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How to learn forex course?

Jun 10th, 2009 09:41
forex pips, http://jackmaben.blogsome.com/2009/06/10/p3/

Forex Basics
I know that maybe you already know this, but there are some basic points
that definitely need to be addressed before we really start our course.
So if you are a more advanced trader, you can skip this part and wait
for tomorrow’s lesson. Here it goes:
The Exchange Rate
The base currency is the term for the first currency in the pair.
The counter currency is the term for the second currency in the pair.
The exchange rate represents the number of units of the counter currency
that one unit of the base currency can purchase.
In a foreign exchange trade, clients are speculating on the exchange
rate between two currencies.
The exchange rate measures the relative value of a currency meaning it
measures how much one currency is worth in terms of another currency.
A pip is the unit of measurement for exchange rate movement.
The number of pips a currency pair moves determines how much a trader
will earn or lose on the position.
A pip is the last significant digit in an exchange rate, and is the term
used to define the unit of measurement for exchange rate movements.
The number of pips that the exchange rate moves dictates how much a
trader has gained or lost through an FX trade.
The Basic Process in 2 Steps
1. One currency is being borrowed.
2. The proceeds from the borrowed currency are used to finance the
currency that is being bought.
Opportunities in Forex
One of the premier advantages of the foreign exchange market is that
profit opportunities are equally present in all market
conditions; you can profit when the exchange rate is declining or when
the rate is rising.
You will notice that there are always 2 prices for each currency pair.
In Forex, there is a BID and ASK price
The bid is the price at which a dealer is willing to buy and clients can
sell the base currency in exchange for the counter currency.
The ask is the price at which a dealer is willing to sell and a client
can buy.
BID = The Price at which the Trader (You) Can Sell
ASK = The Price at which the Trader (You) Can Buy
In Forex, only a small percentage of the actual position value needs to
be deposited prior to entering the trade.
This small deposit, known as the margin, is not a down payment, but
rather a performance bond or good faith deposit to ensure against
trading losses.
The margin requirement allows traders to hold positions much larger than
their account value. Margin requirements are as low as 1% .
Types of Orders
The term “order” refers to how a trader can enter or exit a speculative
position in the market. There are basically 2 ways of dividing the types
of Orders:
1. Orders used to enter positions
2. Orders used to exit positions
1. Orders Used to Enter Positions
Market Order
A market order is an order to buy or sell a currency pair at the current
market price. The key advantage of market orders is that they ensure the
trader that he will get in the position.
The key disadvantage, though, is that the trader may not get the best
price he could have gotten had he used another order type.
Another disadvantage is that market orders are more conducive to being
used recklessly and without discipline.
Entry Orders
Entry Orders will only be filled if the market reaches the rate
specified. Is to say, you place the order before hand and leave it
there. Then when the market reaches that price, your trading station
will automatically enter the trade.
2. Orders Used to Exit Positions
Limit Orders or Take Profit Orders
A limit order allows a client to specify the rate at which they will
take profits and exit the market. Limit orders are great tools to help
traders maintain discipline and lock-in profits.
The main disadvantage is that they may result in prematureprofit-taking
Stop-Loss Order
Stop Loss Orders work like limit orders, but in an opposite fashion: it
specifies the maximum loss that a trader is willing to accept on a given
Stop-loss orders are a necessity for every Forex trader. They will
prevent you from losing all your money in a couple of trades and Will
guide you when deciding your risk-reward ratios.
However, the main disadvantage is that if stop-loss orders are not
placed at the appropriate level, can result in traders being taken out
of positions at a loss prematurely or when in fact the market was going
to reverse to a profitable position.