Getting Started on Forex-Investors.com
Introduction to Foreign Exchange
The foreign exchange (Forex) market is the largest and most liquid financial market in the world, with average daily trading volumes exceeding 5 trillion US dollars. This expansive market operates 24 hours a day, five days a week, across major financial hubs including London, New York, Tokyo, and Sydney, facilitating currency trading among governments, central banks, corporations, financial institutions, and individual traders.
Due to its high liquidity and accessibility, Forex attracts a broad spectrum of participants—from multinational corporations managing foreign exchange risk to retail traders aiming to profit from short-term price movements. However, the market’s volatility and use of leverage also introduce significant risks, making informed strategies and sound risk management essential for success.
Most Influential Players in the Foreign Exchange Market
The most influential participants in the Forex market are central banks, commercial banks, and institutional investors. Together, banks and institutional investors account for approximately 50% of daily turnover. Exporters, importers, and other multinational corporations contribute around 10% of daily turnover.
□ Read more: » The Basics of Forex Investing | » Basics of Forex Trading
The History of the World’s Exchange Rates
The 5th century B.C. silver drachma of Athens was likely the first currency accepted beyond its issuing state. Since then, gold has been the only true global currency. The Greek drachma was followed by the Roman gold Aureus and silver Denarius, which remained in use until the early 4th century A.D. Afterwards, the Byzantine gold Solidus became dominant, followed by the Islamic Dinar.
In the 13th century, the Florentine Fiorino rose to prominence in the Mediterranean, succeeded by the Venetian Ducato in the 15th century. Later, the Spanish Dollar was widely used in Europe, the Americas, and the Far East, and became the first world currency by the 16th century. During the 17th century, the Dutch Guilder was the world’s leading currency. Following that period, and until World War II, the British Pound Sterling was the most widely accepted currency globally. Since WWII, the dominance of the US Dollar has been undisputed.
□ Read more: » Exchange Rates History
Foreign Exchange Risks & Forex Risk Management
Like all financial markets, the Foreign Exchange market carries various risks. Therefore, effective risk management is essential for achieving long-term profitability. This analysis outlines the major currency risks and provides specific recommendations for managing them.
Six (6) Key Tips for Managing Forex Investment Risk
(i) Multi-level portfolio diversification — No exceptions
(ii) Brokerage diversification — Maintain accounts with multiple brokerage firms
(iii) Trading account diversification — Deposit funds only within limits covered by compensation schemes
(iv) Trade small position sizes — A professional trader risks no more than 2% of portfolio value on any single trade
(v) Avoid high trading leverage — Leverage increases both risk and trading costs
(vi) Prepare for black-swan events — Allocate part of your portfolio to physical gold
Effective risk management is the defining factor of long-term success for any investor, separating the professionals from the reckless gamblers. This includes setting stop-loss orders, diversifying portfolios, sizing positions appropriately, and never risking more than a small percentage of capital on a single trade.
□ Read more: » Foreign Exchange Risk
Foreign Exchange Cyclicality & The Role of Central Banks
Recognizing the macroeconomic cycle and interpreting the intentions of central banks are two key factors in achieving long-term success as a Forex investor.
It is essential for any Forex investor to understand and capitalize on the cyclical nature of the Foreign Exchange market. There are two primary types of cycles in the Forex market:
(i) Long-Term Macro Cycles
Over the long term, currency movements tend to align with the broader macroeconomic environment and follow the interest rate cycle. The monetary policies of central banks play a significant role in shaping these macro cycles of exchange rates.
(ii) Speculative Cycles & Contrarian Trading
In the short term, currency movements are often driven by speculative cycles. These are influenced by large institutional players who strategically open speculative positions in the derivatives market. These positions initiate trends, which then lead to price breakouts. As breakouts occur, market sentiment shifts, prompting retail traders to enter late. Once retail traders are in, institutional players typically exit their positions, causing the trend to reverse abruptly. This is why adopting a contrarian approach to prevailing market sentiment is crucial when trading Forex on shorter timeframes.
□ Read more: » Forex Market Cyclicality & Central Banks
Famous Investors & Trading Tips
In this section, you’ll find quotes and trading tips from some of the most successful investors of all time.
» William Delbert Gann | » Jesse Livermore | » Warren Buffet | » Napoleon Hill | » George Soros
Automated Trading & Forex Robots
Forex robots are software programs designed to integrate with trading platforms (primarily MetaTrader), transforming your PC into an automated trading system. These robots typically use scalping strategies aimed at generating small profits—usually between 10 to 40 pips per trade. They can execute dozens of trades daily on a 24/5 basis, requiring no human intervention. Forex robots help eliminate the psychological pressures of trading and never suffer from fatigue. They can execute trades instantly and efficiently, often more precisely than human traders. Like manual trading, robots can set take-profit and stop-loss levels, including trailing stop-loss orders.
□ Read more: » 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. It typically includes several key components:
-
A detailed trading plan outlining objectives, taxes, and time horizons
-
Trading setups specifying conditions for entering and exiting the market
-
Money management (MM), covering trade sizes, risk limits, and portfolio diversification
Implementing a trading strategy involves four stages: planning, back-testing, adjusting & optimizing, and execution.
□ Read more: » Best Trading Strategies
- Carry Trade Investing Strategy
Carry traders are among the most profitable Forex traders. This strategy involves selling a low-interest-rate currency and buying a high-interest-rate currency to profit from the interest rate differential. Timing is key—positions should be opened when a Forex pair has completed a correction wave and is ready to move in the opposite direction.
□ Read more: » Carry Trade Strategy
- Fundamental Forex Strategies
This strategy is based on fundamental analysis and hard economic data. The goal is to anticipate future market conditions by analyzing key macroeconomic indicators. Fundamental traders often combine this approach with intermarket analysis, observing correlations between Forex and other asset classes like bonds, commodities (e.g., oil’s impact on CAD), and equity markets. They also track political events (elections, trade wars) and unforeseen shocks (natural disasters, pandemics) that can trigger volatility.
□ Read more: » Fundamental Strategy
- Swing-Trade Strategy
Swing trading involves holding positions from several days up to a few weeks. Tight leverage is recommended, and trades should only be taken if the Reward/Risk ratio exceeds 3.
Swing trading is ideal for traders who want to capitalize on medium-term market movements without the stress of day trading or the long-term commitment of position trading. This strategy seeks to capture "swings" in price momentum, often targeting key support and resistance levels, Fibonacci retracements, or moving average crossovers. Unlike scalpers, swing traders avoid excessive intraday noise and instead focus on high-probability setups that align with the broader trend.
□ Read more: » Swing-Trade Strategy
- Building your Intraday Trading Strategy
Intraday trading is very risky and not suitable for everyone. Successful intraday traders require a specific trading plan, disciplined money management, and logical rules to handle all market conditions—especially on smaller timeframes.
□ Read more: » Custom Trading Strategy
Forex Pairs Volatility and Typical Spreads
The most traded Forex pairs benefit from high liquidity, resulting in significantly 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
A Forex investor must choose the right broker—one that ensures fund security, offers reliable technology, and provides competitive spreads and commissions. An ECN (Electronic Communication Network) Forex broker enables clients to execute trading orders directly through an electronic network. This results in faster order execution and tighter spreads for Forex traders.
□ Find More: » Brokers Directory
Forex Regulation & Forex Investor Protection
Before opening and funding a Forex account, investors must prioritize fund safety. Regulation matters because:
-
Authorities enforce strict operational rules for licensed brokers
-
Regulators can penalize misconduct or revoke licenses
-
Mandatory client fund segregation (separate from corporate accounts)
-
Licensed brokers must display their regulator on official websites
Client’s Compensation in Case of Forex Broker’s Insolvency
Table: Client Compensation Schemes (In Case of Broker Bankruptcy)
|
Regulatory Body |
Country | Compensation Limit |
|---|---|---|
|
Switzerland |
|
|
UK |
|
|
Cyprus |
|
|
Germany |
|
|
Greece |
|
|
Malta |
|
|
Ireland |
|
|
Australia |
|
|
British Virgin Islands |
|
□ Read more: » Foreign Exchange Regulation
PAMM: Forex Managed Accounts for Currency Investors
PAMM stands for Percentage Allocation Money Management and refers to a technology that connects retail Forex investors with successful professional traders (Money Managers) via a Forex trading platform.
-
Investors allocate funds to a Money Manager’s PAMM account.
-
The Money Manager executes trades, and profits/losses are split according to each investor’s share.
-
The manager earns a performance fee (e.g., 20-30% of profits) and sometimes a management fee (fixed % of capital).
□ Find More: » Forex Managed Accounts
VIP Forex Brokers & Premium Forex Services
VIP accounts were originally created to offer customized solutions for high-net-worth Forex investors. Today, however, many brokers offer VIP accounts with significantly lower minimum deposit requirements. Several Forex companies now provide premium services and VIP features to clients who deposit substantial amounts.
Key Tips
-
Fund security is paramount - only open accounts with properly regulated and reputable Forex brokers
-
With a trustworthy broker secured, prioritize trading costs (spreads, commissions, and SWAP rates)
-
Ensure access to a dedicated account manager
-
Always evaluate a broker's trading conditions using a Demo Account before committing
□ Find More: » Forex Brokers & VIP Accounts
■ Forex Tutorial: Getting Started
Forex-Investors.com (c)
