2Bull Forex Blog

Foreign Exchange (or Forex) trading has grown in popularity in the last ten years. There are new traders entering the market every day, and the daily trading volume in this financial market is ever-increasing.

Unlike most other financial trading markets, currencies are not traded on their own, but rather in pairs. The trading of currency pairs have unfortunately confused many would-be traders and have discouraged them from learning more about currency trading.

What Is A Currency Pair?

Whenever we purchase a product, we pay money for it. This is also what happens in the stock and futures trading markets: we trade our money in exchange for a stock or for a futures contract. It’s not a difficult concept to grasp, right?

Now, in the currency market, things will get a little more complicated. You see this time, instead of trading money for goods you are trading money for money. So for example, if I wish to purchase 1 Euro, I would have to pay a certain amount of U.S. Dollars for it. If I wish to purchase 1 Pound, I also would have to pay a certain amount of U.S. Dollars for it.

For example, one stock of company A may cost US$20, so we have:

1 stock of ABC company = $20

In the same manner, one Euro may cost US$1.50:

1 Euro = 1.50 USD

This is known as a currency trading rate. For purposes of simplicity, this rate is often quoted as:

EUR/USD = 1.5000

This is essentially how most currency trading rates are expressed. The Euro is the Base Currency, as it is the currency that the U.S. Dollar is quoted against.

For the USD/JPY currency pair, the U.S. Dollar is the Base Currency. For the GBP/USD pair, the Base Currency is the Pound.

And that’s all there is to it. It’s easy to understand Currency trading rates when you know how, isn’t it?

Currency trading, also known as Forex trading, is rapidly gaining popularity in the world of Finance. This high leverage and 24 hour market provides attractive incentives for many retail traders to consider Forex trading over any other form of financial trading. Indeed, one can easily start an account with merely $200, which is impossible in most other capital markets.

A beginner retail trader is always advised to first start out by paper trading. This is another term for demo trading, where you make buying and selling decisions as though you are trading for real, except that you are trading with ‘fake’ or virtual money instead. The aim of demo trading is to allow the trader to familiarize him or herself with the ups and downs of the daily market price action. Demo trading is a great way to get your feet wet!

In this article, I will discuss 2 demo trading tips that you should know of, if you are considering to demo trade, or if you are currently demo trading.

Tip 1. Don’t be afraid to try different platforms

There are a large variety of demo trading platforms for you to choose from. Don’t be afraid to experiment with various different platforms to see which one you like the most. There is no single ‘best’ trading platform however, only one which caters to your needs. A platform that is suitable for one trader may be unsuitable for another.

Trading is a very personal activity, so you should always select a platform that you’re comfortable with.

Tip 2. Learn about the broker you’re working with

The reason why you can easily set up a demo account is because the trading platform providers are hoping that you’ll sign up an account with them when you decide to trade ‘live’.

You have to remember that demo trading is only the first step in being able to trade profitably. Eventually, you’ll want to move on to trading your own live account. That’s why it’s crucial that you first do some research about the broker that you’re going to be demo trading with. Familiarize yourself with the terms and conditions, as well as any policies that may affect your trading.

You wouldn’t want to be caught in a situation where you’re used to their platform, but when you start a live trading account you encounter difficulties with their policies and thus have to spend time and money to switch brokers and platforms.

Today I’ll like to talk and give you 5 forex pointers that you can really use (assuming you don’t know them yet). Ok, if you’ve brought on the popcorn, I’ll start the show.

1. Forex has a volatile nature and you must cater for that

We all know that the forex market is the most volatile and active out of all the trading markets in the world, be it futures, equities, etc. With that said, you need to cater your trading around that. By that, I mean you have to practically bend your rules to fit the market you’re trading in. And that means not having very tight stop losses for one as you have the odds against you even when you have a very good setup. Make sense?

2. Not more than 7% drawdown in a month (I use 5% currently)

Be sure to set a limit on the maximum monthly drawdown you’ll allow yourself to get into by calendar month. Drawdown meaning your losses. Set it as a percentage % of your total equity balance. So if you’ve got $10,000 at the start of the month and if you decide to set 7% as your max drawdown, you need to jolly well stop trading when you hit a loss of $700. Personally I use 5% as my max drawdown per month (i’m conservative).

3. Learn to stop trading when I’m ahead (…risk of overtrading)

When you’re ahead of the game, learn to control your emotions and get away from it all otherwise you might risk losing your profits and even your pants. By getting away from the terminal, you allow yourself to stay rock steady and not get your heads in the cloud. This is the mark of a true and good trader.

4. Market gives clues … It usually tells you quickly when you’re wrong (it’s up to you to listen and obey the signal)

Out of 100 trades that I take, there’s seldom a time when the market doesn’t give you any warning that it’s about to turn its tide on you. It’s one of those things where you just know it when it happens and when it happens, you should take heed and just obey and follow the market. No one is stronger than the market itself.

5. Do not bet on a reversal … Bet on the trend to continue instead

Finally, more often than not, market will always continue doing what it has always been doing. Can’t remember which Newton’s law which says that something in motion will remain in motion until an opposite force acts upon it. The forex trending market is not an exception.

Okie dokey … I had fun writing this for you. Use these tips to your own trading advantage and be sure to come out ahead of the game.

If you have not read my 5 powerful tips for forex trading article yet, be sure to do so. Today, I’ll like to share with you 5 intermediate keys for forex success. These are information that people would easily pay hundreds of dollars to get so count yourself lucky for getting them free.

1. Great exits are more important than good entries

Just remember, most traders are always focused on getting their entries right and I’m not denying that that is important but it’s the exits that matter a lot more than the entries. Don’t argue with me on that please. I’ve traded long enough to know my entries and exits. Where you exit will determine the fate of your trades. Period.

2. Moving my stop to BE+1 as soon as feasible

This is a bit of an idiosyncrasy for me. I never like seeing my positive trades turn into negative ones. When I say that, I mean trades that are really in the black already and not just up by 10 or 20 pips. Forex is much too volatile for that. Typically whenever trades are up by 30 pips or more, I’ll move my stop loss to 1 pip more than break even. Essentially that means I’ve locked in at least 1 pip of profit. Let’s move on …

3. Not reading too much into pivots on Mondays

If you rely on pivots for trading, be sure not to read too much into them on Mondays. They are the least reliable on the 1st trading day of the week. Needless to say, these pivots are based on information from last Friday’s trading but because there’s a gap over the weekends, things tend to be screwed. I’d say to use pivots only from Tuesday and onwards.

4. Early European trends start around 0645GMT

Need I say more? Eastern Europeans will start the ball rolling around this time. Take note!

5. Reversals of the above (if any) then tend to happen around 0730GMT~0815GMT

Listen … you’ve just gotten some real gold ok? If there are any reversals from the european trend that starts around 0645GMT, it will tend to happen in a 45 minute period that starts from 0730GMT-0815GMT. Is that cool or what?

Now that I’ve let the cat out of the bag, be sure to take full advantage of this. You’ve just read some really golden information. Enjoy it …

I’ll like to share with you 6 powerful tips for forex trading with you today … These are tips that I’ve gathered from my months and years of forex trading so don’t look down on them. Are you ready to receive them? Ok, let’s go …

1. Intentionality of Trading

Ok, the first one here isn’t too much about forex trading as it is about trading in general. Have you ever asked yourself why you want to be trading whatever you’re trading? (be it futures, currencies or stocks) I say this because there are some people who trade only because they want excitement or they feel bored and that’s a totally wrong motive for going into trading. Be sure to clarify this with yourself.

2. Daily Hi/Lo Fibonacci Swings

Be sure to understand the basics of fibonacci extensions and retracements. It would be wise of you to do a fibonacci study on a daily basis of the previous day’s range (from high to low). Most important points are the 38.2%, 50% and 61.8% retracements.

3. Market Reacts to Psychological Numbers

If you haven’t noticed by now, market very often reacts to psychological numbers or round numbers for that matter. So whenever it gets close to the double “00″ figures, be sure to pay attention to what the market is actually doing and wanting to do.

4. Average Daily Range of the Pairs You’re Trading

Be sure to understand as much as possible about the pairs that you’re trading. You need to know that GBPUSD has a greater range than EURUSD for one. Use ATR (an indicator) over a period of 9 or 21 to find out the average true range over the past 9 or 21 days respectively.

5. Put in your stop and take profit per trade during entry

This isn’t common knowledge but it’s based off my own experiences. I always put in my stop and take profit for each and every trade during trade entry time or during the first 5 minutes. You don’t want to be caught with your pants down.

Hope these 5 powerful tips will come in useful for you … I need to say this again. They are really useful and powerful because these come from experience.