Do you put it into stocks? Or do you try your hand at the forex market? To know which one is going to be best suited for your aims, you first need to understand a little bit about both – enough to base a solid decision on anyway.

For starters, the stock market is based on buying shares in various companies. To profit, you can either hold your shares until their value increases, and then sell them, or hold them for even longer and enjoy the periodic dividends (shared profits) that some companies distribute.

Once upon a time, stocks were primarily ‘long-term’ trades, where stocks were bought and left to appreciate over time. Certain stocks that are particularly stable and known to gradually appreciate are known as ‘blue chip’ stocks. Nowadays that trend of ‘long term’ stock trading has been supplemented by a ‘short term’ system too, but this is relatively risky.

On the other hand, the forex market is definitely more short term than long term. When it comes to forex, it is immensely difficult to predict how currencies may fluctuate over a lengthy period of time, unless of course it is a particularly stable currency in the first place (such as the Swiss Franc!).

As such, most forex trades take place over the duration of a single market day.

Primarily, this is the difference between the stock and forex market. However, as an investor there is more to it than that. Truth be told, many find that the forex market is an easier place to make quick, and less risky, profits.

Partly this is down to the large number of options that are available, with an entire slew of currencies that you can migrate to, and from. Whereas with stocks your only option is to sell your current shares, with the forex you could use your current currency to buy an entirely different currency altogether.

Experienced investors also find that the forex market is a lot more predictable than the stock market. Unless you are privy to the inner workings of a company (which you shouldn’t be!), it is difficult to figure out how it will fluctuate.

End of the day, if what you’re interested in is turning a decent profit in a short amount of time, then the forex market certainly trumps the stock market. Of course, you could invest in both, but for now, concentrating on the forex will probably get you the results that you desire a lot faster.

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Of all the risks inherent to the Forex market, three types in particular stand out, and they are:

1. Self Risk

No, this doesn’t mean that you’re risking yourself, or your life, but rather that part and parcel of the riskiness of investing in forex stems from you, yourself. Foolhardiness, an unwillingness to quit when you really should, or a lack of confidence to make the calls that you feel are right can all contribute to the risks that you face.

And considering there are other risks out there, self risk is really something that you don’t need! With time and experience, you can overcome most of these risk factors though.

2. Broker Risk

Generally speaking, different brokers operate differently. Some charge a flat rate per transaction (though these aren’t often found anymore), while others take a commission based on your profits (also unpopular nowadays).

Most often, brokers tend to make money on large trades, and that means that they’re not so much interested in whether or not you actually profit, but are more interested in the fact that you start to develop a large spread.

Don’t be fooled into thinking that your broker is only concerned with your best interests!

3. Market Risk

Last, but certainly not least, there is the ever-present market risk. Going into ‘deals’ with people in forex can be risky in itself seeing as most of these people are more interested in their own profits than anything else.

Tips, advice, and so on can be helpful, but at the end of the day no one is going to give you the ‘secret’ to success for free. Be wary if you’re approached by someone who has a proposal that seems particularly risky. Chances are that they’re using you to leverage their own efforts.

While discussing these three big risks may put you off trading forex slightly, you shouldn’t let it get you too down. Yes, there are risks in the forex market, and yes, if you aren’t careful you could end up losing some money.

But at the same time, being aware of those risks is the first step towards facing them, and now that you know what you’re up against you’re certainly well equipped enough to start.

So long as you’re wary of the risks that you’re undertaking, and fairly vigilant when it comes to accepting deals and advice, you’ll find that the forex market has some incredible opportunities that are ripe for the picking.

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Here is why….

There are many markets that you can invest your money int0 – equities, bonds, futures, commodities. There are many. While you can make money in any market, there is no better market to make money other that the Foreign Exchange Market, or Forex Market (FX).

Here are the top six reasons why the Forex Market is the best financial market to make money:

1. Forex is the best financial market to make money because of its sheer size, volume, and liquidity. It is huge. The daily volume averages almost 2 trillion. This is nearly triple of all the other markets put together, and two hundred times bigger than the NY Stock Market. Liquidity basically means that it is easy to sell your positions for cash. There is nothing more frustrating to an investors that to be stuck in a position with no buyers. Because of the sheer size of the Forex Market, you are able to trade quickly in and out of positions.

2. Forex is the best financial market to make money because it offers 24 hour trading, six days a week. This is very appealing to people who work from home, or choose to manage their investments during the evening. Because Forex offers around the clock trading (except Saturdays), you are able to execute your buying and selling positions in a manner that is more profitable for you.

3. Forex is the best financial market to make money because trading is done online and all you really need is a laptop and IP. This means that you can be on the beach, at a resort, or simply work a home and make money online. Personally, this is very appealing to many home based business entrepenuers.

4. Forex is the best financial market to make money because it offers huge margin accounts unlike other financial markets. In the equities market, it is not uncommon to have a 2:1 margin, or leveraged, account. That is, for every $1 of your own capital, you can borrow $2. While leverage investing magnifies the gains, it also magnifies the losses. In Forex Trading, you are able to leverage on a 100:1 and even a 200:1 ratio. Imagine having $200,000 worth of currency positions with only $1,000 of your own principal (a 200:1 ratio). This is a huge spread, and means if you play it right, you can easily turn $1,000 investment into a huge return.

5. Forex is the best financial market to make money because you only have to keep track of a few currency pairs. This is in stark contrast to having to keep your eye on hundred, if not thousands of mutual funds and equities, let alone futures, bonds, etc. This makes trading a lot simplier and manageable for many people. The major currency action is in these four Foreign Exchange pairs:

• US Dollar / Japanese Yen
• British Pound / US Dollar
• US Dollar / Swiss Franc
• Euro / US Dollar

6. Forex is the best financial market to make money because its volatility is controlled. The markets move up, and the markets move down. Some days are more volative than others, and of course you want to buy low and sell high, and buy again when it is low. That is easy to understand. What makes it different for every investor is predicting when these ups and downs have reached the top and reached the bottom, and knowing when to trade. Equity markets make this most difficult. With the Forex markets, the volatility is more controlled because it is not subject to CEO and corporate scandals like we have seen in the equity markets. Rather, what drives the Forex Market is normal fundamental and technical underpinnings.

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There are a number of important steps you have to take into consideration when you are learning how to trade forex. Each of these steps can be a course in itself, but for the sake of simplicity to my readers of this article, I will be very general. You can read other sections of this blog to study each area.

How To Trade Forex Step 1 – Learn Money Management

When you are first starting out, your money management skills will be tested. You will have some gains, you will have losses, and it is important that the management of your own money is solid and you are not in any dire financial situation. If you are totally in debt, and have no income, and looking to trade Forex with your last dollar in the hopes amassing a fortune, then Forex trading is not for you at this time. Have your own personal financed in order  before you launch into Forex currency trading.

How To Trade Forex Step 2 – Get A Course First And Learn World Currency Fluctuations

Foreign Currency Exchange is the largest in the financial market sector, larger that bond and equity trading. If you are going to learn how to trade forex, then you must be fluent in your understanding of world currency fluctuations, the basics of fundamental and technical analysis reseach, what moves the currency markets, and the patterns and signals of price fluctuations. Currencies are traded in pairs, and when you start out you want to start with a single pair and learn all you can about it price fluctuations from this single pair. For this reason, you will want to get your hands on a very good Forex Trading Course first before go live with your trading account.

How To Trade Forex Step 3 – Learn A Forex Trading System And Stick To It

There are many excellent Forex Trading Systems in the marketplace today. This website recommends only the best. The key is learn the system and stick to it. Do not jump around from one system to the other until you have mastered the one you work with. Many people have lost money from being forex trading system jumpers, while never being successful with any one system.

How To Trade Forex Step 4 – Start Off With A Forex Demo Account

Do not use real money when you are starting off, but use a Forex Demo Account. This will give you the advance to aquire the skillset first before you actually go live with your hard earned cash. I recommend in starting with either a mini account (10k lot size) or even a micro account (1k lot size). Either way, you will want to practice first, and a Forex Demo Account gives you the perfect opportunity to learn how to trade forex without losing money from inexperience.

How To Trade Forex Step 5 – Get A Forex Trading Chart

Forex Trading Charts are a absolute necessity. I recommend some excellent one’s on this site. You will want to see current pricing of currencies and be able to make technical analysis and fundamental evalulations quickly.

How To Trade Forex Step 6 -Have A Trusted Forex Broker/Advisor

Here is a Forex Tip – you want to have a Forex Broker that will give you a margin of 100:1  on your account. That is, for every $1 of capital you put into your margin account, you are able to trade 100 units of currency.

How To Trade Forex Step 6 – Understand Risk/Return

Like any of the financial markets, Forex is subject to great fluctuations, and the greater the risk, the greater the returns, both positive and negative returns. The goal in Forex trading is to minimize the risk and maximize the gains. I recommend only using your extra cash flow when it comes to investing in the Forex market. Do not invest all your financial portfolio in the foreign currency market. Learn how to trade forex wisely, with patience and persistence.

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Let me get right to the point. Forex is a trillion dollar industry and it the largest of all the financial markets, even larger than the bond and equity markets. Hence, there are plenty of opportunists offering you the latest secret, the latest cheat sheet, and the coolest gadget, all as an attempt to simply sell you stuff.

Now, don’t get me wrong. If you want to be a main player in the foreign exchange market, you have to keep up with all the latest news and forex trading strategies. But, every forex strategy and secret has its limitations, and so don’t be scammed by believing someone when they say they have broken the “forex code” and they want to sell it to you.

Let me tell you why….

Forex Markets are fundamentally unknowable, and the sellers of products are telling you that they are.

Let me put it to you this way. If foreign exhange markets and/or investments lent themselves to rational analysis in any significantly predictive way, somebody would have perfected that analysis already and would have taken away all the chips of everybody else at the table a long time ago. Meaning, there would be no money left for anyone else. This clearly has not happened. And if it has not happened by now, even with all the charts, diagrams, computer geeks and nerds, it simply is not going to happen.

Here is a Forex trading strategy secret: there no secret.

There are new discoveries, but every predictable pattern will vanish sooner of later because Forex Markets are volatile based on human behaviors, not computer analysis.

As soon as you believe a supposedly Forex professional that they have discovered a secret Forex strategy to beat the foreign exhange currency markets at its own game, and they want to sell you this knowledge, you are setting yourself up for significant losses and subjecting yourself to the gambler’s ruin.

You see, when it comes to Forex currency financial markets, two and two make four just often enough to lull you into a false sense of security. Then, the very next day, they make five. And it won’t be long in your Forex Trading career that they make paper airplanes. You get the point.

It is impossible to beat the Forex exchange market 100% of the time. While signal patterns and currency market trends can establish themselves over time, even yet, they are not fully predictable and are also subject to much volatility.

The bottom line is: no matter how much Forex trading strategies and secrets you acquire or purchase, you still can’t prove what’s going to happen in the future, and especially in the financial markets.

So, what is my Forex Scam advice?

Yes, you want to buy products. Yes, you want to keep abreast on all the latest news and Forex trading strategies, but just don’t go out and leverage all your capital and put all your eggs in one basket. Otherwise, you will end up in the alley with nothing but the shirt on your back as capital.

You want to be balanced and test any tips, secrets, and newly acquired Forex knowledge with a reduced risked strategy. Go slow, go small, and test the evidence and results yourself, instead of relying on a so-called expert who has the biased perspective of simply wanting to sell you his/her possible Forex scam.

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Are you looking for a Forex software that is fully-automated, or semi-automated? Or perhaps you want one with a user-friendly interface.

While these factors are important to look at, the most important factor in the software’s ability to make you money. I am a bit of a pragmatist when it comes to Forex tools and automation. It seems that the more automated your Forex trading becomes, the less unsure you can be if you are making money with it or not.

While some will bed to differ with me (especially the software developers), nothing can eliminate the human decision making process of “buying and selling.” An of course, with the human element comes the emotions of fear and greed, which can drastically drive market up or down in any given day, including your Forex trading account. Trading robots have been tried and most of them have their limitations. Otherwise, everyone would be a millionaire who purchased the trading robot…and that is far from the truth.

The wisest principle when it comes to buying the best Forex Trading Software has to be simply “How Much Money Does It Make Me.” Actor Tom Cruise in Jerry McGuire said it best, “Show Me The Money.” In fact, picking the best Forex Software is easy when you apply this one principle.

While other factors can be taken into consideration, the bottom line has to be on “profits.” After all, this is about making money with Forex.

The next question you must be asking is, “Which Forex Software is the best to make me money?”

That is what this website is all about, namely, helping you choose the best software’s and courses. The best software today will be different 3 months from now. The FX market is fast paced with new systems, software’s, and technologies. That is you will want to BOOMARK this site to keep abreast on all the latest Forex Trading Softwares and technologies.

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Traders who use TA in conjunction with Fundamental Analysis have a distinct advantage over those who just use news data and events to trade. What is important to realize is that TA does not conflict with the fundamental consensus, it merely measures it. By combining the two it will help you interpret the underlying fundamentals that influence price and vice versa.

Keys to successful TA: 3 Methods to Interpret the Studies

Although there are hundreds of different studies and variations that fall under the TA grouping, the most effective methods are usually the simplest. By integrating basic charting tools such as Candlesticks, Moving Averages, Relative Strength and Pivot Points, you will be able to make trading related decisions more effectively. We will start with the most simplistic form of TA, and that is Support and Resistance.

1. How to find Support and Resistance

The most effective attribute a trader can have is to be cable of identifying levels of significant Support (S) and Resistance (R) as they evolve. If a trader is able to do this effectively he can place orders in strategic locations to yield profits and shield losses. Thus, upon iteration of the process he is capable of experiencing growth in account equity.

Technical and flow analysis can help traders discover S and R prior to the arrival of price at the respective levels. By the end of this course you will have the knowledge necessary to:

• Find S/R levels
• Pinpoint places to place entry and exit orders based on S/R
• Trade with peace of mind

Another method to interpret the studies is…

2. Trendlines and Channels

Trendlines are just as straightforward and easy to apply as S/R. They should be interpreted in a nearly exact same way as well. In this case the Trendline is tracing the price lower, however Trendlines can be applied to both falling and rising markets.

To draw a Trendline all you have to do is simply connect two or more price extremes with a line, below is an example.

As you can see on this chart by connecting the first two peaks in price you were able to discover the descending resistance or as traders refer to it as Trendline Resistance.

Creating Channels on your price chart is just as simple creating a Trendline plus one step. Most packages include a utility to create them, however they can be created by simply drawing two parallel Trendlines.

Channels and horizontal levels will give a trader means of placing entry and stop orders strategically based on historical price data.

It is important to realize the lines do not represent a path the market will follow exactly. All Channels and S/R levels are eventually broken through. What the lines will do for you is give you a clear method for measuring the pace of the market so you can place orders accordingly. Below is an example of a channel using parallel Trendlines.

This brings us to our third method to interpretation…

3. Fibonacci Retracements and Projections (Fractals)

Leonardo Fibonacci was a mathematician born in Italy nearly 1000 years ago. Dubbed the “greatest European mathematician of the middle ages”, and authored The Book of Calculations credited for implementing the Hindu-Arabic numerals, also known as the decimal system replacing roman numerals in Europe.

Among these extraordinary accolades Fibonacci was sought after by many powerful rulers of his day to solve problems in trade, finance and urban planning.

In his book Fibonacci describes what is known today as the Fibonacci Sequence, or what the ancient Greeks coined the Golden Ratio (Phi or ?), while modeling trade and exchange rates amongst several Mediterranean nations for The Holy emperor of Rome. Similar observations were made in the Far East at an undocumented time in history.

The Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers:

0 + 1 = 1 + 2 = 3 + 5 = 8 + 13 = 21 + 34 = 55 + 89 = 144 + 233 …… ?

This simple two-stage iterative process results in a number of intriguing interrelationships and self-similarities, such as that any given number is approximately 1.618 (Phi) times the preceding number and any given number is approximately 0.618 (Reciprocal of Phi) times the following number.

We observe the occurrences of this sequence in many instances of dynamic systems including financial markets. However, it is not entirely necessary that you fully grasp the significance of the relationships to utilize it. Rather it is of much greater importance that you understand how to apply it to a chart.

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Here are just a few of the areas that Fundamental Analysis looks at to determine why the Forex Markets are volatile.

• Geopolitical events – War, Terrorism, Political Developments
• Federal Reserve announcements – FOMC announcements and Beige Book
• Employment data – NFP and Unemployment Percentage Rate
• Inflation data – GDP, CPI and PPI

As you may or may not know, the market often responds with volatile price changes following the release and dissemination of major market data. With so much information to process in such little time and the market making large swings, it is easy to feel like you are well behind the curve. Fortunately there are ways to compartmentalize this seemingly insurmountable data in order to preserve your account equity in the face of uncertainty.

There are just a few things that you must realize in order to make heads or tails of it all.

• The majority of market moving data is released at the onset of American trading, usually 8:30 am in New York.
• The biggest releases are on the first Friday of every month (NFP and Unemployment).
• The days before, of, and following the FOMC announcements are volatile.
• Geopolitical unrest creates uncertainty about stability of exchange rates – uncertainty often translates into weakness in market leading currencies and strength in safe-haven currencies.

Additionally, I have to mention, the U.S. economy and in particular, the U.S. dollar plays a major role. There is another factor that plays a major role in the Forex Market’s volatility, namely:

Employment Friday

Employment Friday as its known in trading pits around the world is the day the U.S. government divulges its latest compilation of the previous month’s employment figures for the entire United States.  The two components of the report that traders are concerned with are Non-farm Payrolls (NFP) and the Unemployment Rate (%).

The numbers are heavily scrutinized and the reaction is potentially very large and often instantaneous.  All markets are impacted by the number from bonds, domestic and international, to exchange rates of countries like Denmark, South Africa and Norway, as well as international equity markets.

U.S. Currency – The Benchmark

You may be wondering: Why in a global market the data from one country moves the market the most?  When the fact of the matter is that the U.S. dollar is the benchmark currency.  This fact is known and accepted as fact on dealing desks all around the world from London, Frankfurt, Dubai, Hong Kong, Tokyo, New Zealand to Sydney and elsewhere.  For that reason traders around the world are very much attuned to the Benchmark nation’s state of affairs with regard to economic data, political developments and various market moving tidbits.

Naturally of course due to information networks and globalization all of the nations of the world are interrelated to one degree or another indefinitely, therefore it is important for others to look to the leading and major contributing economies for clues as to how things are likely to play out in their own respective nations and currency.

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1. Keep Trading Logs

Keeping a brief but concise record of your thoughts at the time of making a trade is one of the most invaluable practices a trader can take on. Doing this will help traders in a many ways:

• The same mistakes that were made in the past are less likely to occur simply because you have documented the event and it will be recalled with ease, and you’ll be in better position to analyze the reiterative flows in your strategy and or thought process for the same reason.
• Good record keeping is synonymous with positive performance in most every task
• Positive reinforcement of favorable habits will emerge with frequent repetition.

Attaching a chart to the comments in a .doc file or spreadsheet will further in your development as a profitable trader.

2. Build Your Account Equity

The key to increasing the size of your account in regular intervals really lies on just one primary factor – consistency.

You need to practice all of the profitable techniques on a consistent basis. This can be difficult for a few reasons:

• The fluctuations in the account can deceive you when in fact they are completely normal and what can be expected when interacting with a spurious variable such as the FX market. This may cause a trader to change from a profitable technique to an unprofitable one creating unnecessary losses.
• Bad habits will arise in place of the good ones – and they may be hard if not impossible to overcome later.
• Factors influencing the trader outside of the market can be damaging unless a sound basis in the fundamentals of trading profitably are firmly in place.

Dispelling Myths

Many of the impedances between traders and profitability come from the traders own actions. Accepting that as fact is 99% of trading profitably. Humility will help bring this to light, and must be practiced at all times.

Novice traders who experience some success in most cases begin to think that they can do no wrong – if they buy they market will go up – if they sell the market will go down. This misnomer will lead to future losses almost certainly. The market teaches ‘tough love’ and you must be humble to it at all times – both in times of rising equity and falling.

You must except that errors are made so that they can be corrected, and profitability is given a chance to come to fruition.

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The candle itself represents a period of time. For example, a daily candle chart will show you the open, high, low and close of that day’s trading range. The top of the candle represents the highest price of the period or the maximum power of the buyers. The bottom of the candle represents the lowest price of the period or the maximum power of the sellers that day. However, every time frame can be used from monthly down to 1 minute. This fact makes them very useful for pattern traders and identifying valid levels of support and resistance.

Candles:

• Illustrate the price range for any given period
• Create patterns making the inclination of the market clearer

The creators of the method consider highs and lows relatively insignificant professing these levels represent the height of panic trading. Rather, they focus on the relationship between opening and closing prices or as they call it the real body of the candle. Often, these candlestick patterns may include several candles in a specific sequence.

The advantages of the candlestick charting:

• Allow traders to visualize the substantial pricing of that period allowing you to focus on certain aspects of the period’s price action.
• Help traders pinpoint key levels of S/R

The most important thing to know when considering the meaning of a candlestick formation is that it can be interpreted differently depending on where it appears and what type price action preceded it. In some instances a candle may indicate the complete opposite of what the exact same formation indicated previously in that same day. Clearly it is important to know how to differentiate.

Below is the most common candle you will encounter trading FX.

The Doji Cross (Doji)

The Japanese word translated in Latin based languages means “a sudden danger”. A perfect Doji has the same closing price as the opening. However, like any other chart formation, there is some flexibility involved. One to five ticks difference between the open and close is acceptable, depending on the time frame and range. On shorter time frames 1-5 ticks and on larger time frames as much as 5 or even 10 on a very large time scale. Just keep in mind that the larger the scale the larger the difference is acceptable.

The Doji is one of the more dynamic formations in that it can appear in many places on your chart but mean something different entirely depending on that location. For example, when found after a large move it indicates a reversal may be looming. Conversely, when one appears after a period of consolidation, or sideways trading, it demonstrates that a large forceful move may be coming soon.

Doji Candlesticks in review…

1. Doji has the same closing price as the opening
2. Demonstrate that a large forceful move may be coming soon
3. When found after a large move it indicates a reversal may be looming

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