Forex stock comparisons is showing the advantages of choosing to trade forex. Of course if you are looking for long term investment then that is another matter, but for speculative traders the forex trading has many special features that make it particularly attractive. Here are the top 5 reasons for choosing forex trading over stock trading.

1. 24 Hour Market

One practical advantage of the forex market is that it is open for trading 24 hours a day Monday through Friday. This is because of the global nature of the market and the fact that it is always business hours somewhere in the world, excluding weekends and holidays. So a forex trader can work a day job and trade in the evenings or early mornings.

2. Liquidity

Currency is liquid by definition, if liquidity measures the ease of converting an asset into cash. More often it is taken as the amount of money in a market. On this, too, currency scores very high.

Turnover in the forex market was almost $4 trillion per day on average according to a survey by the Bank For International Settlements in December of 2007. It has probably exceeded that now.

This is considerably more than is traded on all of the stock markets in the world added together. In forex you are not limited to trading in your own country or on your own country’s currency, so the advantage to this trader of being part of this huge market is clear. You have a much better chance of getting the price that you see or the price that you want.

3. Openness

Another advantage stemming from the sheer amount of money in this market and its high trading volume, is the openness of the market. There is very little opportunity for insider trading in a market which deals with the economic performance of whole nations and involves every major financial institution in the world. This means that the retail trader is not at a disadvantage to the extent that might be true in the stock market and lends more weight to our forex stock argument.

4. Leverage

Leverage is the trader’s most essential tool in that it allows a small fund to control a large position size, resulting in a massive proportional return on investment, assuming that you are profitable. The leverage offered by forex brokers tends to be higher than in stock trading.

In forex, 100 times leverage is seen as standard or low, 200 times is common and 400 is possible in some circumstances. Of course this makes forex trading extremely risky but for a successful trader it is a significant advantage because it means that more money can be made from less.

5. Trade Both Directions

When you trade forex, you are always dealing with a currency pair, exchanging one currency for another. This means that you can trade in both directions. For example if you are trading EUR/USD, you can start by investing in either euros or US dollars depending on which one you think will rise. So you can buy or sell the pair (go long or go short).

In a sense this is like trading stock options or futures, but with more flexibility. The flexibility comes from the fact that currency values are relative to each other. They can never all fall at the same time, as stocks can. So this is another point for forex in the forex stock comparison.

Foreign exchange news can be a good basis for day trading and forex scalping techniques, but there are some pitfalls that you need to avoid. It is all too easy to get trapped in a losing position when trading around the time of forex news announcements. Here are 3 possible problems to watch out for.

1. Spread

Spread can be the bane of the forex day trader. It is hard enough to maintain a profit on short term trades with a regular spread cutting into each one, but around the time of news announcements the situation worsens. Many brokers will increase spreads because of the uncertainties and the low volume of trading around that time. In some cases brokers will not implement new trades at all.

So when planning trading around the time of news releases, it is vital to take into account the likely higher spread, as well as checking that your broker will honor your trades. Some brokers will guarantee this, but the spread is still likely to be anything up to 5 times the normal level.

2. Slippage

Slippage is the difference between the price that you saw on your screen and the price that you actually get. In normal circumstances a trader might expect to get the price that he clicked on, although this can vary from broker to broker. Some have a reputation for nasty slippage even at steady times. However, when there is a foreign exchange news announcement, the prices will be moving so fast that slippage is extremely likely and can be big enough to cut into profits in a big way.

3. Effect Of Expectations

When trading on the basis of foreign exchange news, it is very important to take into account the prior expectations in the market. To take a simple example, imagine the US GDP (gross domestic product) is about to be announced. Generally speaking, if the US GDP is high, the US dollar will strengthen. So a trader who is expecting the news to report an increase in the GDP might invest in the dollar just before the news is due to break.

However, it could be that the market was expecting a high GDP to be reported and therefore some of the rise in price had already happened in the days leading up to the announcement. If the report is as expected, there will not necessarily be any further improvement in the value of the dollar. Worse, if the GDP is up but not to the extent that was expected, the dollar could actually fall following the announcement.

So a short term trade right around news releases will only pay off if the figures announced are significantly different from what was expected. Therefore it is clearly important for a day trader operating around foreign exchange news announcements to take account of the expectation in the market, as well as the likely figures to be released.

The forex market is driven by economic forces, so forex forecasts depend to a large extent on economic or fundamental indicators. These form the basis of the financial news and announcements that you can see coming up on a forex calendar.

Of course, some of these economic factors are more important than others in terms of currency prices. Some will pass with scarcely a ripple on the surface of the market. Others have the power to shake the forex market by its roots and overturn even the biggest trends. So which are the ones that you must keep track of for your forex forecasts? Here we list the 7 top fundamental indicators for the currency market.

1. Interest rate

An interest rate change in any of the major financial powers (USA, Britain, Japan, Germany, etc) can have a huge effect on currency prices. Even if you are trading a pair that does not include that particular currency, you are likely to see a knock on effect. Interest rates are the biggest driving force for the forex market.

This is because the interest rate is one of the strongest and fastest indicators of a country’s economic performance. Investors are looking to invest in countries with a strong performance, so a rise in the interest rate will immediately attract investors. This affects currency prices because they must in effect buy that country’s currency in order to invest in its stocks. It will also, clearly, affect the currency of other countries where they will selling investments in order to buy into the new strong country.

Interest rate changes in turn are driven by other factors which the central banks will watch in order to decide whether a change in the interest rate is needed. This means that instead of waiting for the interest rate to change and affect the market, you too can watch these other indicators and formulate your own forex forecasts from them. The remaining 6 factors will all be used by central banks as indicators of a country’s performance.

2. Consumer Price Index or CPI

A high index (high prices) reflects a strong economy.

3. Producers’ Price Index or PPI

This is the cost of materials for manufacturers etc. When these rise, the price rises will be passed on to consumers, which leads to a higher CPI (inflation) and perhaps a rise in the interest rate.

4. Gross Domestic Product or GDP

The GDP is like the accounts sheet of the whole nation. Results are reported every quarter and economists generally take this as the strongest indicator of the nation’s economic performance. Again a high GDP may be a signal that interest rates could be rising.

5. Payroll Employment

National payroll figures are a measure of the employment situation in the country. This index is also high when the economy is strong.

6. Retail Sales

This figure records the total receipts of retail stores in the nation, indicating consumer spending and confidence.

7. Durable Goods Orders

This is a measure of the value of orders placed with manufacturers.

So increases in all of these factors will indicate a strong economy and probably strong currency values. However, be aware that sometimes a result may be announced which is less of a rise (or fall) than the market expected. This applies particularly to GDP and interest rates.

In this case the market will have moved in anticipation of the change, and when the announcement comes and is less of a change than expected, it could cause a backlash. So even if you watch the indicators, forex forecasts can sometimes catch you out.

Forex technical analysis is one of two ways to analyze the foreign exchange markets. It works by studying the movement of prices, while the other method, forex fundamental analysis, looks at external economic factors such as the strength of the national economy, political events and so forth.

Studying price movement with forex technical analysis involves currency trading charts. The theory of it is that if you look at the historical records of how prices have moved in the past, you can identify tendencies and trends which will mean that you can predict how the prices will move in the future. Then as soon as you spot an emerging pattern that fits your system, you have a trading opportunity.

There are three types of forex charts:

1. Line charts

Line charts simply plot each closing price and join them with a line. The rise and fall of the line shows the general movement of a currency pair. However, it does not show movements within the trading period, only the close.

2. Bar charts

A bar chart will show a series of vertical lines or bars. The top of the line represents the highest price during that time period. The bottom of the line represents the low. A short horizontal bar on the left side indicates the opening price and a short horizontal bar on the right side indicates the closing price.

Since they show the open, high, low and close, bar charts are also sometimes called OHLC charts.

3. Candlestick charts

Forex candlestick charts show all of the same information as a bar chart, but presented in a different way which most people find easier to read at a glance.

You have the same vertical line with the high at the top and the low at the bottom, but there is also a wide block in the middle showing the gap between the opening and closing price. The blocks will be filled white (for a rising price) and black (for a falling price) or more often these days they are colored. Colors can vary but a common combination is green or blue for rising and red for falling.

Most people prefer candlestick charts over bar charts because they are easier to interpret. It is much easier to see turning points in the market using candlestick charts. You can immediately see where the market reversed from an upward to a downward trend and vice versa.

When you see a trend forming, you can make money by trading in the same direction as the emerging trend. ‘The trend is your friend’, as currency traders say. For this reason, identifying the trend is the most important thing to learn in forex technical analysis and using candlestick charts is probably the easiest way to do this.

Learn more about forex technikal analysis

If you want to start trading currency it is worth looking around to make sure that you find a top rated forex trading course. Obviously you will want to start seeing a profit as soon as possible but forex trading is risky and if you do not get a good forex education you could easily be losing money instead.

It is not so simple to predict which way currency prices will go. There are many factors to take into account. On top of that, it is vital to open and close your trades at the right moment to get maximum profit from any price change. If you try to work all of this out for yourself it will take a lot of time. So why not give yourself a head start by taking a good ?

Your course should cover all of the basics so that you are well prepared to begin trading. Here is a short list of important points that you will need to understand. Make sure that your course covers all of these before you sign up.

1. Principles of currency trading

Any good currency trading course will explain the basic principles of the forex market including leverage and margins, pips, spread and other costs, and what to look for in a broker.

2. Technical analysis

Technical analysis includes interpreting charts and indicators to identify trends, swings, breakouts and other factors that could be signals for you to open or close a trade. Different systems rely on different indicators. In the beginning, you only need to master the indicators for your own chosen system. Trying to cover them all could be confusing. Later, you might want to refer to other indicators to tweak your system for better profitability, so it’s good if you have access to a course that you can dip into again further down the line.

3. Fundamental analysis

Fundamental analysis relates to the economic news, announcements and other events which affect currency prices. In the end, it is each country’s economic performance which causes the value of its currency to change. You do not necessarily need to be able to predict these events. In fact many traders stay out of the market completely around the time of a forex news announcement. But it is important to understand how the process works and keep an eye on the alerts for anything that might affect your trading.

4. Risk management

Risk management concentrates on minimizing your losses through the use of stops, and protecting your funds by limiting the position size. In general your risk on any one trade should never be more than 5% and many traders work on 2%, 1% or even less. Broadly speaking you should expect to reduce the risk for larger fund sizes, simply because it will be more important to protect a fund of several million dollars than one of only a few hundred dollars. But you are pretty sure to crash and burn if you exceed 5% so make that your limit. You may feel like taking a chance for quicker growth on a small fund but wiping out your funds is not a good way to go!

5. Mindset

We put this last because it is usually the last thing that beginning traders want to hear about, but it is possibly the most important of all. In the end, if you do not master the mindset of a successful trader you will not be able to profit from the forex market.

You must develop a cool headed approach and work on your discipline so that you can follow a trading system without letting fear, excitement or other emotions get in your way. You also need to understand how to handle losses on the psychological level. Risk management techniques can help but if you let your emotions get the better of you, it is easy to fall into a pattern that will guarantee more losses. A good forex trading course will include teaching and exercises to help you master the art of self discipline and keep your emotions off the trading floor.

There are many Forex Trading Courses on the market. The most frequently used is

Forex Time Machine

When we are reviewing forex trading methods, forex courses, forex robots or forex signal services our goal is to be sure they meet a specific set of criteria and to measure each product against those criteria before passing judgment.

The logic here is that not all forex products are created equal — in fact, many of the forex courses and automated forex trading systems out there are designed to make money for the creator of the product, not to make money for the forex trader.

With the eruption of Forex trading products that have hit the market in the past year, it is more important than ever that forex traders do their homework before spending their money on that program that promises to turn $5,000 into $150,000 in just thirty days.

We’re seeing a significant rise in these types of claims – and forex traders would do well to remember that many if not all, of these claims are simply a Scam.

Here’s an example: Maybe you’ve seen a headline like this:

"My Brand New Super Forex Robot Turns $300 into $30,000 in just 5 Days. Get It Now For Just $49.95…"

Think about that for a moment — that means in the second week, you would turn $30,000 into $4.5 MILLION — and in the third week, you would turn that $4.5 Million into $675 Million.

And in just ONE MONTH your $200 would become $101,250,000,000 (that’s $101 Billion).

You’d be the wealthiest person in the world. All that for just $49.95.

Do you believe that?

Now we’re the first to admit we’d LIKE to believe it…but we know better.

This is why we develop our standards for reviewing and testing forex products and why every product must meet our certain criteria before we’ll give it a passing grade.

The criteria we use to determine whether a trading method should be considered:

• In-depth, detailed learning instructions
• Trade Opportunity Identification
• Entry Rules / Exit Rules
• Trade Plan and Strategy
• Risk Management (Initial and Ongoing)
• Product Support (Materials and Customer Support)
• Additional Product Tools (Forums, Member Websites)
• Product Guarantee

If a forex trading method, forex robot or other forex course or program does not meet these criteria, we won’t approve it as worthy of your time or your money. Remember nobody can promise you profits trading Forex (or any other market). If you’re reading outrageous claims, you should avoid the product because there is simply no way they can be true.

We’re tired of seeing traders scammed by those claiming HUGE, windfall profits. The reality is this: Forex trading is a risky business and you are better off armed with education and a method where YOU are in control of your trading activities.

Automated forex trading programs, black box systems, mechanical forex trading systems or forex robots take control AWAY from you. We argue this is a bad idea and can only lead to massive losses for you over time.

There are basically two types of currency exchange trading: forex fundamental analysis and forex technical analysis. There is a lot of debate about which is better. In fact, both are important.

The simplest way of looking at these two methods of analyzing the market is to say that fundamental analysis considers the world economy while technical analysis looks at charts. In this article we will consider the different fundamental or economic factors and how they can affect your trades.

It will be clear to anybody who has even the most rudimentary understanding of the currency markets that a nation’s economic status will have an effect on the value of that nation’s currency.  A healthy economy means a strong currency, just as a company’s stocks will rise in value when that company is doing well.

Any time that a major financial or economic report is due from one of the main players in the world economy, you can expect to see an effect on the foreign exchange markets. This includes reports of the country’s Gross Domestic Product, statements of the national debt, inflation, employment levels and trade deficits. Many of these reports are given out regularly at predetermined times and dates, and you will see a lot of volatility in the forex markets around those times.

It is very important to keep track of when these reports are due, not only in your own country but in all of the countries whose currencies you regularly trade. You cannot rely on national newspapers and television for this. They do not carry international economic news at a sufficiently detailed level. You need specialist publications. Many people use the internet for this purpose.

However, it is not only the economy that counts. Social and political forces also have a strong influence on a nation’s currency values. Events such as an election, civil unrest, or a natural disaster can cause fluctuations in values.

Some of these events are difficult or even impossible to predict, but you can still base trades around what is likely to happen after the event. You can use historical analysis to see what happened in the currency markets the last time there was a similar event.

If you want to base your trading around fundamental analysis of the forex markets you will need to be the type of person who enjoys following the financial, political and economic news.

The alternative is to use information about upcoming events to avoid trading at those times. People who prefer to rely mainly on technical analysis will do this. But you still need to know what is happening, in order to keep out of the market. So even for somebody who prefers basing their trades on charts, forex fundamental analysis is important.

Currency trading courses can benefit you greatly whether you are a novice forex trader or have been around the forex market for some time. There are thousands of people interested in trading the forex markets from home and a number of very effective training courses have developed to help these people to actually make money rather than losing it in the risky world that is forex trading.

Just about all currency trading courses are available online. Forex traders work from their computers so that is naturally the place that you want to have your educational material.

So do you have to study a lot to be a successful forex trader?

Really, it is not so much a question of studying as picking up new practical skills. You will need to read a certain amount but at the same time you put that into practice by trying everything out on a free forex demo account.

One of the most important things that you need to develop to make money with forex trading is skilful money management. Understanding risk management will help you preserve your funds when the inevitable losing trades occur. So whatever forex trading course you choose, be sure that you cover this subject.

Most forex courses will teach you one or more specific trading strategies that you can apply in the markets. It is always important to follow the instructions exactly. Do not think that you can cut corners or apply the system in a different way. Usually this will not work and you will lose money. First, put it into practice exactly as described. Then when you are completely familiar with it you will be in a position to make modifications. Of course, you will always test new strategies in your demo account, not on the real money market.

For an experienced trader, it is worth enrolling in a course from time to time to sharpen your edge. When you have been doing anything regularly for any length of time you begin to fall into habits that are not necessarily the best. A forex course can bring you up to date and at the same time teach you some new tips. Many traders buy just about every new course that comes out, just to see what it can add to their trading skills and tools.

Do not be concerned if the course already covers many things that you know. This is inevitable if you are an active trader. What you want is to find the nuggets of gold, the new tips and tricks that are in there. If you are very experienced, maybe 80% or even 90% of the course will not be useful to you, but the parts that you can use could easily double your income. So do not judge currency trading courses too soon but take the time to examine them closely and pick out what you can use.

When you are looking at forex systems, one of the factors that you might see mentioned in a good forex system review or summary is drawdown.

So What Is Drawdown?

All trading systems have their losses, as I am sure you know, and occasionally you will have several losses in a short period of time. The amount of loss that you might expect to have in a certain period varies according to the system, but it will follow statistical laws and is probably more than you think. The amount that you can expect to lose on each losing trade also varies with different systems, of course.

So there is a need for some kind of measure that will apply to any system to give you an idea of how much your funds are likely to diminish when a string of losses occurs. This is drawdown: the degree of loss between the peak value of your funds and the lowest point after a bad run.

Why Is It Useful?

Having a figure for the drawdown of a system is a very useful measure of the risk that you are likely to encounter. Clearly it depends on how much risk you are placing on each trade, so knowing this figure will help you keep your per trade risk within boundaries where your funds are not likely to be wiped out when things go against you. It gives you a worst case scenario based on past results.

If your actual loss goes to more than you have on deposit with your broker or the credit you have agreed with him, your broker will ask for more money (issue a margin call) or close your position. Having a drawdown figure for your system helps you to avoid this by making sure that your expected potential loss is covered.

Some caution is required here because you cannot assume that the past results are necessarily going to continue into the future. You should plan for a buffer, probably at least as much again. 

Drawdown is also used in calculating the Calmar ratio of a financial trading system. This the compounded annual return divided by the maximum drawdown of a system. Often, a system with high returns will also have high risk, but you can use the Calmar ratio to compare different forex systems. One with a higher Calmar ratio will have a higher return in relation to its risk and most people would consider that makes it a better system, at least on historical results.

How To Calculate Drawdown

Of course, many systems are described or sold without telling you the drawdown. Or you may be designing your own system and want to be able to assess its risk. You may wonder what to do in this situation. The answer is very simple. If the system does not tell you exactly what its drawdown is, you should try to work this out for yourself. The best way to do it is to run the system for a considerable period in a demo account. This is always a wise plan when testing a new system anyway.

As you probably know, demo accounts allow you to run a forex trading system in real time but with virtual funds so that you do not have to risk any of your own real money. Most brokers provide them and it is best to have a different demo account for each system that you are testing. This makes it easier to track results and variables such as the drawdown of your forex systems.

FXYard -  most frequently used demo account

If you want to discover the most successful forex trading strategy for making big money, you need to concentrate on the money itself and how to manage and track it. A profitable forex trading system is necessary of course but the best system in the world will not make money for anybody if they do not know how to manage their funds.

This sounds like it should be a very basic skill that anybody could do. Unfortunately it is not so easy and does not come naturally to everybody. If you are good with your finances generally, able to keep within your income and always know how much is in your checking account, you will be starting with an advantage. But putting your funds at risk will require a different attitude. We all need to learn to some extent and the best way is to start small.

If you try this for yourself, you will find that the best way to make big money is not to think about making money at all, but just concentrate on avoiding big losses. You should not be worried about occasional small losses, because these are inevitable. However, make sure that your trading plan is not one that exposes you to the risk of large losses.

It is true that a plan that involves many small wins and occasional large losses can be profitable. However, it is not the best plan for anybody starting out in forex trading.

This is simply because a large loss, when it happens, is likely to unsettle you, sometimes to the point of causing panic. You will be afraid to continue with your trading plan in case it exposes you to another similar situation. At the same time, you will want to recover your lost capital as quickly as possible. This is a dangerous situation where it is very easy to slip into bad trading decisions.

Do not be tempted to try to make a huge amount of money by using maximum leverage on a small account. Even if you think that you see the perfect trading opportunity that cannot possibly lose, you could still be wrong or the situation could suddenly change. Unexpected news is always a danger and there are no guarantees in the currency markets.

Limiting your risk to 2% of your account balance is a good forex strategy for most traders, especially in the beginning. This means $20 on a $1,000 balance. This is the minimum balance that many experts recommend for starting out. Although you can find forex brokers who will let you open a mini forex trading account with less, it is better to have at least $1,000 in your account. And of course, that should be money that you can afford to lose. Then you can take care that you don’t!

Something else that you should be sure to do is to keep records of your trades. Enter them all onto a spreadsheet, with your opening and closing prices, profit or loss after deducting the spread, and preferably, the reason for making the trade such as the indicators that you used.

Even if you are only using a demo account at this stage it is worth taking the time to do this. You can learn a lot from looking over this spreadsheet in a few months’ time. It will help you to improve your forex strategy so that you have a better chance of making big money when you start trading for real.

Beginners looking for a forex trading tutorial are always very keen to get out there and start making money but without the right attitude to your start up funds this often does not work out well. You may think that you want to get started so you start out with a small balance and you do not care if you lose in the beginning, but at the back of everybody’s mind is the hope of making big money and it can be very disappointing when things go wrong.

In fact, many beginning traders give up almost before they started, simply because they began without the right preparation or enough of a back up investment fund. So how much money do you actually need to get started with forex trading?

Of course it is true that you can open a live forex trading account these days with only a hundred dollars or even less, but for most people that is not a great idea. You cannot start out with such a tiny amount of money and hope to be making a living from forex trading any time soon.

Another problem with starting forex trading with a very small account balance is that you will be tempted to over trade. You may begin to treat it as a game. You will want something to happen and you do not have much to lose so you will open a trade that does not fit with your system just as an experiment. Sometimes it will win, sometimes it will lose. Probably on balance you will lose money that way, but that is not really what matters.

The big problem with this is that unless you keep very meticulous records (which is hard to do when you are only risking cents on each trade) you will end up not knowing if your original system would have been profitable or not, because you didn’t keep to it.

As for how much money you need, it’s probably more than you think. Brokers will let you open a mini account with $1,000 but if that is all you have to invest we suggest a micro account. You should be trading micro lots otherwise your risk is too high and you could lose it all.

Multiplying that up, you would be wise to wait until you have $10,000 to open a mini account. And joining the big boys with a standard account requires around $100,000 if you want to give yourself a good chance of success.

It sounds like a lot of money but there is no need to let this stop you from trading forex. Just remember to start small and begin with micro accounts if your funds are not huge. Keep this in mind and you may be thanking us for saving you from a wipeout with this forex trading tutorial.

Foreign exchange software is a must to have if you want to get started in forex or currency trading. The days of calling up your broker on the telephone are long gone. Everything is done online now, over the internet.

So to begin, you will need a computer of course. Most modern computers are fine (say, less than five years old) provided you do not have them so packed with other programs that they run very slow. For some software packages you will need Windows, or a Windows emulator if you have a Mac.

You will also need a broadband connection. Dialup will not do for foreign exchange trading. It is simply not fast enough. You will have many missed trades and slipped prices due to the time delays, and sometimes you may not be able to trade at all. It would be very frustrating to try to trade on a dialup connection.

The software program that you actually use will be provided by your broker. This is the interface between you and the forex market via your broker. It will allow you to make your own trades based on the prices that you see on the screen. They usually give you a free forex trading demo account so that you can try everything out before you start risking your money on real trading. Most forex broker software platforms also provide free charts so that you can analyze price movements and identify trends to help you make profitable trades.

Broker foreign exchange software platforms may be either web based or desktop based. If they are web based, you log in and control your account from the broker’s hosted platform. If they are desktop based, you download the software to your own computer and run it from there.

Some web based platforms have downloadable elements but the deciding question is whether the software will still run if you switch off your own computer. If it is web based, you can set up a trade or a stop loss, then switch off your computer and the trade will still be triggered. If the software is on your own computer, you have to leave it switched on and connected so that it can make the trade at the appropriate time.

Some people buy a new computer that they use only for their forex trading. There are several reasons why you might want to do this even if your present computer is fine. One is so that you can have a dedicated computer that you can leave on all the time. You do not have to share it with other family members and risk having someone else disconnect it when they are finished.

The other major reason is that you might want a backup. Computers are subject to faults developing that can take several days to fix. They can also be attacked by viruses and malware. You might want a second computer running a backup copy of your foreign exchange software so that you can still trade if your main machine is out of action.

There are many Foreign Exchange Software on the market. The most frequently used is

Fap Turbo – Automated Foreign Exchange Software

The Relative Strength Index or RSI is a very popular indicator that can be used to identify oversold and overbought markets on forex charts. It is a momentum oscillator developed by Welles Wilder that compares the size of a currency’s recent gains to the size of its recent losses and expresses this as a number between 0 and 100.

In most cases, a reading of less than 30 indicates an oversold market and a reading of over 70 indicates an overbought market. Some traders prefer to wait for a stronger signal by setting the marker lines at 20 and 80. Crossing these lines can be used as a buy and sell signal respectively.

The RSI can also be used to identify or confirm trend formation at a glance. There is a center line at 50. If you consider that the market may be on the point of forming a new uptrend, take a look at the RSI and check that it is above 50. This is a bullish signal, indicating that average price gains are higher than average losses. In the same way if you suspect that a downtrend is forming, check the RSI shows below 50.

When we talk about trends here, of course we are not looking at short term fluctuations in the market. These trends may last for several months. So this is not a tool for day traders.

The RSI is a running calculation that relies for its accuracy on the number of past time periods that are used in the calculation. Depending on your charting package you may be able to vary this parameter. 14 is generally the minimum. Increasing this number will improve the accuracy of the RSI but will mean that it does not pick up on a new trend so early. So you have to balance the advantage of getting in on a new trend near the start, with the disadvantage of sometimes opening a trade on a false signal.

The RSI is a very popular tool because it gives the Forex trader so much useful information in such a simple form. If you start using regularly you will probably find that it pays off. Indeed, it may be tempting to rely only on RSI for your signal to enter the market. However, it is never wise to depend on only one indicator. They all have their failings and will let you down when you least expect it. You should always confirm your findings by checking with the stochastic or another indicator on your forex charts.

The forex trailing stop is a stop that you can set in an expert advisor on the Metatrader 4 platform. It is pretty much what you might guess from the name: a stop loss that moves according to the current prices on the forex market. And a stop loss, of course, is a marker you set that will cause your MT4 expert advisor autopilot software (EA) to exit the trade when it goes against you to prevent you having any risk of a large loss.

But there are several things to be taken into account when you consider how to use the trailing stop. It is a little like a ratchet in that it can move up but not down. When you move into profit, it follows behind, moving up by the same number of pips that the market moved. But if the market falls, it stays where it is. So the market can rise and rise and you go on making more profit, but when it falls just a little way, the stop loss comes into effect and exits your trade with whatever profit or loss you made up until that point.

To give an example, you open a trade to go long. Of course at the moment of opening you are at point zero: 0 pips profit or loss. Let’s say you set your trailing stop at minus 30 pips. If you are unlucky and the forex market just falls and falls, the stop loss will kick in and close the trade for you at 30 pips down. But if the market rises, the stop loss will rise with it.

So when the market is 20 pips in your favor, your stop will have moved to 30 pips below that. If the market then falls and the price hits the stop, the EA would get you out with a loss of just 10 pips.

If the market rises to 40, the stop moves up to 10 above zero. You then have a guaranteed profit of 10 pips. In fact as soon as the market rises by the same number of pips as your trailing stop (in this case 30) you cannot lose.

Sure you could monitor the markets and operate this strategy yourself, but there is a risk of you failing to make your exit at the right moment and taking a greater loss than you planned, or having to exit a trade while the market is still rising because you have to sleep or whatever. So as long as you can leave MT4 running, an EA on autopilot relieves a lot of the pressure that would otherwise be on you in this situation.

The volatility of the market is the main factor in deciding where to set the trailing stop. You do not want to take a heavy loss but at the same time you do not want to have the stop triggered by random fluctuations in the market. A forex trailing stop that is too close to the starting price will be triggered so often that you could end up making constant small losses.

There are many MT4 expert advisor autopilot software (EA) on the market. The most frequently used is

Fap Turbo Robot

In this currency trading tutorial we will look at one of the best ways to maximize your profits from the same number of trades. That is, keeping track of your trades.

Most traders are aware of the importance of having a trading plan, but not so many keep a record of their successes and failures. When we start out, it is easy to assume that we will remember all of our trades. In fact, if you think back over just the last week, whether you are using a forex demo account or trading for real, you probably cannot remember more than half of your trades.

The big gains and losses stand out but the many small trades that are the backbone of our trading plan quickly fade into a blur. And yet it is these ‘average’ trades that will add up to our success or failure as a trader in the long term.

When things are going well, it is easy to fall into a false sense of security and think that there is no need for any work other than following the trends by placing trades at the right moment. But then if something suddenly changes and we hit a losing streak (as we always eventually will), we have no idea what went wrong.

• Was it a fault in our forex trading plan?
• Was it the way we implemented it?
• Did we start increasing the risk because of over confidence?
• Is it a blip in the market that will work itself out in a few days?
• Or is it just a question of statistics, ironing out the better than expected results that we had over the past few months?

Without having a record of our trades to consult, we are completely lost. We have nothing to analyze so we cannot tell whether we should continue with our plan or whether there is something that we should change.

So what kind of records do we need to keep? It can be something very quick and simple.

You can use either a notebook or an Excel spreadsheet. Just write down every trade that you open, plus of course the close. You will want to note the entry level, stop loss, profit target and actual profit or loss. Also record the reason for opening the trade. And if you deviate from your plan in any way, e.g. by holding on in the hope of a bigger profit than your target or closing early for fear of a loss, write that down too.

If you use more than one system, you will want to record them on separate sheets. If not, you could end up with a situation where you are recording your trades and showing a small profit overall. This is OK so you do not analyze any further. But if you have the different systems on separate pages you might see that one system is performing very well and the other is actually making a small loss. If that continues over a significant time you could hugely increase your profits by putting the losing system on hold while you try to improve it.

Then at the weekend you can look over the previous week’s trades. You may be surprised at what you see. No matter how experienced you are as a forex trader, you will learn something almost every time by following the advice in this currency trading tutorial.

Free Training Video – The 6 Big Currency Trading Mistakes