How to Make Money in Forex (part 1)

In the explanation of how to make money in forex this time will begin the explanation of how currencies traded in the market, then we will outline a foreign exchange contract to buy and sell positions. Also discusses three critical points in every trade and explain the difference in supply / demand that brokers charged for each transaction. Also, it provides four reasons that cause money fluctuates every day. We then turn to the theory of shards which helped us decide to be in a position to buy or sell. Concludes with an explanation of how to read charts and how to identify the structure of the market.

Buy Low, Sell High

Forex traders make money by speculating on the movement of currency values. There are only two ways to do this. The first way is to buy, hoping prices will rise. The second way is to sell, expect prices to fall.

Buy

Currency rate AUD / USD is currently 1.0325. You enter long positions on hopes the Australian dollar will strengthen against the US dollar. Purchase transactions are called "long positions" in the forex market.

After three hours, the exchange rate of AUD / USD to 1.0375. You are right, and you make 50 pips in this transaction. Another way of stating this is a buy position you generate profits.

The following example presents an accurate contract:

Buy AUD / USD at 1.0325

Suppose you buy 100000 Australian dollars for this contract, or one standard lot. Because the exchange rate is 1.0325, you pay AUD 100000 to USD 103250.

After three hours, the exchange rate of AUD / USD rose to 1.0375, then you sell AUD 100000 and receive USD 103750. This transaction resulted in a total profit of USD 500 for you.

Action	AUD	USD
Buy AUD 100 000 at the exchange rate of AUD / USD is currently at 1.0325	+ 100000	- 103250
3 hours later, selling AUD at the rate 1.0375 100000	-100000	+103750
The resulting total profit is USD 500	0	+500

If you do not use leverage, you have to spend USD 103 250 to USD 500. The yield calculated by percentage, your profit is only 0.484% (500/103250).

However, if you use 100: 1 leverage given broker, you only need to spend a margin of USD 1032.5 to buy AUD 100000. calculated by percentage, your profit is 48.4% (500 / 1032.5).

Sell

EUR / USD rate today is 1.3142. You enter short positions as it predicted the euro will continue to weaken against the US dollar. Transaction is called a "short position" in the forex market.

After two hours, the EUR / USD to 1.3112. You are right, and generates 30 pips on this transaction. Means your transactions generating profits.

Let's look at the following example:

Sell ​​EUR / USD at 1.3142

Suppose that you sell 200 000 euro for this contract, or two standard lots. Because the exchange rate is 1.3142, you received $ 262840 from the amount of 200000 euro. After two hours, the EUR / USD fell to 1.3112.

Then you buy back  200000  euro  and pay USD 262240. This transaction resulted in a total profit of $ 600 to you.

Action	EUR	USD
Selling 200000 euro at the exchange rate EUR / USD 1.3142	-200000	+262840
2 hours later, the repurchase of 200000 euro at the rate of 1.3112	+200000	-262240
The resulting total profit is USD 600	0	+600

Similarly, if leverage is not used, you should use a 200000 euro or USD 262840 to USD 600. The yield calculated by the percentage of this is a gain of only 0.228% (600/262840).

However, if you use 100: 1 leverage given broker, you only need to spend a margin of USD 2628.4 to sell 200 000 euro. Calculated according to a percentage of your profits is 22.8% (600 / 2628.4).

Three Points in Every Trade

When you execute a position, there are basically three points in each transaction, namely: entry price, profit targets and stop loss.

The price of entry is defined as the price at which the trade is triggered. Target profit is defined as the price at which trading ended with a profit. Stop losses are defined as the price at which trading ended with a loss.

Long Position (Buy)

Suppose the price of GBP / USD is 1.5800. because you estimate pound will strengthen against the US dollar, then you enter into long position (buy).

You decide to get 30 pip profit and stop loss of 30 pips. Once this value is recorded in the brokerage platform, there are only two things that can happen, the trade will reach its profit target or stop loss suffered.

In this example:

Price entry = 1.5800

Stop losses = 1.5770

Target profit = 1.5830

See the following picture:

For a buy position, profit targets placed over the price of entry, while a loss placed below the entry price. In this example, you take a pip in an amount equivalent to exit: 30 pips above the entry price, and 30 pips below the entry price.

Every time a transaction have the same distance between the price of entry to target profit and the price of entry to stop losses, this transaction has the risk to reward ratio of 1:1.


The following figure shows the actual movement of trade by buying position:

The following figure shows the actual movement of trade with a buy position and ended up with a profit:

The following figure shows the actual movement of trade with a buy position and ended up with a loss:

Short Positions (Sell)
Suppose the price of GBP / USD is 1.5800. You estimate the pounds will drop against the US dollar, therefore you enter short positions.
You decide to get 50 pip profit and 30 pip stop loss. Only two things will happen, trade will reach its profit target or stop loss suffered.

In this example:
Price entry = 1.5800
Stop losses = 1.5830
Target profit = 1.5750

See the following picture:

For a short position, the profit target is placed below the entry price and stop loss placed above the entry price. In this example, you set a 30 pip stop loss and profit target of 50 pips. This is called risk 3: 5 to reward ratio.







The following figure shows the actual movement of trade with short positions:

The following figure shows the actual movement of trade by selling positions that ended with a profit:

The following figure shows the actual movement of trade by selling positions that ended with a loss:

Every transaction must always be accompanied by stop loss. For most traders, have a profit target is a natural thing, almost no traders who thought to use stop losses. Interest stop loss is simple, but very important. Basically Stop losses are a level that warn you to get out of the deal with losses that could be accepted because the transaction will not benefit you.
In my career as a forex trader, I often see traders who destroyed their accounts because they refuse to use stop loss on each transaction. When it comes to transactions in the foreign exchange market, we will not always be true. Interest stop loss is to help us, not hurt us.
Trader face the risk of destroying their entire account when making transactions "naked" or not using stop loss. Do not adopt this practice. Interestingly, a group of traders who destroyed their account by not using stop loss are a group that left the forex market because they think the trading currency is risk. Again, I recommend that you use stop loss on every your transaction.

Okay, I continued on the next post (how to make money in the forex part two), I will review about the difference in supply / demand, the things that cause the price of the currency to fluctuate, and the theory of fractions.

Play the Game of Forex! (Summary)

Play the Game of Forex! (Summary)

After I write an explanation of game currency, the seven major currencies, reading the quote currency, the yen factor, pip, pipette, to calculate the value of one pip, lot size, up to leverage. See part one, part two, and part three.

This time I will summarize all the above exposition.

The foreign exchange market is the largest financial market in the world, with a trade value of more than US $ 4 trillion a day, once again in a day instead of one year. Although hundreds of currencies change hands every day, the majority of transactions conducted in the seven major currency pairs. Currency pairs most traded are the EUR / USD. Although this is not my favorite currency pair.

Quote currency is always displayed in pairs. Examples include EUR / USD, USD / JPY, and AUD / USD. The currency on the left is the base currency, the currency at the right hand is the counter currency. Nearly all currency pairs quoted to four decimal places, unless the Japanese yen as the counter currency. In this case, the quote appeared in two decimal currency.

A pip is the smallest price movement in a currency pair. If EUR / USD moves from 1.3457 up from 1.3456 into is called 1 pip. Similarly, if you move down from 1.3456 becomes 1.3455, this movement is called 1 pip movement. Each time the dollar as the counter currency, one pip generate USD 10 for a trader to one standard lot.

Some forex brokers go further by quoting prices with five decimal places. For brokers like that, quote EUR / USD is written as 1.34567. It is important for you to note that with five decimal figures are not named by pip, but pipette. Citations to the Japanese yen as a currency counter is displayed with three decimal places instead of two.

Broker gives leverage to retail traders to trade in the forex market. Without leverage, a trader must pay $ 100,000 to trade one standard lot currency. With 100: 1 leverage, a trader need only 1/100 of overall amount of capital, or USD 1000. This amount is called the margin. Margin basically allows a trader buys a contract without the need to mention the value of the contract completely.

The higher the leverage used, the smaller the margin required to trade one standard lot. Some brokers even offer leverage up to 500: 1, this means that trader only need $ 200 to trade currencies amounting to USD 100 000.

Leverage is a double-edged sword. Although leverage to help increase the profits of a trader, leverage can also magnify losses a trader. Therefore, it is very important for a trader to understand the leverage's  advantages and weaknesses before deciding the amount of leverage that is unfit for use.

Okay, in the next post I will write about make money in forex.

Play the Game of Forex! (Part 3)

Lot size

Most forex brokers nowadays provide up to four categories of lot size for traders, namely:

1. Standard Lot

2. Lot Mini

3. Lot Micro

4. Lot Nano

Standard lot is defined as 100 000 units of base currency. For example, if you buy 1 standard lot of EUR / USD, it means you bought 100 000 euro to the US dollar.

Lot mini defined as 10000 units of base currency. For example, if you buy 1 mini lot GBP / USD, then you buy 10,000 pounds to the US dollar.

Micro lot is defined as 1000 units of the base currency. For example, if you buy 1 lot of micro USD / CHF, meaning you buy 1000 dollars with swiss franc.

Lot nano defined as 100 units of the base currency. For example, if you buy 1 lot nano USD / CAD, meaning you buy 100 US dollars with Canadian dollars.

Lot size shrunk by a factor of 10 from the standard to mini to micro and eventually to nano. As the following table:

Lot Size Category	Unit Amount
Standard	100000
Mini	10000
Micro	10000
Nano	100

Lot Standard

If you are trading a standard lot, using the same values ​​with the same example in the previous post, that explains how to calculate the value of a pip.

USD / CHF = 0.9235

Value pip = USD 0.000108

Pip value for a standard lot = USD 0.000108 x 100000

= USD 10.8

USD / JPY = 81.55

Value pip = USD 0.000123

Pip value for a standard lot = USD 0.000123 x 100000

= USD 12.3

AUD / USD = 1.0237

AUD pip value = 0.00009746

Pip value for a standard lot = USD 0.0001 x 100000

= USD 10

Lot Mini

If you trade a mini lot, 1 pip value will drop by a factor of 10. Using the same example above:

USD / CHF = 0.9235

Value pip = USD 0.000108

Pip value for a standard lot of USD 0.000108 x 10000 =

= USD 1.08

USD / JPY = 81.55

Value pip = USD 0.000123

Pip value for a standard lot of USD 0.000123 x 10000 =

= USD 1.23

AUD / USD = 1.0237

AUD pip value = 0.00009746

Pip value for a standard lot = USD 0.0001 x 10000

= USD 1

Likewise for a lot of micro and nano lot.

Leverage

Financial success is almost always achieved through the use of leverage. By using the leverage we can do more with fewer resources.

In the previous section, we talk about how the value of 1 pip rise dramatically when a trader to trade a standard lot or even a mini lot.

In fact, not many retail traders can spend $ 100,000 or $ 10,000 to trade one standard lot or mini.

This is where the role of foreign exchange. Simply put, foreign exchange brokerage business model is to give leverage to retailers so that they do not have to spend the entire $ 100,000 to trade one standard lot.

Let's see how it works. When forex brokers give you leverage of 100: 1, not the $ 100,000 that you need to pay, you only need to pay $ 1,000 to trade one standard lot. Sometimes this is called margin. Brokerage also call our trading account with margin accounts.

Margin basically allows a trader buys a contract without the need to mention the value of the contract in full. In this example, $ 1,000 is a margin Adana need to trade $ 100,000 on a leverage of 100: 1

By using a simple formula:

Margin required = Lot Size / Leverage

As an example:

Margin required = $ 100000/100

= $ 1,000

Percentage margin = amount of margin / lot size

= $ 1000 / $ 100,000

= 1%

Similarly, if the broker gives you a leverage of 50: 1 and not $ 100,000 but you need to pay is $ 2,000 to trade one standard lot. In this case, the margin percentage is 2%.

The higher the leverage given broker, diminishing the amount you need to pay to trade one standard lot. Here's an explanation in the table:

Margin Requirements	Maximum leverage
5%	20:1
3%	33:1
2%	50:1
1%	100:1
0.5%	200:1
0.2%	500:1

See table above, logical to conclude that we should choose the highest leverage, because it requires us to pay the least amount of money to trade standard lot.

Excessive Leverage Risk

Leverage is a double-edged sword. Although it has the potential to increase the profit a merchant, leverage also has the potential to magnify losses. In fact, as great leverage the greater the risk.

Let us observe an example:

Trader A and Trader B opened with a broker and start trading with a capital of USD 10000. Trader A using 100: 1 leverage while trader B using a 10: 1 leverage. Both traders then decided to sell the EUR / USD as the sovereign debt crisis is the ongoing pressure on the euro.

The total value of the contract trader A is 100 x $ 10,000 = $ 1 million, this equates to 10 standard lots. The total value of the contract trader B is 10 x $ 10,000 = $ 100,000, this equates to 1 standard lot.

For EUR / USD we know that the value of one pip is equal to 10USD for one standard lot. If the transaction resulted in a loss of 50 pips for them, both of these traders will suffer losses as follows:

A trader: (10 lots) x (50 pips) x ($ 10 / pip) = USD 5,000

Trader B: (1 lot) x (50 pips) x ($ 10 / pip) = USD 500

Loss of USD 5000 represent 50% of trader capital A, but lost $ 500 represents only 5% of trader capital B.

In conclusion, although leverage could potentially magnify your profits, leverage also has the power to magnify your losses. So it goes both ways.

The following table summarizes the two traders above:

	Trader A	Trader B
Capital	$10000	$10000
Leverage	100:1	10:1
Total value of the transaction	$1 million	$100000
Loss of 50 pips	-$5000	-$500
% Capital loss of trade	50%	5%
% Residual  capital of trade	50%	95%

Thus the entire explanation of part one, part two, until part three. next post is a summary, bye and thank you.

Play the Game of Forex! (Part 2)

Reading Forex Quotes

Foreign exchange rates quoted in the currency pair and almost always with four decimal places. For example, if the quote currency is the EUR / USD = 1.4321, the left hand of the eye called the "base currency" and the currency right hand is called "counter currency." Base currency always has a value of 1. In the example above, the euro is the base currency while the dollar the United States is the counter currency. Here's how to read the quote currency, one euro equals 1.4321 dollars the United States, at the time.

The foreign exchange quote stating two things. First, if a broker wants to buy the base currency union, they have to pay 1.4321 US dollar to buy 1 euro union. However, if a broker wants to sell the base currency they will receive 1.4321 US dollars when sold 1 euro. It is also important to understand that the exchange rate fluctuate with changing market conditions, each time stronger or weaker euro against the United States dollar.

Factors Yen

Not all citations made in foreign currency equivalent, especially when associated with the Japanese yen. Whenever the Japanese yen is in a position counter currency, currency quotations appear with two decimals instead of four. Example:

USD / JPY = 80.77

The quote above states that the United States 1 dollar equals 80.77 Japanese yen at the time.

If the quote USD / JPY rose from 80.77 into 80.97, the United States dollar strengthened against the Japanese yen, and vice versa.

Pip

Pip stands for price interest point. It is the unit of measurement to express the change in value between the two currencies. For example, the price of AUD / USD is 1.0123, if the price rises to 1.0124 or down to 1.0122, this is a movement of 0.0001, or one pip. When the price of USD / JPY today is 81.12, and if the price rose to 81.13 or fall to 81.11, then this is a movement of 0.01 or 1 pip.

One pip is the smallest value changes on foreign exchange quote, good value quoted with two decimal or four decimal places. Here are some examples:

• If the quotation EUR / USD moved up from 1.3123 becomes 1.3146, this is a movement of 23 pips. If the quote EUR / USD move down from 1.3123 into 1.3101, this is a movement of 22 pips.
• If the quote USD / CHF moving up from 0.9100 becomes 0.9154, this is a movement of 54 pips. If the quote USD / CHF move down from 0.9100 into 0.9000 is the movement of 100 pips.
• If the quote USD / JPY moved up from 80.66 into 80.88, this is a movement of 22 pips. If the quote USD / JPY moved down from 80.66 into 80.00, this is a movement of 66 pips.

Pipette

Many brokers quote currency is currently expanding beyond the standard four and two decimals, and three to five decimal places. For example, a broker can quote USD / CAD as 1.00888. If quotes rose to 1.00889 or dropped to 1.00887, this movement is called 1 pipette.

Similarly, if the USD / JPY is quoted as 81.222, when this currency pair rose to 81 223 or drop to 81.221, this movement is called 1 pipette.

How do I calculate the value of one pip?

Different currencies have different values. Therefore, the value of a pip is different for each currency.

The first thing to consider when calculating the value of a pip is found that for the majority of the foreign exchange quotations, especially the seven major currencies, the US dollar is the base currency or counter currency.

At the quotation USD / CHF, the US dollar is the base currency. At the quotation AUD / USD dollar is the counter currency.

Let's calculate the pip value for each sample, starting with the US dollar as the base currency (see example below)

The first example:

Suppose the price of USD / CHF at the moment is 0.9235. Thus the smallest movement of a pip is 0.0001. The formula to calculate pip value is:

Pip value = Motion smallest decimal / current rate

= 0.0001 / 0.9235

= 0.000108

A value of 1 pip while the USD / CHF is 0.9235 USD 0.000108.

To determine the value of a pip for Japanese yen pairs, let's look at another example.

When the price of USD / JPY is currently the smallest movement 81.55 for a pip is 0:01.

The formula to calculate pip value is:

The value of the smallest decimal pip = Movement / the current exchange rate

= 0:01 / 81.55

= 0.000123

A value of 1 pip when USD / JPY 81.55 is USD 0.000123.

Second example:

Let's see how to determine the value of a pip when the US dollar is the counter currency.

If the AUD / USD is now 1.0237, then:

The value of the smallest decimal pip:

= Movement / the current exchange rate

= 0.0001 / 1.0237

= 0.00009768

A value of 1 pip while AUD / USD 1.0237 is AUD 0.00009768. Note that in this case, the value of 1 pip 1 quoted in Australian dollars. To determine the value of 1 pip in US dollars, multiply the current pip value with the current exchange rate.

Pip value (in USD) 

= pip value (in base currency) x the current exchange rate

= 0.00009768 x 1.0237

= 0.0001

Thus the value of 1 pip when AUD / USD 1.0237 to USD 0.0001.

While the process may seem complicated, the good news that every broker with whom you trade will automatically calculate this value.

Okay, I will continue to the next post, about lot size and leverage. 

Play the Game of Forex! (Part 1)

I will present some basic things to know when to start trading in the forex market. I will outline seven major currency pairs most commonly traded worldwide and explain price movements. Foreign exchange trading has changed recently year. At present, foreign exchange trading is no doubt and it is the largest financial market in the world, with a daily trade exceeded USD 4 trilion in 2010. The authoritative source for global foreign exchange market activity is Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity, which in issued by the Bank for International Settlements (BIS). The official figure is available for the daily foreign exchange turnover taken last survey carried out in April 2010. 53 central banks and monetary authorities participated in the survey, collecting approximately 1300 market participants. Below from BIS:

• Global foreign exchange market turnover was 20% higher in April 2010 than in April 2007, with average daily turnover of $4.0 trillion compared to $3.3 trillion.
• The increase was driven by the 48% growth in turnover of spot transactions, which represent 37% of foreign exchange market turnover. Spot turnover rose to $1.5 trillion in April 2010 from $1.0 trillion in April 2007. (http://www.bis.org/publ/rpfx10.htm)

A report reveals interesting facts, it turns out 48% of the growth occurred in a cash transaction, which includes 37% of the total turnover of foreign exchange transactions in the world. The bulk of cash transactions made by retail traders, namely the ordinary rang like me and you. The group is expanding rapidly and is expected to contribute a larger portion of the total foreign exchange turnover at the time of the next survey results were announced. Official figures daily foreign exchange turnover is expected to reach more than $ 4 trillion at the time. The following chart details the average daily turnover by instrument:

Daily turnover of $ 4 trillion in foreign exchange markets is fabulous. According to the BIS Triennial Survey in April 2010 this number is greater than 23 times the average daily turnover of global equity, and larger 40-fold annual turnover of world gross domestic product. It is remarkable, is not it?

AndOverview Quarter BIS in March 2012, a senior economist at the Department of Monetary and Economic BIS, Morten Bech, estimates that the global activities of forex in October 2011 of about $ 4.7 trillion, compared to $ 4 trillion, according to a report central bank survey Triennial conducted in April 2010. Imagine, in daily average of $ 4.7 trillion.

The good news for retailers is due to increased demand, as the price difference transaction costs decline, the technology offers improved, and value-added services for foreign exchange brokerage firms soared.

It certainly is the best time to start trading in the forex market. Moreover, further strengthened by the daily record (people like me and you) who pursue foreign exchange business quickly.

Currency and Seven Major Currencies Traded

Foreign exchange is a market where each other money exchanged for another currency. This is why currency quoted in a currency pair. Every world currency by which the three-letter code as defined by the international standards organization (ISO) and is regulated by ISO 4217.

Eight currencies most commonly traded are:
1. USD (US dollar)
2. EUR (euro)
3. GBP (pound United Kingdom)
4. AUD (Australian dollar)
5. JPY (Japanese yen)
6. CHF (Swiss franc)
7. CAD (Canadian dollar)
8. NZD (New Zealand dollar)

These eight currencies most commonly traded form the seven major currency pairs. Seven currencies utamka controls the foreign exchange market in terms of volume traded. Since January 2012, it is estimated more than 85% of the volume traded in the forex market are controlled by seven major currency this.

Seventh major currency pairs are:
1. EUR / USD (euro vs dollar)
2. USD / JPY (US dollar vs. Japanese yen)
3. GBP / USD (United Kingdom pound vs US dollar)
4. AUD / USD (Australian dollar vs. US dollar)
5. USD / CHF (US dollar versus the Swiss franc)
6. USD / CAD (Canadian dollar versus the US dollar)
7. NZD / USD (New Zealand dollar versus the US dollar)

Okay, I will continue about how to read the quote currency in the next post.

Loss of My $5000

Loss of money USD 5000 my efforts in less than 10 days time it is an experience that is poignant and painful. Discouraging thoughts come to my mind, "Foreign Exchange is full of risks, foreign exchange is gambling, foreign exchange is not suitable for me." I tried to go out of the foreign exchange market and went to look for other revenue.

However, when I was at a low point in my life, I remembered the words of a businessman, that there is no successful business in this world, there are people who are successful in business, so there are only successful people. Do not blame business, blame yourself in running a business. Apparently, in this world there are many successful people are also in the business of foreign exchange? Although also not a few failures. We just need to choose, we participated was in a group of successful people or in another group. Yes, we only need to change the way we think to be successful. The reference to cheer yourself this is a turning point in the course of my foreign exchange business. I decided to take control of this foreign exchange trading business. Rise from adversity, start learning the proper trading skills. Start reading books, searching for information, trial and error and do it every day. 

In this blog, I will start from the understanding of the foreign exchange trading to teach techniques in trading, so there will be easier to learn and practice in accordance with yourself. So I hope, follow this blog. thanks.

My First Transaction

The first transaction, I am selling the GBP/USD. Both currencies have experienced a bullish trend, and the price reached a new peak. It's the right time, I thought, rubbing my hands with glee. I would be a millionaire and has plenty of money next week. Seeing the price has reached the highest level, I think that prices will not rise again. I click "sell" at that time. The decisive moment poignant lesson for me. After clicking the "sell" prices continue to climb, and continued for several days. When prices continue to climb, I decided to re-press the button to sell. This time with twice the amount of the lot (and intensity doubled). The reason is that if I click two times the number of lots, what happens is the price down a bit before I scoop up to passable. After clicking the "sell" my eyes widened. Prices continue to rise even further. My hands began to sweat, my head began to glisten with sweat began dripping from my head. In desperation, I hold my laptop and turned it over to describe the price drops. My ego hit. "Prices should go down," I muttered. When I click the "selling" for the third time, with the amount doubling lot second transaction. The numbers on my laptop screen when it is not different from the numbers shown my friend. It's just that the numbers belonged to my friend no negative sign. A few days after my third click, I was exposed to a margin call. In total less than 10 days I lost money in my account. I am comforted to know that as human beings we have a similar way of thinking. But my heart was shattered after my account messy. Hopefully this kind of thing does not happen to your trading account.