Forex Tutorial  -Getting Started on Forex-Investors.com 

Foreign Exchange Tutorial

-Getting Started on Forex-Investors.com

 

Introduction to Foreign Exchange

The Foreign Exchange is a huge financial market with daily volumes exceeding 4.0 trillion US dollars.

Most Influential Players in The Foreign Exchange Market

The most influential players in the Forex market are central banks, commercial banks, and institutional investors. Banks and institutional investors combined account for about 50% of daily turnover. Exporters, Importers, and other similar multinational groups account for about 10% of daily turnover.

□ Read more on: » The Basics of Forex Investing

 

The History of the World’s Exchange Rates

The short history of the world’s exchange rates

The 5th century B.C. silver drachma of Athens was probably the first currency that became accepted outside its issuing state. Since then, Gold was the only real global currency. The Greek Drachma was followed by the Roman Gold Aureus and Silver Denarius that last until the early 4th century A.D.. Afterward, the Byzantine Gold Solidus became the dominant currency, followed by the Islamic Dinar. During the 13th century, Florence Fiorino became dominant in the Mediterranean area, followed by the Venice Ducato in the 15th century. During the 17th century, the world’s dominant currency became the Dutch Guilder. Afterward, and until World War 2, the British Pound Sterling became the most accepted currency in the world. Since WW2, the dominance of the US Dollar is undisputable.

□ Read more on: » Exchange Rates History

 

Foreign Exchange Risks & Forex Risk Management

Like every other financial market, the Foreign Exchange market incurs many risks, consequently, risk management becomes a vital factor to consider in order to be profitable in the long-run. This analysis will present all major currency risks and specific recommendations on how to deal with them. These are some tips for managing successfully the Forex investing risk:

(i) Multi-level portfolio diversification (no exemptions)

(ii) Brokerage diversification (maintaining accounts on different brokerage firms)

(iii) Trading accounts diversification (depositing funds covered by the compensation scheme)

(iv) Trading always small sizes (a professional trader will not risk more than 2% of the portfolio value on any position)

(v) Avoiding high-trading leverage (trading leverage increases your risk and your trading cost at the same time)

(vi) Being always prepared for black-swan events which may cause systemic risk and chaos in the financial markets (maintaining 8% gold and 2% Bitcoin)

□ Read more on: » Foreign Exchange Risk

 

Forex Trading Resources

These are some facts regarding the Forex Market:

Foreign Exchange Cyclicity-The Forex market is open 24/5

-The most important currency trading centers are London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, and Singapore

-Currency trading uses the ECN network (Electronic Communicational Network)

-The most traded currency is the US Dollar and the most traded pair is EURUSD

Read more on: » Basics of Forex Trading

 

Foreign Exchange Cyclicity & The Role of Central Banks

Recognizing the macroeconomic cycle and decoding the intentions of central banks are the two key elements of the long-term success of any Forex investor.

□ Read more on: » Forex Market Cyclicity & Central Banks

 

Famous Investors & Trading Tips

The world's most successful investors of all times, and their key trading tips:

» William Delbert Gann | » Jesse Livermore | » Warren Buffet | » Napoleon Hill | » George Soros

 

Automated Trading & Forex Robots

Forex robots are software programs that plug-in a trading platform (mostly MetaTrader) and turn your PC into an automated trading machine. Forex robots are usually implementing scalping strategies aiming to achieve small profits of 10-40 pips per trade. They can execute tens of daily trades on a 24/5 basis without any human intervention.

A Forex robot can instantly execute trades without any delays. As in the case of manual trading, Forex robots can place a take-profit and a stop-loss order or even a trailing stop-loss order.

□ Read more on: » Automated Trading Systems

 

Forex Trading Strategy

A Forex trading strategy is a method of trading Foreign Exchange currencies based on a predefined set of rules and techniques. A Forex trading strategy includes several components:

  • a detailed trading plan that contains objectives, taxes, and time horizon
  • trading setups that include the conditions of entering/exit the market
  • money management (MM) that includes trade sizes, rules to limit the risk exposure, and conditions to achieve portfolio diversification

□ Read more on: » Best Trading Strategies

 

Carry Trade Investing Strategy

Carry trade is a very popular Forex investing strategy that involves borrowing or selling a Forex currency with a low-interest rate, and at the same time buying a Forex currency with a higher interest rate.

□ Read more on: » Carry Trade Strategy

 

Fundamental Forex Strategies

The fundamental Forex strategy involves opening positions in the Foreign Exchange market based on hard data and fundamental analysis. In general, the fundamental analysis aims to anticipate future market conditions based on the analysis of key economic indicators and hard macroeconomic data.

□ Read more on: » Fundamental Strategy

 

Building your Own Intraday Trading Strategy

The first thing you need to do in order to build a custom trading strategy is to find a lot of trading ideas. These ideas may concern recent price behavior, pattern recognition, statistics, etc.

□ Read more on: » Custom Trading Strategy

 

Forex Pairs Volatility and Typical Spreads

The most traded pairs enjoy high liquidity and thus considerably lower spreads.

Currency Pair

Daily Volatility

(1)

Typical

Trade Spreads

The American Dollar against the Euro

0.87%

0.1 - 1.4 pips

The American Dollar against the Japanese yen

0.87%

0.3 - 2.0 pips

The British Sterling against the American Dollar

0.78%

0.4 - 2.2 pips

The American Dollar against the Swiss Franc

0.95%

0.6 – 3.0 pips

The Australian Dollar against the American Dollar

1.08%

0.8 – 3.0 pips

The American Dollar against the Canadian Dollar

0.77%

0.8 - 3.0 pips

The New Zealand Dollar against the American Dollar

1.17%

1.0 – 3.8 pips

(1) Based on TradingCenter.org research

 

Compare Brokers for Forex Currency Investors

It is very crucial for a Forex investor to select the right Forex broker. The right broker should provide the safety of funds, fast technology, and competitive trading spreads and commissions.

□ Find More: » Brokers Directory

 

Forex Regulation & Forex Investor Protection

Before opening and funding an account with a Forex broker, Forex investors should seriously consider the safety of their money.

Client’s Compensation in Case of Forex Broker’s Insolvency

Being able to receive compensation in case of brokerage bankruptcy is very important. Below you can find the compensation scheme behind each different license:

  • FINMA (Swiss) - All foreign exchange dealers domiciled in Switzerland have been obliged to hold a banking license and that means that up to 100,000 CHF are fully covered

  • FCA (UK) -The compensation scheme (FSCS) in case of default covers up to 50,000 GBP

  • ICF (Cyprus) -The Investor Compensation Fund (ICF) covers up to 20,000 EUR

  • ASIC (Australia) - There is no coverage in case of bankruptcy

  • FSC (BVI) - There is no coverage in case of bankruptcy

  • BaFIN (Germany) – The compensation scheme covers up to 20,000 EUR for investment

  • HCMC (Greece) = The investor compensation scheme covers up to 30,000 EUR

  • MFSA (Malta) –The investor compensation scheme covers up to 20,000 EUR

  • CBI (Ireland) –The investor compensation scheme covers up to 20,000 EUR

□ Read more on: » Foreign Exchange Regulation 

 

VIP accounts were initially designed to offer custom-tailored solutions to large Forex investors, but nowadays, Forex brokers offer VIP accounts for a significantly smaller minimum deposit.PAMM: Forex Managed Accounts for Currency Investors

PAMM stands for Percentage Allocation Money Management and refers to a technology that connects retail Forex investors and successful professional traders (Money Managers) via a Forex platform.

□ Find More: » Forex Managed Accounts

 

VIP Forex Brokers & Premium Forex Services

There are several Forex companies providing VIP accounts and premium services to clients depositing large sums of money. VIP accounts were initially designed to offer custom-tailored solutions to large Forex investors, but nowadays, Forex brokers offer VIP accounts for a significantly smaller minimum deposit.

□ Find More: »  Forex Brokers & VIP Accounts 

 

 Forex Tutorial: Getting Started

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