approximately twice the USA annual budget and fourfold - the annual budget of Great Britain) is a guarantee of high liquidity of the market. Liquidity is a currency ability to be changed practically without any difficulties with other currency.

There are lots of professionals who work with Forex (banks, trusts, funds, transnational corporations, broker companies). Broker companies act as intermediary between the currency market and individual traders, enabling investors with different financial abilities to carry out operations at Forex and to earn (due to significant leverage) significant means.

Not aiming to give full detailed history of financial markets, we will mark some of the most important dates of its development.

The currency market has a great history that starts in the Ancient Middle East. In the Middle Ages the appearance of international banks rises the necessity of means of payment that could be valid when offered to third parties. This period is marked with increase in number of transactions, their variety and flexibility.

By the end of XIX century the currency market takes more or less developed forms. In 1867 in Paris it was registered as legislative structure. There were no fluctuation of currency at that period as all the currencies were tied to the gold. This period is called The Epoch of Gold Standard.

The next important date is 1944 when in the Bretton Woods (USA) the Bretton Woods Agreements were signed. According to them all the world currencies were tied to USD, and the latter - to the gold. The agreements established the International Monetary Fund (IMF). The rate changes were strictly regulated within 1%.

In 1971 USA gave up on free convertibility of dollar to the gold, and as a result of the agreement signed in Washington (USA) - the Smithsonian agreement, the fluctuations to 4,5% against dollar and to 9% against non-dollar pairs became possible. In fact it brought the Bretton Woods system to the end.

In 1976 IMF proposed to confirm legislatively the relationships between currency market participants in the form of a new agreement which was signed in Kingston (Jamaica) by the leaders of 20 largest economic countries, except those in communist block. As the result of this (Jamaican agreement), USD became international reserve currency with function of universal mean of payment and the evaluation of currencies of other countries. This agreement also officially opened the possibility to free-floating rates, although some countries ignored the established in 1971 restrictions on currency fluctuation.

Probably, it is the moment of beginning of the Forex market in its actual form. With time and development of telecommunication technologies, the trading in the building of stock exchange gave way to phone dealing and then to electronic dealing systems. Today practically all the transactions take place via Internet.

Advantages of Forex

As it was already mentioned, due to high liquidity Forex allows to change without any difficulties practically all volumes of one currency to another. Moreover, high liquidity means that a transaction might be closed practically immediately. It is achieved due to two reasons. Firstly, the trading is carried out via electronic means, secondly, every moment the market is full with big number of buyers and sellers that in accordance create the highest demand and equitable supply. However liquidity and volumes are not the only advantages of Forex.

Working with Forex you have a possibility to choose when and how long you are going to work and when and how long you are going to have a rest, fun, to study or communicate with friends and relatives etc. Your profit depends only on you. It does not depend on your boss or your stuff, your business partners, supplies, terms, goods or services. There is seasonality at Forex but it does not influence your profit. You can choose the appropriate profitable tactics for every time period. You do not spend money on advertisement of your goods or services, you do not look for buyers, you are not obliged to certificate or license your production, and all this brings your overhead and commercial expenses to naught.

You will need a PC or a mobile device (laptop, tablet PC) with the net access for your work. This is all. LiteForex will supply you with special software for free. You can work in your apartment, dealing-room, Internet-cafe, to put it simply, in any place with Internet access. With the help of Internet data card you can choose a comfortable place for your work in any place of the world.

Apart from these there is one more advantage of Forex. Having fix profit on a percentage base (for example, 30% per month) your profit in absolute term will grow with the increase of your capital. Mathematicians proved that having a positive (no matter how small it is) mathematical expectancy of trade strategy, with the help of means of money management it is possible to provide anexponential growth of deposit.

The difference between line and exponential profit

In case of using the advisors in trade (EA), this type of profit may be regarded as passive profit. It means that once you create the conditions for gaining the profit, you just get it regardless of your work.

The Significance of the Foreign Exchange Reserves

Even if you are a newbie you have probably heard about the so called Foreign exchange market reserves. We will try to explain in the following article all the significant features of such Forex reserves and their impact on the global Forex trading system in general. So read further in order to find out more about these mysterious Forex reserves.

In fact there is nothing mysterious in the definition or functions of such Foreign exchange market reserves because they simply refer to the various foreign exchange notes and governmental debts which are held by the hugest world’s central bank organizations. Most of the world’s countries have their own Forex exchange market reserves which are used when it is necessary. By means of such reserves a country can impact on the exchange rates and on the import-export economy as well.

Speaking about more precise identification of the Foreign exchange market reserves, we should say the following: government representatives use such reserves in order to provide a proper amount of different international payments. The functions of such payments can be very different but mostly concern procuring of various services and products like raw materials, real estate objects and equipment for military forces. High reserves mean a country is rather powerful from the economical and financial point of view. As you may understand, every nation and government is very motivated to develop a strong and high Forex exchange market reserve. Having such a strong back-up a country can provide negotiations concerning reducing interest rates on a country’s debt and close the contracts with huge international partners on much better terms.

You may ask – what central bank organizations can get from such Forex exchange market reserves? And we answer – the officials get a chance to control exchange rates on their own domestic currency rates using reserves as strong financial back-ups and political tools. In order to make a domestic currency more stable and stronger a nation can spend a Foreign exchange reserve to purchase its own domestic banknotes. For sure, such activity will increase the demand for this currency which will lead to higher valuation rates. Or a country can use such a strong reserve to buy foreign banknotes in order to reduce the value of its domestic currency. Everything depends on the chosen strategy a country follows.

To make it easier for you - those nations which can boast stronger export economies are aimed at reducing the exchange rates making them weaker. In such way exported products become more affordable for foreign customers. Besides, a weak home currency can attract a buying interest for the security investments of a nation which become very cheap for foreign customers as well. So in order to attract more foreign potential customers and investors a nation with a strong foreign exchange market reserve can weaken a domestic currency on purpose.

As for the low exchange rates they set for home currency they can become inflationary due to the fact imports turn to be more expensive at home. If such situation occurs a central bank of this nation uses a FX exchange reserve to purchase a home currency and support in such way higher exchange rates under the circumstances when inflation turns into a concern.

Forex Information Useful For Every Beginner

The most common information and the initial knowledge along with understanding Forex trading can assist you a lot if you do your first steps in this direction. Surely, any article or issue even the most detailed one can’t give all necessary Forex information a beginner should know before starting a trade but the most basic data you can learn from reading the following article dealing mostly with explanation of terms and the Forex market scheme of work.

Any basic Forex information would not be full without explanation of what Forex means. Forex market or sometimes called as FX stands for a foreign exchange market (also known as “currency market”) where people – traders and brokers – are involved into buying and selling world currencies against each other. At the moment a lot of people join Forex market as traders due to great popularity and huge financial base and opportunities this market can offer even if comparing it with stock exchange markets. Besides approximate daily trade results which Forex and related markets show are really impressive –more than 3 trillion USD – which is over all results of all U.S stock markets. Due to the fact that trading at Forex market can be conducted all over the world by means of the Internet and other communication means like fax and phones Forex trading is also considered as one of the most convenient and easy to use ones comparing with stock markets.

If you want to start your Forex education in a correct way you need to learn to distinguish Forex market and stock market scemes of work because many newbies suppose by mistake that these two markets work basing practically on the same principles and using the similar tools and instruments. There are plenty of differences but only two of them denote the evident dissimilarity between these types of markets:

1) Difference in trading hours. The main advantage of Forex market is that it works 24/7 without breaks and day offs. Forex information and trading itself can be provided from three continents from a lot of big cites like Tokyo, London, New York, Zurich and many others which allows following and reacting in a proper way at various and fast fluctuations happening at Forex market. As for the stock markets – they open at Sunday night and close on Friday evening.

 2) Commissions can be different. Online electronic Forex trading and high competition created circumstances making possible reducing in bit-off spreads (equals to stock commissions). Such spreads cover all those risks which are inevitable when one deals with the market makers. Many people find Forex spreads rather low but any spread can rise if the currency liquidity drops due to some reasons. Besides such Forex commissions considered as the lowest ones according to trade sizes comparing with stock markets in spite of the fact that lately FX commissions have been reduced. In the most Forex trading houses leverage is offered as 100 to 1 (for example a trader who can suggest a deposit fund of 10 000 USD can leverage this sum up to 1 million USD). Such situation involves interference of speculators who can narrow a pip spread but government and the hugest banks impact on prices and commissions as well so the chances are equal. Besides never heed that stock markets offer all participants involved into trading an equal level of an access and practically the same prices while the Forex market suggests few totally various levels of an access where commissions and spreads differ from every next level. The hugest investing banks involved into Forex trading can offer the lowest spreads.

Why spreads are so important in Forex trading?

Any initial Forex information presupposes explanation of spreads functions and meaning. To explain what is a spread we need to appeal to such terms as the BID price and the ASK/OFFER price. The BID price means the price at which a trader can easily sell one unit of any base currency offered at the Forex market (or buying one of secondary currencies) and the ASK/OFFER price stands for the price used by a trader for buying a unit of one of base currencies.

The following example explains this in practice – if the exchange rate of the currency pair EUR/USD equals to 1.3473/1.2476 it denotes that a trader should pay 1.2476 USD to buy one Euro (which is obviously a base currency) and if a trader sells one Euro he will get 1.3473 USD. You see, it is not so hard to figure out. As you have noticed the BID price was lower than the ASK/OFFER price and that tiny difference between these two prices is called a spread which is measured in “pips” (1.2476 - 1.3473 = 3 pips) and in such way denotes the possible profit and the dealing room used in the Forex trading houses.

And the last piece of Forex information we want to discover deals with retail Forex trading. The mentioned before market makers or also known as retail Forex brokers work representing retail customers and capture one of the smallest niches of the Forex market. Due to the dry statistics data – retail Forex broker is responsible for estimation of the total volume of retail trading which equals up to 50 billion per day (around two percent from the total value of the whole Forex market). However this segment shows a tendency to grow lately because of appearing high quality Forex trading platforms and individual traders using these platforms.

How to become a Forex broker

Many people interested in foreign exchange market or simply in Forex trading want to know how to become a Forex broker and what skills are required for this kind of occupation. Due to the great popularity of Forex market plenty of interested people are looking for occupations which are related somehow to the international and the most profitable financial FX market.

Most of such job-seekers choose a profession of a Forex trader because they want to earn huge sums of money while the others stick to an idea that a job of a Forex broker is more reliable and provides reduced risks comparing with Forex trading. Each of them is partially right but we want to say that a Forex broker really experiences less amount of risks so if you do not belong to adventurous type of human you better think about choosing an occupation of a FX broker as an alternative to Forex trader profession because awards these guys get are really worth of it.

So what things you need to have, know and understand in order to become a successful Forex broker?

1) Foremost you need to understand how Forex market works. We mean really understand all those important trifles and nuances concerning complicated and at the same time rather simple scheme of work of the foreign exchange market. That is why never save money and your time on a proper Forex education. Reading web articles, buying and studying every book and special literature you will manage to find, visiting conferences and seminars and listening to educational courses of the Forex experts: all this is the list of educational means you should use in order to become a real pro in this filed. Make sure that you learn the modern slang and nomenclature every contemporary Forex broker should know. Pay heed to the basics: most widespread Forex trading systems, mechanisms, automated Forex trading software and its setting up, functional and technical analyses and so on. Your prospective clients: Forex traders will ask your professional opinion and advice. You have to be ready for explaining certain nuances to newbies and to experienced traders as well.

2) You need to find a teacher: an experienced Forex broker: who is quite professional and can introduce you in the verse of the Forex market, its trading strategies and explain all requirements this hard and day-to-day routine job brings. Such practical point of view along with theoretical background can help you to reach professional heights and build up a perfect career as a Forex broker. Do not get lazy then and browse in the Web in order to find the announcements in your area concerning seminars leaded by professional Forex experts, visit special discussions groups where traders and brokers with different level of experience can meet and talk about the latest trends and schemes of the Forex market trading.

3) Any Forex broker also should obtain a professional certificate proving his educational degree whether in economics or in business management. There is also an organization which provides all Forex traders with specific certificates in the filed of the Forex trading and brokerage: it is called the National Association of Securities Dealers - and offers a test everyone can fulfill if he or she positions himself/herself profound enough in this sphere. Bear in mind that positive results of this text will make your career as a Forex broker more successful especially if you have a college degree in business or/and economics.

Exploring Basics of Technical Forex Analysis

For those who only make their first steps in the Forex trading and try to figure out how this huge financial market with plenty of opportunities to earn the fortune works such words as technical or fundamental analysis mean nothing or at least a little. Due to the fact many people risk in order to gain something at this available and free for any sort of speculation with currency exchange rates market it requires knowledge concerning the most widespread strategies used by experienced traders who are quite successful in earning money at the FX market.

As it was mentioned there are two types of analysis exist at the FX: technical and fundamental. While fundamental Forex analysis is based in gathering and analyzing Forex trends of past technical analysis is grounded on studying of price charts in order to make forecasts concerning any prices fluctuations of any currency pair. As you may guess knowing basics of technical Forex analysis can serve as a solid background when you as a trader have to decide whether to buy or sell currencies at the FX market.

The following issue concerns certain aspects of technical Forex analysis so you could get a full picture of what benefits it may give you if you study the basics.

The major purpose of the technical FX analysis is in studying price charts and this knowledge is quite enough to forecast any sort of fluctuations. For sure traders which use this Forex analysis's methods commonly have to follow the latest economical, political news in order to take them into account while analyzing the details within the price charts which help to predict price movements and their direction. That is why the most obvious purpose of the technical Forex analysis is to make money predicting possible changes within a certain price chart. Accurate analysis can make one a prosperous man and that is why no wonder many newbies try to figure it out.

Methods of the technical Forex analysis include a variety of different techniques centered on studying price charts particularly. In the core of this analysis lies the estimation and forecasting of actual price action which is usually not so changeable but modern software offers such innovative tools for accurate setting up of charts that many traders can learn them in few months which is really fast taking into account a great amount of details and nuances. In addition to this the technical analysis involves formulas appearing on the top of the certain price charts.

If we talk about Forex trading strategies we should mention technical analysis for sure because many effective and efficient trading strategies planned by Forex traders are based on this type of analysis for instance such as trend recognition and moving averages. Such strategies are planned by traders in order to lessen any risks to lose money to minimum and that is why they can be modified with methods taken from the fundamental Forex analysis. Let's say that any good FX trading strategy is factually based on technical analysis and involves elements of fundamental analysis as well.