2Bull Forex Blog

Do not fail before you even start trading foreign currency by making the mistake most rookies make.

It has now been over a year and a half since I stumbled across Foreign Exchange trading while surfing the internet. I have spent a great deal of time and money trying all kinds of different programs and courses. I love learning new things, and for the most part this has been a wonderful experience. I now enjoy getting other people successfully started in the world of FX trading.

Do not go through what nearly caused me to quit. I was trying to find legitimate trading courses, mentors and/or programs but continually got sucked in by fakes. The internet, as I am sure most of you are aware, is swarming with individual marketers who are making money off of this huge FX market selling materials that are absolutely useless.

I was very unaware of the number of fakes online, but I now know that finding legitimate material on a topic of interest on the internet is more difficult than I ever imagined.

My advice is do not buy an expensive ebook based program as it was likely thrown together in a few hours and it costs the marketer nothing to send to you. You won’t know how good it is until you have paid for it - too risky! Do not buy a system that promises quick and easy profit making as nothing is quick and easy when learning how to become a successful fx trader.

Do not give your money to a marketer who does not offer mentoring (a good mentor gives daily audio/visual reports on the markets and this is a must!). Don’t buy anything from someone claiming to have made millions trading when they are trying to make their first million selling crap to you!

Do not buy something that is not dynamic and changing with the ever changing markets.

Consider purchasing a system that offers the following:
daily advice and can show you previous samples of his advice; has a proven track record of happy customers; will check out as legitimate on forex forums where real traders know their stuff; who sends you manuals, computer disks and dvd material that are actually real and cost him money to produce; who offers free materials to give you an idea of what he can offer if you purchase his system; who has a dynamic website (not just a sales page) full of resources and finally; one who will truly teach you how to become a successful trader!

I went to legitimate forums and asked around - rather than reading reviews etc. which are often created by the marketers themselves! You too need to find someone who truly knows what they are talking about and who actually trades rather than spending all their time marketing themselves.

And I must say, once you get great mentoring and then get a taste of making money by sitting in front of your computer monitor, there is no turning back, but if you fail before you begin by purchasing poor learning materials, you may never experience this thrill and that would be a real shame.

With fx trading you need a mentor to teach you. You cannot just do what you think will work or what is recommended by non traders who market themselves and their materials as legitimate - you must learn techniques that really work. Trading is both a science and an art, so practice is very valuable before you start to trade for real. Start with a demo account until you learn the techniques taught in the system you purchase, and then go to a mini account (designed for beginners or those who want to do smaller, yet real, trades) before going into a regular account. As a result are far less likely to do what most beginners do which is say goodbye to their initial investment! I not only kept mine, but now make good money trading.

When the day arrives, that you open a real account and start trading you will be glad you found a legitimate fx trader as a mentor and because you did your homework and practiced proven techniques with the demo accounts, the transition to a real account will be easier with the hardest part being to learn not to shake in your shoes as you enter into this exciting arena along side some of the wealthiest people in the world. Keeping calm takes awhile and then you come to the realization that you too are on your way to making more money than they ever imagined!

I am confident that if you do your own careful research you will ultimately find a great mentor and will be on your way to successful trading. By the way, I sadly reviewed an ebook trading system that cost over $700 (US funds)a lot more than a great mentor charges for a complete system plus months of daily reviews and almost endless teaching materials. What a shame these frauds are out there! be careful and enjoy learning to trade the fx markets.

What forex day trading signals do you use to enter and exit the market?

How do you know that they are not going to give you a false entry signal?

How can you use these signals to exit your trade?

Let’s look at Fibonacci first of all. This 750 year old “natural order” of numbers reflects the birth of rabbits in a field, the number of rinds on a pineapple, the sequence of sunflower seeds. So how do we apply it to forex trading?

First of all we need to understand that Fibonacci is a commonly traded forex day trading signals indicator. The ratio given by the Fibonacci numbers are converted into a percentage. The Fibonacci sequence of numbers is 1,1,2,3,5,8,13,21,34,55,133,222 etc. adding the left number to get the next number in the sequence. When we apply Fibonacci to our charts, we take a particular market move of say 50-100 points and plot the Fibonacci ratio levels.

This brings out levels of potential support and resistance on to our charts. The top of the move is considered “0%” of the move and the start of the move is considered as “100%”. We then have Fibonacci “retracement” levels at 23.6%, 38.2%, 50% and 68.1%. These “retracement zones” can give us forex day trading signals.

If the price has moved down say 70 pips and then retraces we can say that the strongest Fibonacci point of resistance is at 23.6% and if the price is going to stop and reverse back to the original direction after the correction. If we break the 23.6%, then the 38.2% is the next strongest resistance level then the 50%. If we hit the 23.6% resistance line and the price “bounces” back downwards, we can start thinking about whether this was just a correction - a Fibonacci retracement.

It is not enough just to know the price has hit the line of resistance and bounced back though. We should also try to get an indication that the strength and momentum of the market is also in favour with our theory. For this, we could have a slow stochastic oscillator, a MACD and a RSI just as an example to give us an indication of the weight of our reentry into the trade or late entry based on the retracement idea.

You would be surprised at how accurate the Fibonacci method of trading is in terms of how history repeats itself again and again in the forex market. It is very tempting to exit a trade when the price turns the other way, however it is worth utilising Fibonacci to ensure it is not a minor (23.6%) retracement and allowing the trade to run it’s full course.

When trading forex, what is the best time to trade?
There is a simple answer to this. But first, we need to ask the question: what is the financial captial of the world in terms of forex? The answer to that question is that London, England is the financial capital of the world.

This is a common mistake people make. They think that because the US is the stock market and economic capital of the world, so it is with forex. Not so. That is why there is a higher concentration of American banks with trading floors in London than anywhere else in the world.

What it also means, to the trader is that it is far more likely you will see moves worthy of your attention during UK business hours than at any other time in the day. These times are approximately 8 am to 6 pm UK time give or take 1 hour on either side.

Strictly speaking, the UK business hours are 9-5 GMT (sometimes plus or minus one hour due to the UK clock changes twice per year).

Of course, one of the attractive things about forex is that it is a 24 hour market. Starting at sunrise in Australia and going round the world, “the forex never sleeps”

You can place a trade at any time. But the best time to trade is during UK business hours. Period. Obviously, newstime is very important and this tends to be around the start of the US open generally speaking (that’s not the golf tournament - it means when the US trading hours begin at 8a.m. EST).

It’s nearly impossible for economists and commentators to predict newstime annnouncements, and also, whilst generally speaking, the more market moving, US announcements are not always the only announcements in the day.

So, it can be best to be out of trading during the particularly important announcements. This means there are 2 times to trade in a day recommended by this article - in the UK morning before the US news. And after the US news.

Of course the US day finishes after the UK day, and this will be marked by a slowing down of volume and movement after the close of the UK session normally.

Forex is an exciting, interesting field of study. We have touched times to trade and the idea of fundamentals being important too in this article. The missing ingredient is technical analysis. It’s great to be able to know the major announcements, when, what, why and where.

But it is also useful to be able to apply mathematical analysis to the current market, sometimes based on what has happened before. Luckily, traders have gone before us who provide the neccessary “formulas” and it’s not so much a case of needing ot be a mathematical genius as to learn how to use the indicators for your technical system

Basic analysis such as working out the trend in the short, medium and long terms and levels for retracement and correction are all important in the author’s opinion. Such analysis is outside the scope of this article.

In forex, for the retail investor, things are totally different than the banks and institutions who trade with each other 24 hours per day on a daily basis and in the millions with actual transactions occuring (usually 2-3 days later also known as the Spot Value).

Investment banks will take out a credit check on each other, a bit like when a person applies for a mortgage. Whilst currency trades are placed and completed real-time either by computerised system or telephone, the actual transfer of funds happens a couple of days later.

However, with the retail forex trader, usually, the trade is only placed in the brokers books and no real transfer of funds occurs, although the retail investor is in effect trading with the banks at almost the same quotes and with a very similar spread these days.

So who is the forex broker and what is their relevence in the answer to this forex topic? The retail investor places their trades through the environment of the margin broker. Trades are placed in real time and via a trader who receives the order from the investor, either buy (long), sell (short) or close position.

The broker not only allows retail investors to trade forex live with the banks, but also provides a system of leverage. This means that the broker only requires a deposit to represent the amount of currency a person wants to control, so long as the deposit is enough to cover any losses that might be incurred by the trade.

Take for example a margin leverage of 100:1 given to you by the broker. This means to control $100,000 of real currency (1 lot), you need to provide security to the broker of only $1000. Each ‘pip’ movement in price will cause your equity to increase or decrease by $10. For example if the currency pair you are trading is GBP/USD (also known as cable) and the price you are quoted is 1.8484, this means 1 UK pound sterling is equal to 1.8484 US dollars.

So, if you are controlling 100,000 units of currency (or you have placed a buy/sell forex trade of ‘1 lot’)in the above case, each time the price changed by 1 pip - ie. 1.8484 changes to 1.8485 - you gain or lose $10 US. This is because 0.0001 x 100,000 = 10 and you have opted to control 100,000 units of currency.

The amazing thing though is that you as a retail trader have only used a security measure of $1000 deposited with the broker in your brokering account and the only cost for placing the trade is a small spread (no comission in many cases) of say 2-3 pips in which the broker makes his profit regardless of whether your trade is successful or not. And the chances of you losing that entire $1000 in the trade are extremely slim, especially if you use risk management and safeguard your capital from losses by setting a “stop loss” - a topic out of the scope of this article.

So what about mini-forex trading. It’s a subject which many people seem to want to know about. What is a mini-forex trading account? What is mini forex trading? Mini Forex trading is quite simple to explain given the above information. In light of the information that is told to you above about retail forex trading in general, the use of a mini-account is exactly that!

Rather than trading 1 whole lot each time (ie controlling 100,000 units of currency using only 1000 units of security or deposit to trade for a profit of about $10 per pip depending on the forex currency pair you and trading) you can use a mini-account (sometimes this is entirely indistinguishable from a standard lots account) to trade a fraction of a lot. This could technically be as little as 0.1 lot (ie $1 profit per pip) or half a lot - $5 profit per pip etc.
This is the authors understanding of mini-forex-trading.

In conclusion then, mini forex trading is explained away by understanding what a ‘lot’ is in forex. Once you understand that forex is traded in ‘lots’ and what ‘1 lot’ means to the investment banker/forex trader in the bank and to the retail investor using margin leverage provided by a broker, you can understand that mini-forex trading is forex trading on a mini-scale. Instead of trading in lots or multiples of lots (more than one) the retail investor uses a smaller deposit with the broker and trades for less profit, but less risk as well and not needing so much profit to start out with, eg 0.1 lots or 0.5 lots. Some forex brokers these days will allow currency trading with a deposit of as little as $500 into a customers account.