Getting Started With Forex Trading

 I have created the following videos to help new traders to kick start them into the world of trading.

What Are Cross Currencies In The Forex?

In the time past, a cross-rate was any currency pair that did not include your home currency. The US dollar/Japanese yen exchange rate would be a cross-rate for someone in the UK or Europe, for example.

Today, however, the common definition of a cross-rate is any currency pair that does not include the dollar. Therefore, the USD/JPY exchange rate is a “major” exchange rate and not seen as a cross-rate by people in the UK or Europe, while the AUD/CAD would be seen as a cross-rate by everyone, including Australians and Canadians, even though the rate includes their home currencies.

This convention for defining a cross-rate is not accepted everywhere and you will see lists in newspapers and websites that define cross-rates differently. The US dollar accounts for about 70% of global government money reserves and 70% of world trade, so placing the dollar as a component in all the major exchange rates is not without justification. In fact, there are more dollars in banknotes and bank deposit accounts outside the US than inside the US, so it may be accurate to say the dollar is the most-used currency in some places even though it is not the home currency.

How Are Instruments Quoted In Forex?

 We can refer to foreign exchange as  two bags of money such that each bag stands for a denomination. A particular transaction at a particular time can be like buying a bag of 165 dollars in return for £100 at an airport desk. The exchange rate is $1.65 per UK pound sterling.

You may ask why is the exchange rate not £0.6061 per dollar? This the same exchange rate, just expressed differently (it is the reciprocal, or 1 divided by 1.65). The answer lies in the historical convention of quoting the price of other currencies in terms of what they cost in pounds. The pound sterling was the benchmark currency for centuries until just after World War II, meaning the central currency against which all other currencies were judged and priced.

After World War II, the US dollar became the benchmark currency and most other currencies were priced in terms of how many units of the foreign currency you could get for one dollar.

As a rule, any money not issued by your home government is “foreign.” The natural way to look at foreign exchange is to ask: “How many units of the foreign currency can I get for a fixed amount of my home currency?” This is how a tourist or an importer looks at foreign exchange. But because the dollar is currently the benchmark currency against which almost all others are priced, the dollar comes first in the name of many currency pairs, although not all. The first name in a currency pair is generally the important name and the second is the secondary or less important one.

Putting a name first is to assume that the fixed amount is denominated in that currency and the variable amount will be the other currency. In other words, the first currency is the base and you are applying a ratio to derive the price of second currency. When the European Monetary Union decided to quote the euro in the format “Euro/USD” and “Euro/JPY,” etc. it was a deliberate choice to make the euro the more important of the two currencies in every pair.

The rule is that whichever name comes first is the one that is getting stronger on higher numbers and weaker on lower numbers. If the number goes up in the pound, for example, from 1.6000 to 1.6500, it means the pound is getting stronger and by definition, the dollar is getting weaker because in this pair, the full quote should read GBP/USD. It is accurate to express the quote as $1.6000 to $1.6500, meaning the pound used to cost $1.6000 but now it costs $1.6500. Journalists usually apply the convention of putting the dollar sign in front of the price quote, although brokers and analysts tend not to insert the currency symbol.

This is also true of the euro (EUR/USD) so a higher number always means the euro is getting stronger vis-à-vis the dollar. You could say the EUR/USD moved from 1.3200 to 1.3900, meaning it got more expensive in dollar terms. If you are new to Forex, you can place an imaginary currency symbol in front to the first-named currency to get your bearings. Therefore, the price quote now looks like $1.3200 to $1.3900.

The pound, euro, Australian dollar, and New Zealand dollar are the top key currencies in which the dollar does not come first, because of historic convention. All other currencies are quoted in terms of dollars, such as USD/CHF = US dollar against the Swiss franc.

What Is The Meaning Of Forex?

 

The word FOREX is the abbreviation frequently used today for “foreign exchange,” which means the price of one currency relative to another currency. Forex prices refer to the connection  between two currencies and they come in pairs.

The word FOREX is sometimes used  synonymously  with “FX.” Both of them  are used today and both refer to the same thing, foreign exchange. The term “FX” is mostly used in the US while “Forex” was more broadly used in the UK until recently. Professional traders in the US at banks and brokers tend to use the term “FX” while “Forex” is the term used in the retail market, adopted from the British usage. Also used is the word “currency,” as in “I trade currencies” or “something happened in the currency market.”

Foreign exchange refers literally to money, or more accurately, to money in two different denominations. The “exchange” part of the term means giving one thing of monetary value in return for a different thing of equivalent value. The word exchange refers to the transaction in which each of two parties is willing to exchange his respective basket of money for the equivalent amount of money denominated in the second currency. The price at which the two parties are willing to make the exchange is the exchange rate.

The price of one currency in terms of another currency is called a “rate” and not a “price,” although the word “price” is equally valid and often used. Foreign exchange is the only market in which the word rate is used instead  of the word price.

The 8 Most Important Websites For All Forex Traders

1. Forex Factory
Forex Factory is for professional foreign-exchange traders. Its mission is to keep traders connected to the markets, and to each other, in ways that positively influence their trading results.

Confidence is not "I will profit on this trade." Confidence is
"I will be fine if I don't profit from this trade.”


2. Investopedia
Investopedia is the world's leading source of financial content on the web, ranging from market news to retirement strategies, investing education to insights from advisors.

“Trading doesn't just reveal your character, it also builds it if you stay in the game long enough.”

3. Babypips
Helping forex traders is our bread and butter. Whether you're a noob wanting to learn how to trade currencies or an experienced forex trader trying to become more disciplined, there is something on the pips à la carte menu for you. The only thing that isn't served are foolish claims of easy money and holy grails. Bon apipetit!

“Don't ever make the mistake of believing that market success has to come to you fast. Trade small, stay in the game, persist, and eventually, you'll reach a satisfying level of proficiency.”

4. DailyFX
DailyFX is a free news and research website.It is one of the world’s leading news sources for the currency trading community. DailyFX analysts report every day on the latest changes in the currency market, providing timely technical analyses and a close examination of promising chart formations with live currency quotes. DailyFX.com also provides analysis of market moves, explaining economic, political, and technical factors driving the market.

“Trading mastery is a state of complete acceptance of probability, not a state of fight it.”

5. RatesFX

Foreign exchange rates change all the time, so make sure you’re up to date on the currency pairs you’re trading with RatesFX. RatesFX provides foreign exchange rate data on all currency pairs. It is a comprehensive source for daily exchange rates with performance information, currency conversion, key cross rates, and an exchange rate alarm to notify you of key signals.

“Genuine acceptance that there will be losses on your way to market success will greatly decrease the hurt when they eventually come.”

6. Traders Laboratory

Trading can be lonely. Find community, friends, peers, groups in your area trading the same things you are. Traders Laboratory is a forex forum where you can find traders from around the world discussing all topics related to the financial markets. Contribute your own trading experiences, help out your fellow traders, and get real feedback from real traders with Traders Laboratory. Whether you’re looking for specific technical analysis tips, or locking down a bad trading habit, the community at Traders Laboratory will have a topic, opinion, and answer for you.

“Trading effectively is about assessing probabilities, not certainties.”

7. Bloomberg
Bloomberg feeds its followers with fresh world news with respect to global finance and policies. It is the center of valuable information for good trading decision by traders. The quality of analyses of news and other economic and political events delivered by Bloomberg will greatly improve the trading efficiency of anyone that follows the company.

8.ZeroHhedge
This website is constantly flooded with  blogs and reports with respect to finance, economies and wallstreet. It is a company that tends to educate readers in a very interesting way. They tend to dissociate themselves from bullish outlook many times than never.They tend to bring many hidden facts about the dollar economy to the public table. They provide commentaries that can always help any trader to make the right trading decision.

How To Use Forex Social Trading

Forex Social Trading is a social network of traders that offers interaction between expert traders and new traders or investors in a symbiotic sense. It allows traders to trade online with the help of others by comparing and copying their trades.This is a form of investing that allows investors to observe the trading performance of other expert traders in a network and to follow their investment strategies using copy trading or mirror trading method. 

The first requirement is that you must have a forex trading account before you can participate in the forex market.You need a forex broker to open a forex account. It is very important that you carefully select the broker on whose platform you carry out your trading transactions from time to time.I have been trading forex since 2006 on the platform of  LiteForex . I recommend them to you. They are the best broker for Nigerians.You may click here to create an account with them. I have also created a youtube video on step by step guide on how to create forex account with them, how to pay money into your forex account and how to withdraw money from your forex account.You may click here and watch the video now. 

How To Use Forex Social Trading

I will like to give an example to elucidate the process. Let us say you go through the list of top performing traders in the network and you found that  Bosun is the number one (best performing) trader on the list with the following data:

Trader:@MUJAHIDEEN
Life span:180d
Trader`s share:30%
Profitability:3,685% 
Equity:200,800
Number of investors:55.

All you have to do is to go through the list of trader`s performance click on the trader`s name like MUJAHIDEEN,click on profitability chart and then click copy. Then the same trade they place on their accounts will be placed on your account too at the same time. All you need do is to watch your account grow with time. The good thing is that you can enable and disable any trader at any time. Just make sure that you have atleast $200 in your account.

Benefits of Social Trading

1. Social trading requires little knowledge  about financial markets, and has been described as a low-cost, sophisticated alternative to traditional wealth managers.
2. Copy trading is perfect for inexperienced traders. It saves you lots of time. 
3. You’re likely to earn a lot more money. Even experienced traders can benefit from Forex copy trading. 
4.You can save time and earn more. 
5.There are no (or few) limits to who you can follow. 
Forex copy trading is for everyone.Novice and experienced traders alike are likely to benefit from putting the knowledge and skills of others to work for them. 

Very Important 

1. Ensure that you  edit the copy setting.Either by selecting
 i. Fixed size of each trade   or ii. In proportion to my funds

2.It is good that you always choose a trader whose Life sapn is not less than 180d meaning 180 days and above.

3. I will use 0.01 lot if my account is between $200 and $1000 account balance.