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What is Forex?
Forex Trading is trading currencies from different countries against each other. Forex is acronym of Foreign Exchange. For example, in Europe the currency in circulation is called the Euro (EUR) and in the United States the currency in circulation is called the US Dollar (USD). An example of a Forex trade is to buy the Euro while simultaneously selling US Dollar. This is called going long on the EUR/USD. Forex trading is typically done through a broker or market maker. As a Forex trader you can choose a currency pair that you expect to change in value and place a trade accordingly. For example, if you had purchased 1,000 Euros in January of 2005, it would have cost you around $1,200 USD. Throughout 2005 the Euro’s value vs. the U.S. Dollar’s value increased. At the end of the year 1,000 Euros was worth $1,300 U.S. Dollars. If you had chosen to end your trade at that point, you would have a $100 gain.
Forex trades can be placed through a broker or market maker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the Interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds.
I have been trading Forex for a little over a year. I have sustained severe losses. So what have I learned? Take it slow. Always place stops. Avoid EA’s and pay attention to price action above all things. Indicators are good, but you must have a sound discipline when using them. Have a clear strategy as to when to take losses and when to take profits. I also say, never let a winning trade turn into a losing one. Again, I can’t say it enough. Bet small. In Micro lots or $1k increments. Also known as .01 increments. Do not take this as advice to trade Forex one way or another. I was burned because I listened to people and invested real money way before I was ready. I also made the mistake of trading lower timeframes believing I could “scalp” the market. It really is hard to scalp forext. I recommend you not try that. (Unless you know someone first hand who is doing this consistently and who can assist you in doing it. Forex is not for the faint of heart. If you are afraid to lose money, then don’t do it. But if you have brass balls, and can afford to lose. Give it a shot. It’s always best to run simulation BEFORE betting real money, but it is a pain in the butt. But once you get the hang of it, the amount of leverage Forex offers can really help you earn money.
I have been burned by the good, the bad and the ugly. See my links on the right.
Brego.com
RECOMMENDED BROKERS, INDICATORS and SOFTWARE
The Good
FXDD – Gives you the ability to close positions in any order.
FAP Turbo – Pretty Safe as far as EA’s go, but use SMALL lot sizes
and check youtube fore settings optimizations. You can buy FAP TURBO here.
If you already own FAP Turbo, consider this settings guide with is selling very well.
The OK
FXCM – Consistent, slow on outgoing wires and FIFO compliant. (you can’t exit orders in any order) First in First Out applies.
The Bad
Any of Don Steinitz’s systems. I think they might be useful if you know the right settings, but mastering those settings will take you a year…or two. From my personal experience after buying several of Mr. Steinitz’s EAs, videos and indicators. It’s best to learn price action and proper money management. Mr. Stienitz and those who are making money with his EAs and the proper settings don’t seem willing to share their information. I think I’ll revisit this system once I find someone successfully using the correct settings and raking in money with it. The technology is compelling, but I have only lost money with all of his EAs.
The Ugly
Forex.com – I don’t care for their customer service.
*No information in this article or at Brego.com is to be construed as investing advice.
Forex is risky and not suitable for every investor and may result in financial loss.
Consult a professional adviser before investing.
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