Here’s the real reason you’re still losing money with Forex.

You’ve likely heard the term foreign exchange lately – it is starting to become one of the most up to date trading trends in the markets today. That’s a trend we suspect will continue but today, I would have liked to take a few moments to indicate why as well as why you need to take advantage of trading foreign currencies.

Just a couple of years back, the foreign exchange markets were dominated by the giant brokers and major banks around the planet. Today, the ‘little guys’ have got in on the action – and the expansion in currency trading has increased from $1.9 trillion to nearly $3 trillion in that short space of time ( that’s the typical daily turnover in the markets – a 50% expansion in turnover ).

But why should you trade Forex?

First, the currency exchange markets are highly liquid ( in the major pairs ) and have a strong tendency to ‘trend’ regardless of what is happening in other markets ( stocks, commodities, bonds ).

That liquidity also creates incessant volatility – and the volatility is where the ability to profit from those trends happens. The greater the volatility, the bigger the profit potential.

2nd, the exchanges have been beaten down, rallied, fallen, rallied – and there are robust suggestions that another ‘fall’ is coming. The doubt in these markets is keeping them from a particular direction, or trend. In the currency exchange markets , however , traders don’t have to fret about’bull’ or’bear’ markets – the currencies are always in a trend ( whether up, down or sideways ).

furthermore, the financial upheaval driven by the credit tightening and the enormous state responses means investing or trading in the stock markets will never be the same – but these same events helped to create even bigger opportunities in the foreign exchange markets.

foreign exchange trading is not without risk – and frankly, the general public approach the currency exchange markets totally wrong. The current business and financial conditions make this one of the best times to take on currency trading, but only if done properly.

35+ year trading vet and currency exchange educator, Bill Poulos, has latterly released a new video on the RIGHT way to approach trading currency exchange.

See, most traders go into forex trading with the idea of getting rich fast. And they come out pretty poor.

What Bill shows you is how to get into trading currency exchange by managing risk FIRST and taking profits SECOND. It’s extremely turning the currency exchange community the other way up.

Watch this free video – see whether you disagree with him :

http://www.yourforexangle.com/y/?i=1042601&u=4&l=f2

We were chatting with some currency exchange traders about one of the Problems inspiring them while their trades were ongoing and found a standard issue – watching winning trades become losing trades.

As we’ve discussed before, if you are not handling your foreign exchange trades, from entry point to exit point, you are going to see this happen to you – and it’ll likely occur often .

Here’s the base of the issue :

A trade is entered along with a preliminary stop loss. What most traders do is try to get ALL their profit at once, but they don’t actually have a ‘target’ -

When the trade initially gets moneymaking, many traders will ’screengaze’ – they get targeted on how much they have made or are making at that moment. What they don’t do is plan for exiting the trade – they overstay in the trade and often watch their profits evaporate when the market turns against them ( and then compound that mistake by staying in EVEN LONGER to ‘get back’ those lose profits ). This is a losing offer in foreign exchange trading.

in short , they let greed make them lose sight of the point of the trade.

what’s the point of a trade? To maximize gain and minimize risk – it IS that easy.

Maximizing gain doesn’t mean you exit a trade at the comprehensive ‘Top’ – it means that for the duration the trade is on, you have a set of rules that establish where you may exit for profit – and it isn’t where you suspect it is! More on that in a bit

Minimizing risk means more than only setting that 1st stop loss – you MUST manage your stop losses throughout the period of a trade.

When currency exchange traders enter a trade they must protect their capital first and think profit 2nd. When their position starts trending up, they can take the right action to protect their capital AND their profits.

In fact, most successful currency exchange traders presume they’ll lose on each trade. They perform this psychological trick to make sure their risk plan is always top of mind! Once a trade turns in their favor ( much to their surprise ), the 1st steps they take is get themselves into a break-even trade situation ; followed by assertive stop loss management to maximize their profits on the trade.

They think risk first, profit 2nd.

Watch this video to see how it’s done :

http://www.yourforexangle.com/y/?i=1042601&u=4&l=f2

Currency trading takes place thru major banks, market makers, and brokerage hourses around the planet, who together make a marketplace for trading currencies on a near 24/7 basis.

The foreign exchange market is always’open’ ; it’s the 7-Eleven of the trading world and is the largest finance network in the world with daily average turnover totaling trillions of dolaars.

it is also an expanding market, as more traders turn to foreign exchange trading and away from stocks.

At its simplest, trading foreign currency involves 2 currencies traded similtaneously, called a ‘pair’. Fore example, the EUR/USD pair, trade the Euro against the US greenback. In this example, a buyer of this pair would be ‘buying’ the Euro and ’selling’ the US Dollar.

currency exchange pairs are described in the following format : XXX/YYY

XXX, the 1st currency in the pair, is called the ‘base’ currency. YYY, the second currency in the pair, is called the ‘counter’ currency in the pair. Prices are always expressed in terms of the counter currency.

For example if the current cost of the EUR/USD pair is shown as 1.3667, this would imply that one EU Dollar ( the base currency ) equals $ 1.3667 US dollars.

Most major pairs are priced to four decimals, or 1/100th of one %. The exception to this is the japanese Yen pair, which trades only to 2 decimals. This is because there are usually over a hundred Yen to the dollar.

In an instance where the US Dollar is the base currency, the USD/JPY pair for example, costs here are expressed in japanese Yen. If this price is 108.02, this means that the base currency, the US dollar, equals 108.02 jap Yen.

Forex costs are expressed in pips. What’s a pip? A pip is simply the minimum increment that a currency pair price can change. For instance, if the EUR/USD price changes from 1.3790 to 1.3791, the costs is said to have gone up by 1 pip.

currency exchange pair quotes are on a bid-ask basis. The bid is the price the market is prepared to pay a seller at the point in time for a specific currency pair. The ask is the price the market is ready to sell to a buyer at a [point in time for a specific currency pair. The difference between the bid and the ask is called the bid/ask spread.

Currency exchange  costs are always listed as Bid price first, Ask price second.

for instance, a standard EUR/USD quote coule be 1.3784 Bid // 1.3787 Ask in which case the quote price is alleged to have a spread of three pips.

The spread is how market makers are compensated, vs ‘commissions’ paid for trading stocks or options. The spread can and will vary depending on a number of factors, including but not limited to : current conditions, the particular broker or market maker you use ( some do charge higher spreads than others ), the currency pair being traded ( more thinly traded currencies frequently have higher spreads ).

For the EUR/USD example above, the quote would be expressed simply as 1.3784/1.3787 or 1.3784/87.

very similar to buying shares of stock, currency exchange trades in ‘Lots’. There different types of lots, including : standard, mini and micro.

Standard lots trade 100,000 units of a currency pair. Mini lots trade ten thousand units and micro lots trade 1,000 units.

for example, for a standard lot purchase, if the EUR/USD quote was 1.3784/1.3787, then buying this pair would mean buying 100,000 Euro dollar dollars and selling short 137,870 US greenbacks.