Beginner Forex Articles

The participants of the Forex Market
How to detect Forex Broker Scams
Forex Glossary
Forex Broker Safety
How to profit from a Falling Dollar
How the news moves the Forex Market
The participants of the Forex Market

Historical Data Articles

How to analyse forex price data
Historical Price Data

Backtesting Articles

Forex Backtesting Rules
All about Forex Backtesting

Other Articles

Trading Software
The truth about managed forex accounts
Spreadsheet showing smoothing approaches

My aim here is to save you some money. You may be tempted to
purchase an expensive currency trading training course. There is no
need, the content at fxtradingguide.com is high quality and is FREE!
We also help you to avoid the scams too.

Forex for Beginners

Why Trade Forex?
Forex Market Overview
Forex Trading Basics
Learning to Trade
What are Trends?
Trading Mindset
Trading Mindset 2
Trading Mindset 3

Forex Trading System Training

Trading System introduction
Build your own forex system
Building a complete System
Price Movements in Trading Systems
Risk Management
Trading Rules

These Forex training tutorials should help you get started with
your trading. As mentioned in many of these tutorials, it is strongly
recommended that you begin your trading on a demo account before
going live. Mistakes are inevitable when first starting, all
experienced traders made them at first.

Currency Futures trading involves the buying or selling of foreign exchange futures. Futures are contracts that have a date of expiry. Contracts are priced based on their current value at the specified date in the future. The pricing of FX futures is based on the interest rate differentials of the currency pair.

For example, Great Britain currently has a benchmark interest rate of 5.25% and the United States have a benchmark rate of 2.25%. Because of this interest rate differential, the longer the expiry the cheaper the contract. For retail spot forex traders, this difference in prices is similar to the “swap” you would earn for an open position.

At the time of writing these are the prices for GBP/USD (British Pound) Futures.

September ‘08 1.9774
December ‘08 1.9619
March ‘09 1.9489
June ‘09 1.9370
September ‘09 1.9251

As you can see, the further out the contract, the cheaper the price. If the British benchmark interest rate was lower than the United States, then the prices would get more expensive for longer contracts.

Futures contracts are traded in set sizes. The British Pound standard contract is for 62,500 GBP. They all have margin requirements. The currently margin requirement for a a 62,500 GBP British Pound futures contract are:

$2,700 initial margin
$2,000 maintenance margin

The initial margin is the amount of margin you must put up to open the contract and maintenance margin is the amount of margin required to keep the position open. Self explanatory really.

Day Trade Forex Futures

It is possible to day trade fx futures, but in many cases the spot forex market has many advantages for day trading currencies such as lower margin requirements and more flexible position sizes. The spot market is also more liquid.

Forex Futures Trading is traded on margin and can be very risky. Unlike retail spot forex brokers, losses in excess of your initial deposit can occur. This will usually result in a call from your broker asking for more margin. It is imperative that you fully understand the risks involved with currency futures trading before trading.

Foreign Currency Options

Foreign Currency Options are contracts that allow the currency speculator or hedge the opportunity to reduce their risks. A Foreign Currency Option is like a currency Future, except the trader has the option whether or not they want the contract on expiry. If the contract ended negative, clearly the trader would not want it. An options contract has a premium. The maximum loss when buying options contracts is limited to the premium.

Currency Call Option

A currency call option is when you are going long on a currency pair. You can buy or sell a currency call option. If you buy a currency call option, your maximum loss is the premium. If you sell the currency option, you take the other side of the contract, so the maximum profit is the premium, but the maximum losses is potentially unlimited.

Currency Put Option

A currency put option is when you are going short on a currency pair. Like call options traders can buy or sell put options.

Strike Price

The strike price is essentially the entry price. With Options you can select your own strike price. For example if the GBP/USD spot was at $1.98, you could buy a call option at $2. At expiry of the contract, your entry would be $2. Due to the fact that in this example the strike price is 200 away from the current spot price, the premium would reflect this difference. If a price lower than the spot price was selected, the premium would reflect this and be higher.

At the money

An at the money option is where the price of the contract is equal to the strike price

Out of the Money

An out of the money option is where the contract price is before the strike price. For example if a british pound call option strike price was $2 and the contract price was $1.98, the contract would be out of the money.

In the money

In the money is the opposite of out of the money. It is where the contract would have a value if the contract was closed at this point in time.

Option Pricing

The are many factors that go into making the price of an option. Most commonly the main factors are the length of time to expiry, the expected volatility in the period and how far in or out of the money the strike price is.

Forex Options Strategies

There are literally hundreds, possibly thousands of strategies that options traders use. Some of them are extremely complex. I will just introduce a few of the basic ones here:

Long Strangle

The long strange is where a call option and a put option are bought at the same time. This strategy can be used when you expect price action to be extremely volatile, but are unsure in which direction it will move. It allows the trader to potentially profit regardless of the direction the market moves. This is where a call and a put option are simultaneously bought. The most the trader can lose in this instance is the cost of the two premiums.
Bear Call Spread
A bear call spread is entered by buying call options at a at a specific strike price and selling the same number of options at a lower strike price. The same currency and same date of expiration must be used. This strategy has both a limited loss and a limited profit.
Forex Options Brokers

Forex Options and futures Brokers

Optionsxpress.com – this broker offers both currency options and futures contracts
Saxobank.com – This broker offers most intruments including stocks, spot forex, futures, options and CFDs

These are brokers I have personally tried and had a good experience with. They are by no means personal recommendations by fxtradingguide.com.

Conclusion

In conclusion trading online fx options involves risk. A good understanding is critical to success. Options can be a good way to trade currencies where the risk is limited regardless of how much the market moves against you.

I have compiled some free forex historical data for you to see how currencies have move in the past. Some of these charts go all the way back to 1978. As you can see below historical forex prices have been highly volatile.

EUR/USD (Fiber) Historical Chart

The Euro was first traded in 1998. Against the Dollar the euro depreciated considerably for the first couple of years then began a long upward trend and this trend is still continuing today. The all time high currently stands at 1.5904. This high could be broken in the future. The all time low back in 2000 was 0.8227.

GBP/USD Historical Chart

The historical exchange rates for GBP/USD (also known as Cable) have often moved with the euro since it’s inception. We have to go back a long long way to find the all time high, in fact all the way to 1980. The high was 2.4540. The pair has not been anywhere near there since. The all time low was in 1985 where it briefly hit 1.0463.

USD/JPY Historical Chart

This forex historical chart shows how the yen has appreciated against the US Dollar considerably in the 1980’s and early 1990’s and has stayed relatively range bound since, never getting anywhere near the all time high of 278.30 back in 1981. The all time low was in 1995 at 79.74.

USD/CHF Historical Chart

The highest historical rate for this pair is 2.9145 which was hit in 1985. The all time low is 1.11 which was hit in 1995. Historically the Swiss Franc has been a safe haven, especially in times of crisis. This pair is also known as “Swissy”.

GBP/JPY Historical Chart

I included this pair as it seems to be a popular carry trade amongst retail traders. The highest historical forex rate for this pair is 572.06, back in 1980. The lowest historical rate is 129.32, back in 1995.

Historical Gold Chart

I included this historical gold chart as gold is highly related to currencies.

I hope you find this historical forex data useful.

Automated FX trading may seem highly appealing. The thought of just having an automated strategy consistently making you excellent returns on your money does sound fantastic. However, This is usually not the case in practice.

Automated Forex Trading Software

The most commonly used automatic trading program is metatrader 4. This software is offered by many currency trading brokerages as their main platform. It is a very user friendly and easy to use trading platform. The platform provides indepth charts, comprehensive technical analysis tools (including, trend lines, fibonacci retracement lines, techincal indicators, candlestick patterns etc) MetaTrader 4 can be downloaded free at http://www.metaquotes.net/

Forex Expert Advisors

Forex Expert advisors are automated scripts designed to run on the Metatrader 4 platform. The script contains a pre-defined FX strategy. The entries and exits for these strategies can be be based on a number of factors such as moving average crossovers, indicator readings, defined support/resistance points being broken etc. If you wish to make a custom metatrader 4 expert advisor, you will need to have some programming knowledge. However, if you don’t, it’s not a problem, but you will have to find a programmer to code it for you.

Automated Forex Trading Systems

Fozzy EA – This is great free expert advisor for the fozzy script. It is an RSI crossover strategy best used on the daily chart. There is a comprehensive ebook on the fozzy strategy avaliable for download here.
Hans 123 – This is an automated day trading system. The full instructions are included in the zip file.

More strategies will be added in the future.

Conclusion

Online Automated Trading has many possibilities, but the truth is there are a very large number of these Expert Advisor scripts available for free download. The reality most of them will be negative at the end of the year. It is a essential to try an automated trading system on a demo account for a considerable amount of time before trying it live. It is also essential to have a reliable internet connection and PC. How annoying would it be if you missed out on a trade because your internet connection died? Most forms of automated forex trading have the scripts on your PC rather than on the server side.

A final tip is to never buy an automated forex trading system. There are many clever marketers out there making unrealistic claims about how good their automated system is. If it was so good, they would be using it to make money, instead of spending their time and efforts on clever marketing!

In this section I have tried to put together a group of FX Trading Strategies for you to try. Most of these free forex trading systems can be used on any size of trading account including micro, mini and standard.

Proven Forex Trading Strategies

They have been tried either by myself or by my trading friends and they have shown to be winning forex strategies. However, as with any forex trading strategy, excellent risk management must be used at all times.

Choosing a Forex strategy

When choosing a currency trading strategy , it is important to select one that best suits your needs. It would be no use using a strategy that required you to watch the market during the whole of the London session if you had a day job. The strategies below are all easy forex strategies to follow. You can of course modify them if you feel you can improve on them.

Forex Scalping System

This is an easy little strategy to follow. It involves pinpointing major support and resistance point. You can use fibonacci retracements for these. Then when price hits a major support point, go long. Whenever it hits a major resistance point, go short. Tight stops must be used as well as small take profits. This allows the trader to capitalize on the “bounce”. There is usually at least a small bounce at major support and resistance points. It would be a good a idea to use a broker with a small spread for this strategy so the spreads don’t eat into your profits too much. This is a good forex strategy with a lot of potential, but be sure to try it on a demo account first.

Forex Hedging Strategy

A popular FX hedging strategy is to buy GBP/JPY and to simultaneously sell CHF/JPY. The goal is to profit from the interest rate differentials as well as the price movements. Currently a long GBP/JPY earns considerable swap interest due to the large difference between rates. You have to pay interest on the short CHF/JPY, but it’s considerably less than on the long GBP/JPY position. Typically a good ratio to use is 1.8 lots for the short CHF/JPY to every 1 lot of GBP/JPY. However, different amounts can be used.

It’s a good idea to leave enough margin in your account to weather at least a 1,000 pip swing against you.

This strategy does involve considerable risk because the currency pair CHF/JPY is not guaranteed to go in the opposite direction to GBP/JPY. However, it could be a lower risk method of taking part in the popular carry trade. This is potentially a very effective forex trading strategy.

Forex Arbitrage System

A clear arbitrage exists between mainstream currency trading brokers and spread betting forex brokers. The arbitrage situation exists because with spread betting you have the option to have your pips priced in different currencies. For example you could have a long gbp/usd position so that the pips are priced at £5 per point. To hedge we could use a short GBP/USD position with a normal forex broker, using 1 standard lot.

We will assume the starting price is $2.
If price moved up to $2.20. The short position would be $-20,000. The long would be £10,000. The net profit would be the £10,000 - $20,000 (£9090). A net profit of £910.

If price moved down to $1.80. The short position would be $20,000. The short would be £10,000. So profit would be $20,000 (£11,111) - £10,000, which would be a profit of £1,111.

So no matter which way price moves, the arbitrage situation works. The reason it works is because of the conversion from dollars back to sterling is at different rates to due to price movement. In theory this is a risk free forex trading system. This may seem like an advanced forex trading system, but once you master the understanding of it, it’s really quite easy. Out of all the online forex trading systems, this could actually be the lowest risk!

5/8 Moving Average Strategy

This is a nice simple forex trading strategy. It involves waiting for the 5 EMA to crossover the 8 EMA. A chart below demonstrates this occurrence.

The stop loss and take profit points are discretionary, but should be at major support and resistance points. Personally, I use fibonacci retracement points and trend lines. Pivot points can also be used. It’s important to always ensure your risk/reward ratio exceeds 1:1.

Profitable Forex Trading strategy

As mentioned above, risk management is very important with any currency trading system. Another thing that is also very important is the ability to stuck to the strategy 100%. It is easy especially at first to feel like you must “be in the market” or feel like you are missing out. It is important that this kind of impulsive behavior is avoided at all costs. If you are not confident you can avoid, it would probably be best to practice on a demo account for the time being until you feel you have masted it.

Currency Trading Strategies

In conclusion, there are so many potential currency trading strategies out there to use choose from. All you can do is choose one that most appeals to you. I would avoid paying money for a “Perfect Currency Trading System” or such like as the chances are it till be a scam. You would be better putting that money into funding your trading account.

I have put together a collection of free forex ebooks that I believe new traders will find useful.

All of these Forex E-Books are in PDF format. This is adobe Acrobat. You will need the Adobe Acrobat reader to view them. This can be downloaded free of charge at the adobe website. If you are the owner of any of these ebooks and you wish them to be removed from this website, please get in touch.

Forex Training Ebooks

Forex Power Trading Course – This is a comprehensive forex training ebook, going into a lot of detail about all aspects of the forex market. It is actually one of the best forex ebooks I have come across.

80 Trading strategies – This online forex trading ebook is actually more of a list of tips than a list of strategies. There are some very useful tips when it comes to risk management and trading in general.

Law of charts – This is an ebook on forex charts. It is an ideal way for the new trader to learn more about how to read forex charts.

Introduction to Forex - This training ebook provides an excellent introduction to forex trading with good information on many topics including risk management, how to interpret economic calenders and fundamental analysis. This is a good read as many new trader avoid fundamental analysis and concentrate on technical analysis.

Forex Strategy Ebook

Fozzy Strategy - This free forex ebook looks at the Fozzy Strategy. It is a simple strategy invented by a chap called “Fozzy” on the forex factory forex. It involves RSI crossovers and bolinger bands. It’s an ideal strategy to start with.

Traders Trick Entry – This ebook looks at how to get better entries on your trades giving them a better chance of being winners as apposed to losers.
A Practical Guide to Technical Indicators; Moving Averages - A great ebook looking at technical indicators and moving averages.

That’s all for now. I hope you find these currency trading ebooks helpful. I will add more if I can find any more good ones. If you have an good forex ebook and would like it to appear at fxtradingguide.com please get in touch

I have put together a list of forex trading brokers that I believe to be reliable, honest and reputable. However, no broker is perfect.

Forex Brokers in Switzerland

Dukascopy – This Swiss Forex Broker has been around since 2004. The minimum account size is high at $50,000. There is no MT4 platform

Swissnetbroker - This Swiss Broker opened in 2005. The minimum account size is much lower than Dukascopy at just $200. They also offer ECN services.

UK Forex Brokers

Forex brokers in the UK are heavily regulated by the financial services authority, potentially making them safer than many brokers.

GNITouch – Now owned by Man Financial, a FTSE 100 company. Minimum account size is 4,000 GBP.

Alpari (UK) – Established in 2004 and offers the Metatrader 4 platform

USA Forex Brokers

In recent years many US Forex Brokers have gone bankrupt, remember Refco? I think to give yourself the best chance, it’s important to choose a large broker that is profitable.

FXCM – This is perhaps the largest forex broker in the USA at retail level. They offer their own trading platform, but claim they will offer an MT4 Platform in the near future.

CMSForex – This broker was established in 1999. They do not currently offer an MT4 platform, but the platform they use is easy to use.

Web Based Currency Trading

Oanda - Oanda is a reputable broker that has a good web based trading platform. They also have very low spreads

As you can see from the list below, Warren Buffet is currently the richest man in the world. Warren buffet has obtained his wealth through many successful investments over a period of more than 40 years. Slim Helu is second, he obtained his fortune partly through inheritence and partly through telecoms business. Number 3 is Bill Gates, founder of the Microsoft Corporation. I think we all know who microsoft are

Warren Buffett $62 billion
Slim Helú $60 billion
Bill Gates $58 billion
Lakshmi Mittal $45 billion
Mukesh Ambani $43 billion
Anil Ambani $42 billion
Kamprad, Ingvar $31 billion
Kushal Pal Singh $30 billion
Oleg Deripaska $28 billion
Karl Albrecht $27 billion

When it comes to Forex trading, it shows that eevn relatively conservative returns can earn big in the long term. Warren Buffet has averaged around 24% per year over more than 40 years and he is the richest man in the world. 24% per year is certainly achievable for many experienced forex traders.

There are many currency books but here I have selected three that every trader should have in their library of books. If you are seasoned pro or novice trader these books are great forex education.

1. Market Wizards (Jack Schwager)

Schwager interviews 17 trading legends including Richard Dennis, Paul Tudor Jones, Ed Seykota, Marty Schwartz, Tom Baldwin and others. The traders interviewed are not just traders their super traders. There methods may all be different but there is something to learn from all of them,

One of the top-selling trading books of all-time and with good reason - if you can’t learn from these guys then there really is no hope

2. What I Learned Losing a Million Dollars - (Jim Paul Brendan Moynihan)

This books focus is on losing and may seem an odd choice as essential reading but it is for this reason as it correctly states

There are many different ways to make money but only a few ways to lose it.

Part biography and part a lesson in money management - if you only thought money management was placing a stop you need this book.

One of the most unique trading books you will ever read.

It focuses on the fact that trading and investing are personal journeys; about finding out who you are, and then how to manage what you find and use this understanding to trade successfully.

The reason why most traders never make money is they don’t understand that success comes from within and that trading is all about self knowledge not the method they are using.

3. The Way of the Turtle - (Curtis Faith)

While visiting a turtle farm, legendary trader Richard Dennis had a bet with his big pal and trading partner - Bill Eckhardt that traders were not born - they could be taught.

To settle the bet, they recruited a group of individuals from all walks of life, gave them accounts to trade, and trained them for 14 days and nicknamed them the Turtles.

The Turtles proved Dennis right and earned more than $100 million in less than four years.
Here the most successful turtle Curtis Faith goes through the experiment in great depth offering his unique perspective on the experiment.

He explains why the Turtle Way works in today’s markets and how to apply it. He also shares his wisdom on taking risks, choosing your own path, and learning from your trading mistakes.

So there you have 3 currency trading books that are essential forex education.

Keep in mind:

Currency trading is relatively easy to learn in terms of method the real problem is getting the right mindset and all the above books will give you a unique insight into getting the right mindset to succeed in currency trading.

Treat yourself and get these 3 currency trading books and learn from true market pro’s.

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For a wealth of free forex education, currency trading course, free PDF’s and more on Best Currency Trading Books visit our website at: http://www.learncurrencytradingonline.com

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