Now let’s get started on the main business.

Currencies are traded in pairs. The major pairs are USD/CHF, GBP/USD, USD/JPY and EUR/USD. Other pairs are USD/CAD, GBP/JPY, AUD/JPY, CAD/JPY and NZD/USD

Types of Order

Market Order: This is an order to sell or buy a particular currency at the prevailing market price.
Stop loss order: This is an order you give the trade station to exit the trade if the trend is against you by a certain number of pips.
Take profit: This is the price at which you want to exit if the trend is in your favour by a certain number of pips.
Buy stop order: This is an order to buy a particular currency pair if it rises to a certain level. For instance, if the current price of USD/JPY is 101.99, an order to buy this pair at 102.22 is a buy stop order. A trader will only place this kind of order if he believes the currency will rise further.
Sell stop order: This is an order to sell a currency pair if the price drops to a certain price believing it will drop further. For instance, if the current price of USD/JPY is 101.99, an order to sell the pair at 101.05 is a sell stop order.
Buy limit order: This is an order to buy a currency pair if it falls to a certain level. For instance if the current price of USD/JPY is 101.99, an order to buy the pair at 101.05 is a buy limit order.
Sell limit order: This is an order to sell a currency pair if the price rises to a certain level. For instance, if the current price of USD/JPY is 101.99, an order to sell the pair at 102.22 is a sell limit order.
(I have decided to use the same currency pair in the example so that you can have a better understanding.)

Other terms used in Forex Trading:

Leverage
This is a worked out ratio which a trader receives to increase his purchasing power. For example 400:1, 200:1, and 100:1 etc. A leverage of 100:1 means for every $1 you have, you are allowed to trade as if you have $100.


Position
This refers to the action you are taking in the market either buying or selling. A LONG position is a buying position while a SHORT position is a selling position.
Lot Size
This is otherwise called volume. It is the unit of trading currency. For instance a Standard account is worth $100,000 while a mini account is worth $10,000.
Margin
This is the amount of money a trader needs to hold a position in the market.
Pip
This is the acronym of price index point. It is the last decimal number in a currency quote. For instance in 124.58, 8 is the pip. Some currency quotes are to 4 decimal places like 1.5529, here 9 is the pip.
Trend
Trend refers to the direction of the market. An uptrend means the market is shooting up while a downtrend means the market is going southwards, while consolidation means the market is indecisive.
Bulls and Bears
The bulls are the buyers while the bears are the sellers. Therefore when the market is said to be bullish, it means there are more buyers than sellers or that buyers are forcing the price upwards and when the market is bearish, it means there are more sellers than buyers or sellers are forcing the price downwards.

In subsequent write ups, we shall be looking at how money is made in Forex trading as well as Technical and Fundamental analysis.
Have a swell time!

Advantages of Trading Forex

The following are some of the advantages of Forex Trading over other forms of Currency Trading;

. Speed of execution
The speed of execution is within the twinkling of an eye. Usually less than 8 seconds, depending on your internet connection.

. High liquidity
The daily turnover is in excess of $US 1.9 trillion, so much money is available to go round.

. Available for 24 hours round the clock on week days
The market runs non-stop from 22:00 HRS GMT on Sunday to 20:00 HRS GMT on Friday. So you choose when to trade. Absolute liberty you may say.

. No commissions
You don’t pay any commission for trades placed. Rather, the trade stations make money from the spread i.e. difference between bid and ask price.

. Market transparency
There are no shady transactions. You choose which currency pair to buy, no middleman involved! No Stockbroker.

. Two way profitability
Irrespective of the trend of the market, either an uptrend or a downtrend, you make money depending on the position you take.

. High leverage
The leverage available in Forex trading enables you to trade high volumes with a little amount of money. For instance a mini Forex account is worth $10,000 but leverage allows you to trade this account with as low as $100!

. Market Orders
This allows you to set where you want to take your profit. You can do this and just walk away from your computer.


Myths About Forex Trading

I will like to disprove the following myths about Forex trading:

1. Forex is a Get Rich Quick Scheme

Forex is not a get-rich-quick thing. As a matter of fact, it is like every other business that has to be built over time. Many people start trading with the notion that they want to turn $500 to $50,000 overnight. This kind of mindset can result in huge losses because you will use unnecessarily high leverage. (We will dwell on this much later)

2. Forex cannot be traded by everybody

This is far from the truth. Forex market is open to all willing traders irrespective of race or country.


3. Forex trading requires huge capital

This is another lie. As a matter of fact, some brokers allow you to start trading micro accounts with as low as $US 100. Even if your broker allows you to trade with this amount, I will not advise you go that low. At least $US 500 will be okay to get started. Remember you are trading to make money not to lose it.

Let’s start by introducing what Forex trading is all about

What is FOREX?

Like you must have known, Forex is the acronym of Foreign Exchange. It is a global market where currency pairs are traded. The beauty of Forex trading is that it is internet based and could be done by any interested individual. Some of the currencies traded are:

USD (United States Dollar)

GBP (Great British Pound)

EUR (Euro)

JPY (Japanese Yen)

CAD (Canadian Dollar)

CHF (Swiss Franc)

AUD (Australian Dollar)

NZD (New Zealand Dollar)

These currencies are traded in pairs, as you shall learn later.

Basically, we shall not dwell too much on the introduction, but we shall be discussing various strategies which can help you tremendously in your currency trading business. I might assume that you know a lot of the basics; like the definition which I just gave above but I will try to introduce the subject properly before we go into the main thing.

To start with, we shall be talking about how to get started.

GETTING STARTED.

Now that you have made up your mind on currency trading, here are a few points to get you started.

1. Get training
2. Get a computer
3. Internet connection.

You will have some of the needed training here, so once you get your computer and internet connection you can get started immediately.

I will STRONGLY advise you demo trade for a couple of weeks before you fund your real account. This is very important to give you confidence in whatever strategy you want to employ in your trade. The demo platform works exactly like the real money mode, so you have nothing to worry about.

FUNDING OPTIONS

There are different funding options available depending on which broker you want to use. As a matter of fact, most brokers have more than one funding option. So find out with your broker. Some of those available funding options include;

Bank Wire

Moneybookers

Credit Card

Egold

Webmoney

Liberty Reserve

Pecunix

E-bullion

All you need do is find out which of these payment options they accept.

CHOOSING A BROKER

Before you choose a broker, I will advise you check the brokers review there you will be able to read peoples opinion about their brokers and learn from their experiences. This will enable you, to a large extent, to make an informed decision.

So to get started, let’s summarize what you have to do in these few words:

(i) Get Training

(ii) Get a computer with internet connection

(iii) Register with any broker of your choice and open a demo account. (Note that the money here is toy money and all trades placed and money made is virtual money. The essence is just to give you confidence and test your strategy before you fund your account with real money)

(iv) Once you are confident, go live. Fund your account with real money and please stick with your strategy. This is very important!!!

Let's start by introducing what Forex Trading is all about