The 5 Needed Rules To A Trading Plan

In trading more so then in any other business, when you fail to plan, you plan on failing. In trading you must have a plan of action written out before you place the trade. The Forex market is way too fast to think you can make sound judgments on the fly. It is full of price reversals and head fakes, and if you have not prepared yourself for the obstacles ahead of you, you are not going to succeed.

You need to have studied your Currency Market and plotted out your support and resistance levels before you pull the trigger on a trade. More so then knowing your forecasted price points your Money Management system needs to be sound and in place. Trading Plans are 85% Money Management and 15% analysis. In this article we are going to focus on some of the Analysis.

I have a whole section in my E- Book on Money Management and it needs a lot of depth. It is the most important aspect to your trading.

Part of it is Position Size which I went over in previous articles. I will not belabor the points here, but I do suggest you reread them if need be. The trading plan has more to do with how you are able to trade the currency market, based on your risk capital.

However, no money management system can make profits for a trader that is hap hazard and makes bad trading decisions, conversely and excellent market timer with great trade selection will not be guaranteed profits without good money management. It is a double edged sword. That's part of the 85% of the trading plan. I will now go over some of the more important minor (most often overlooked) aspects.


Minor Rule Number 1


Before you enter your trades write down the price move you forecast that you can capture. Look for modest profits; don't always be looking or a home run. Get on base often and learn to use trailing stops, this way the market takes you out of the trade. When you are in a good position you will be able to ride the wave longer and capture more profits with less head games occurring. Always be mindful of your risk/reward ratio it should be a minimum of 1.7:1. Example you risk $1000. You should be looking for $1700 in profits.


Minor Rule Number 2


Establish profit objectives. It is a bit different then rule number one. In rule one you have your modest gain that you are looking to capture. In this rule we are going that step further where we are in a run away market that is in our favor and have perhaps broke a support or resistance level. You should have an overall profit objective based on a percentage gain to your equity that you would want to lock in.

Example could be a 12% gain of your account equity. You will move your Trailing Stop to that level and let the market take you out if a retracement occurs. This is a crucial point to keep in mind, I have seen trader's double accounts in one day, and lose all the gain and Base equity because of greed and fear, in another trading session. There can be nothing worse then having a great trade turn bad and not having an exit hatch to jettison out of. Believe me you want to keep those gains; it is really annoying when you let them slip away.


Minor Rule Number 3


Have a maximum amount of capital that you are willing to commit at one time. You have to limit your exposure so you do not begin to over trade. Don t open 5 different positions in different currencies at once. Go to were you believe the action is and plan your trades accordingly. If you feel you need excitement go do something that quenches that thirst. Don' t use your trading account to escape boredom.


Minor Rule Number 4


Have plan for increasing or decreasing your positions. If you want to add to a position do it at certain predetermined levels. Always add less then your base position. (Pyramid Profits with a larger base on first) Example would be if you have 100,000 euro on and you are going to add do 50,000 more, then another 50,000 at a different level. When you go to liquidate the position if you're long sell into the rally at predetermined levels (Stepping).

If you're short buy into the dips at predetermined levels as well.


Minor Rule Number 5


Do Not Force A Trade!

This is really not a minor rule; really there are no minor rules just ones that seem to have less glamour then others. I would like to go over something that I feel is a real important point. Realize how fortunate you are that you do not have to trade every day.

When I worked at the bank I was forced into trading every day and night at times due to customer orders, Interest Rate Swap tails that needed to be bought or sold, Money Market desk activities; that's the borrowing and lending of currencies taking interest rate positions. So my point is do not force a trade if it s not there for you. Enjoy the process of being a sniper, and entering on your terms.

This is an article written by Thomas Strigano, from Forex Confidante.

Four Reasons To Start In Forex Trading

Forex trading on the internet is without a doubt the quickest way to use your investment capital to its maximum. The foreign exchange markets offer certain advantages to the smaller and larger traders, thus making the foreign exchange currency trading more preferable than the other markets such as stocks, options and all of the traditional futures. Here are some of the top reasons why you will want to use the forex trading on the internet, in order to become a more successful forex market trader.

1. The foreign exchange market is the largest financial market on earth giving forex traders unlimited flexibility and liquidity. That’s over three times larger than the equity market and over five times larger than futures.

2. Forex trading can fit into anyone’s schedule because it is available on the internet 25 hours a day, 7 days a week. There is no waiting for markets to open; they are always open day in and day out. This flexible schedule makes the forex market extremely attractive to those professional and potential traders and investors.

3. Forex trading on the internet encompasses buying one currency while simultaneously selling another currency; therefore you have an equal opportunity to make a profit no matter what direction the currencies are heading. Another great advantage to consider is that there are currently only fourteen pairs of currencies to trade. Compare those fourteen currencies to the thousands of stocks, options and futures when you’re considering the pros and cons of delving into the trading game.

4. Investors and traders are flocking to the forex internet trading as a way to gain a higher leverage to their investments. Some brokers even offer margin ratios of 200/1 in open forex trading accounts. There are also those mini-forex accounts that can be opened for a minimum of $200, offering a margin of 0.5%, where $50 in trading capital will control a ten thousand unit currency position.

The forex prices are often predictable, allowing the currency prices to create trends that can be followed to allow the technically trained forex trader to be able to spot, and even take advantage of, the many entry and exit points. One of the best parts about forex trading on the internet is that there is no charges for commissions, any exchange fees or any other hidden fees. The forex market is a very easy market to research the countries and currencies involved. The only fees come from the forex brokers, who only make a very small percentage of what the bid/ask price is. Plus, there is no need to calculate any commissions or fees when completing a trade and your transactions are made a confirmed within seconds. Also because this is all done electronically, with no people involved, there is not much that can slow you down.

How To Guarantee Failure In Forex Trading

Right now due to the Worldwide economic crisis Forex trading has become one of the most exciting new ‘games’ in town. The stakes are variable enough that almost anyone can play, and the potential winnings are high enough to tempt even the most conservative into the running. There’s something romantic and dashing about trading in money – something that stock, bonds and mutual funds just don’t have. With trillions of dollars changing hands everyday, it seems like everyone’s got a fail-safe method that will make you rich overnight.

Here are nine failsafe facts that will guarantee that you fail in forex trading.

1. There is a failsafe method to make money on every trade.

Just like there’s no such thing as a free lunch, there’s no such thing as a failsafe method. You WILL lose money on some trades, it’s inevitable. Expecting to always win is a guarantee that you will hang on to trades long past the point that an experienced trader would have found an out.

2. You don’t need to know anything about the market to make money in it.

Not knowing your playing field is a sure way to hit every bump and hole in it. It’s not enough to read a few articles from your dealer. You need to make a concentrated effort to understand the forces that drive the market so you’ll know the best times to make a move.

3. You can play a winning game by making frequent trades with small profits.

If your goal is to make a few hundred dollars a day, you may be ahead of the game, but you’re seriously limiting your profit potential. The only people getting rich on frequent tiny trades are the dealers taking commission on them.



4. You don’t need a plan to make money in the currency market – making money IS a plan.

Trading without a well-thought out plan is like jumping out of a plane without a backup chute. Your plan is what keeps your eye focused on your goal, and gets you through the inevitable losses. Currency trading isn’t a short-term game, but most new traders (95%) quit within the first year because they didn’t have a plan to follow.

5. If you stick with a losing trade long enough, it will turn around.

Sticking with a losing trade is a good way to lose more money. When a deal isn’t going the way that you expected, it’s hard to admit that you were wrong and get out – but it’s the best way to avoid losing even bigger money. Winning on one trade isn’t going to make you rich overnight. Consistently knowing when to get out – whether it’s to cut your losses or grab your winnings – is the way to be a successful currency trader.

6. Where there’s smoke, there’s fire.

Rumors are just that – rumors – 99% of the time. If you want to win at the game, base your trades on reality, not hearsay. On the other hand, rumors can alert you to look at what’s really happening and make a decision based on the movement that you see.

7. The more currencies you trade, the better your chances are of scoring a big profit.

The more you know about a currency, the easier it is to predict how and when it will move. The more intimately you understand the way it behaves, the better your chances are of consistently making successful trades in that currency. If you’re trying to focus on too many different currencies, you’ll be spreading yourself too thin to really get to know any one of them.

8. Thinking long-term and trading short-term is a sure way to make money in the long run.

That’s one of those logical fallacies that sound good on the surface. Look at it more closely though. If you’re trading in the short term, then you need to keep your eyes on the short term rather than trading to what you think the market will be in a week. Today is today – if you make your best trade today every day, you’ll consistently be ahead of the game.

9. The way to make money in forex is to always have a trade in motion.

Sometimes there just isn’t a trade that’s going to profit you. Making a trade just to make a trade is a sure way to do yourself no good – and possibly a great deal of harm.

Technical Analysis In Forex Trading

Fundamental analysis and technical analysis are the two basic tools used to follow and predict the behavior of the forex market.

While fundamental analysis considers the factors that affect a country's economy and its effect on its currency, technical analysis predicts price movements and market trends by studyimg what has actually happened in the past. Technical analysis looks at the past performance and history of an investment and creates charts to be used as primary tools. It relies on data showing this history and current trends and patterns to make predictions of future market activity. It ignores the intrinsic value of the investment in favor of its statistical abstract. Technical analysis is only concerned with price movements and not with the reasons for any changes.

Technical analysis is used to identify significant patterns of market behavior. The history of the value of currency pairs is a matter of statistical record and can be easily accessed. Its supporters claim it is the only sure way of understanding the market and predicting its future based on the high probability that certain recognized patterns tend to repeat themselves on a consistent basis. This is especially true in the Forex market. Fans of technical analysis say that the economies of modern nations are so complex that they no longer can be accurately predicated. It is only in the study of the past history of the currency and the trends that are revealed that a possible glimpse of the future be found.

Forex technical analysis aims to support the investor in determining his views and forecasts regarding the exchange rates of currency pairs. The technical approach concentrates on prices and is based on objective tools like charts and tables, which neutralize external factors and emotions. It can and should be used to project movements in the Forex trade. Of course, in the end, it is going to be the investor's own preference that settles the question, and this is true of the market. Both fundamental analysis and technical analysis are mere tools that help make the decisions that in the end only the investor can make.

Fundamental Analysis In Forex Trading

How can one predict market movements in Forex trading?

The two most useful tools used to forecast the behavior of the forex market are technical analysis and fundamental analysis. Technical analysis is concerned with the effects while fundamental analysis studies the causes of market movements.

Fundamental analysis forecasts future price movements based on economic, political, environmental and other relevant factors, like seasonal cycles, supply and demand, government policy. Fundamental analysis is a macro assessment of where a currency should be traded based on the movement of the currency's price itself.
The economic conditions of the country, monetary policy and other fundamental elements play an important role on this assessment. Many profitable forex trades are made moments prior, or shortly after, major economic announcements.

Fundamental analysis considers the intrinsic value of an investment when making a decision as to its future activity. There are some who feel that this is an excellent method of making decisions in the Stock market as a lot of data can be gathered and studied concerning the value of a Company. But how can a Nation have an intrinsic value?

The answer is fairly simple. The economy of a country goes through a basic business cycle, and there are a lot of indicators available to the investor to measure where a particular economy stands at any given time. Such indicators are followed by traders worldwide. The analysis would involve matching the stage of the cycle with its impact on the value of its currency. The normal economic cycle consists of periods of inflation and deflation with peaks and troughs in between. Certain indicators such as the Gross National Product (GNP), Employment Report, Consumer Price Index and current prime interest rates can give a good idea of the stage of the economy at any given time.

Each of these indicators would tend to impact currency valuation in different ways, and sometimes would even vary from country to country. In the United States, rising interest rates are normally associated with currency deflation, for example, and it is factors such as this that are the heart of fundamental analysis. This analysis can become quite detailed, but the focus remains on the country and its economy. Every factor that impacts the country and its economy can play a role in the value of the currency, and understanding these factors are the tools the fundamental analyzers use to guide their investment strategy.


Economic News


USD
Dollar Rises on Risk Aversion
Trader's aversion to risk has continued to push safer currencies higher as global equity markets continue to trend lower. Both the Nikkei and Dow Jones Industrials ended lower yesterday and that has been influencing the currency markets. The financial markets show the concerns of a global recession. Traders have been unraveling riskier investments financed with loans from currencies with ultra low Interest Rates, predominately in the USD and the Yen. These two currencies may continue to see support in the short term as investors lose confidence in riskier assets.

The Dollar continued a 3-day rally against the EUR, finishing the day up at 1.3328. The Dollar also posted significant gains against the GBP, sending the pair down 2% to finish the day down 1.4774.

Trading today and tomorrow may be based on fundamental data coming from the United States. The U.S. trade balance report will be released today at 13:30 GMT and is expected to show a decline in the difference between U.S. exports and imports. Tomorrow the monthly retail sales report will be released. This report has proven increasingly difficult to accurately forecast. Traders will be looking for these reports for positive economic data to give direction for the struggling U.S. economy.
EUR
EUR Stops its Slide against the GBP
The EUR continues to lose ground against the Dollar as added market risk weighs on the European currency. However, the currency did break a 4-day losing streak against the GBP to close the day up at 0.9020.

The EUR/GBP, which last year saw an appreciation in excess of 26%, has given back some of those gains so far this year. The drop in the GBP's valuation stems from an ever more deteriorating economic situation. The Bank of England (BoE) has slashed Interest Rates, at times cutting rates much faster and steeper than forecasted. British Interest Rates are predicted to fall close to 0% in the near future, and the next step of action perhaps could be the printing of new money or the purchase of commercial debt to stimulate the British economy.

The economic downturn has been very sharp for Britain and currently Interest Rates stand at an all time low. Despite the British recession, the Pound may be poised to head higher against the EUR on future European Interest Rate moves later this week.

Most traders are anxiously awaiting the Interest Rate decision by the European Central Bank (ECB). In this Thursday's meeting, the ECB is expected to cut rates by 0.50%. So despite the recessionary trends, we may see the EUR/GBP head lower on ECB rate cuts, with perhaps a return below the 0.8900 mark.
JPY
JPY Breaks Support Line
As risk aversion heads higher, so does the value of the Yen. Yesterday the JPY strengthened across the board and dropped below a significant support line. At one point in yesterday's trading the USD/JPY fell to a low of 88.86 before ending the day at 89.27. The large price swing may be attributed to low levels of liquidity as Japanese markets were closed yesterday for a bank holiday.

This is the fourth consecutive day for a strengthening Yen. The renewed gains sparked further speculation of Japanese government intervention in the currency markets. A strong Yen hurts Japanese exports, a major component of the Japanese economy. The government has made pledges to intervene in the open market, but we have yet to see a firm commitment to help weaken the currency.

Traders may look for the Yen to perhaps continue its bullish run. Keep an eye for the U.S. trade balance report today. This may help to send the JPY higher against the Dollar, possibly below the 89.00 level.
Oil
Crude Drops below $40
Crude Oil continues to head lower for the 4th day in a row. The driving factor is concerns of the slowing global economy. Rising supplies and lower demand has pushed the price of Crude below the $40 level. This was a support line that many analysts said could not be broken.

The end to a gas feud between Russia and Ukraine did little to lower the risk tolerance in the market and traders continued to move out of equities and riskier commodities throughout the day. This spat was the start of the Crude rally at the beginning of the year. Now the price of Crude Oil stands below this psychological mark. Many of the concerns are on the demand side due to a global recession.

Some are calling for Oil to be priced at $25; however this figure may be a bit to bearish, even for the most skeptical of Crude Oil traders. A $35 mark could be reachable by the end of today's trading.

 Technical News


EUR/USD
It appears that the bearish trend may have run out of strength as the current price level has dropped the pair into the oversold territory as the 4 hour chart's RSI reveals. The pair also currently floats near the bottom barrier of the daily chart's Slow Stochastic, suggesting a bullish correction may be imminent. In that case, going long with tight stops may be the correct strategy.
GBP/USD
The typical range trading on the hourly chart continues. Both the daily RSI and Slow Stochastic are floating in neutral territory. However, the 4 hour chart's RSI can already be seen in the oversold territory. It appears that the possible next move might be a bullish one. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
USD/JPY
The daily chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the 4 hour chart's RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
USD/CHF
Narrow range trading continues as the pair did not make a significant move in either direction, and is currently traded around the 1.12 level. The 4 hour chart's RSI is already floating in the overbought territory indicating that a bearish correction might take place in the nearest future. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.

Forex Training For Success

Before you commence Forex trading for real you need to learn the basic concepts and the inner workings of the Forex market. Individuals who attempt to enter the foreign currency exchange market without an understanding of market fundamentals often end up losing money. To be a successful Forex trader takes education, determination and discipline.

The foreign currency market is a massive, nonstop global trading arena where knowledge and experience are critical to success. The Forex market moves at lightning speed and can take new directions from moment to moment. The ability to identify the direction the market is going to and to invest in the right currencies at the right time is acquired through observation, training and practice. In Forex trading, a great deal of real-time information has to be absorbed, analyzed and acted upon throughout the day. Trading successfully is by no means a simple matter. It is a skill that is developed over time.

Luckily, a lot of resources and training is available online. Websites and book stores are loaded with Forex trading advice. Anyone with a computer and access to the Internet already has access to a world of information on the basics of the foreign exchange market, technical analysis, trading terminology. More specialized publications (Forex forums included) offer charts, forecasts, Forex outlooks, indices.

Trading platforms provide tutorials, guided tours, seminars and courses.

One can also learn and practice Forex trading with absolutely no financial risk at all through demo accounts offered by many trading platforms. Free demo accounts are designed to familiarize the user with the trading software, as well as test his/her knowledge and strategies under real market conditions. The demo account works exactly like real trading account, except that the user is not exposed to immediate risk. It is advisable to practice with this kind of simulated trading system before using real money and keep detailed records of the trading results to analyze performance.

Other experts and trading platforms recommend starting with very small volumes and increasing them as one gains experience and confidence. For as little as $25 one can start trading and learning in real time.

Forex trading is a profitable and attractive investment opportunity you can do from home or office and from any country in the world. A true trader is a professional who employs knowledge and discipline and uses the latest in technology to execute his daily trading orders.

Forex Miracle Review

On the 12th January 2009 John Kaplan and Kevin Hansen are releasing the 7-figure 100% mechanical forex system that earned them more than $112,000 in just 3 months.

It's called "Forex Miracle" - a radical forex formula that exploits the forex markets in such a devious way that the resulting profits are in the realms of the *insane*.

It consistently generates 91.72% winning rate.

Let me just throw some other figures your way...

- $1,221.59 Per Day...

- $8,551.15 Per Week...

- $36,647.70 Per Month...

...and this was from a relatively small trading account.

That's why the anticipation of this system has been extraordinary.

"Forex Miracle" is an ultra powerful system that gives you the exact trading techniques they use to generate hundreds of thousands of dollars trading just one SMALL account. This is created by highly esteemed forex traders - John Kaplan and Kevin Hansen - and the purpose of this brand-new forex system is to give ordinary forex trader a proven, battle-tested forex trading system and replicate their success.

In fact, some of their own successes in this area have been featured in some of the most well-known financial publications.



They have some incredible proof of making huge income trading VERY small accounts. What makes this both unique and vastly different is that this $112,386.56 was made *without* the help of a huge capital, without any time commitment AND without any trading skills.

From what I have seen, this is unlike anything else that has been released before and it eliminates most of the problems that the majority of forex traders have when trying to generate income.

The good news for most people (and what really sets ‘Forex Miracle’ apart from other forex products) is that to make money with it, you as well don’t need a huge investment, any time commitment, or any trading skills at all. In other words, literally anyone can become successful with this and the good news is it takes very little time to set up.

Listen, every one knows that 2009 is going to be a tough year economically. There are going to be a large number of job losses no matter which country you live in and as a result there could be a very strong possibility that you will need some sort of financial back up if the unthinkable happens.

If you can read and are able follow step by step instructions then you’ll be able to implement this incredible system and build your own $1 million forex empire.

Find out more about "Forex Miracle" HERE.

Choosing A Forex Broker

If you intend to get involved in forex trading, you must do it through a broker or a financial institution. A broker or investment advisor will be able to tell you more about the forex trading market and the forex trading systems to use.

Deciding which brokerage firm is best for you is as important in the Forex market as it is in the Stock Market. However, the way of evaluating the various firms differs slightly between the two markets. In the Stock Market, brokers earn their money from commissions or a flat "per transaction" fee. Forex trading does not actually involve commissions, but it does have what is known as spread, i.e. the difference between the price a currency can be purchased and the price for which it can be sold at a given time. This spread is how the broker makes its money, so it functions exactly as a commission. You can be pretty certain that the spreads vary between brokerage firms just as widely as commissions do in the Stock Market, so you should investigate this carefully before making your selection.

Most brokerages dealing with the Forex market are involved with large financial institutions where the funds are available to provide sufficient leverage for their clients. It is also important to make sure the firm you choose is reliable. In the US, there are many regulations and laws in regards to who can handle forex trading so if you are searching the internet for a broker, be sure you read the print, and the information about where the company is located and if it is legal for you to do business with that company. They should be registered as a FCM (Futures Commission Merchant), and regulated by the CFTC- Commodity Futures Trading Commission.

Several firms offer widely varied packages of tools that can assist you in making trading decisions and understanding the market better. They provide information and research that is available to you in many different formats. It is wise to take a little time to study these tools, and to find the ones that are most helpful to you. They are going to end up being very important and you need to feel comfortable with them.

Look for a firm with a wide variety of account and leverage options. The ability to use the Forex market's advantages in leverage is one of the things that makes it the most attractive to you as an investor, and you want to have the maximum flexibility here. Although there are a few unethical firms operating, a few references and inquires should be able to identify them. Make sure that you learn as much as you can about a broker before you make your decision. It is also a good idea to go with a brokerage company that has been around for a while. This selection process is worth a little effort on your part and an investment of time. It is an investment that is going to most likely pay off by preventing future headaches.

Forex Trading vs. Stock and Commodity Markets

Learning the advantages of investing in the Foreign Currency Exchange Market (Forex) over the Stock or Commodity Market is of fundamental importance when considering the different types of investment. The Forex market offers so many advantages that it is not hard to understand its popularity.

This market is similar to the stock market, as people buy and sell, but the market and the over all results are much larger. On the Forex market, almost two trillion dollars are traded daily. The amount is much higher than the money traded on the daily stock market of any country. The profit potential comes from the fluctuations (changes) in the currency exchange market. The advantage of the Forex Market is that the regular daily fluctuations - often around 1% - are multiplied by 100.

Unlike the stock market, where shares are purchased, Forex trading does not require that you purchase or sell actual, physical currency: you work and trade with your own base currency and deal with contracts for amount and exchange rates of any currency pairs you wish to.

While the stock market operates only on business hours, the Forex Market operates 24 hours a day. It is a truly world wide market, constant trading is done in the Forex markets as time zones will vary and the markets will open in one country while another is near closing.

Although it has its trends and cycles, the Forex Market is not locked in the Bear vs. the Bull market mentality of the Stock Exchange. What happens in one market will have an effect on the other countries forex markets, but it is not always bad or good, sometimes the margins of trading are near each other. Since all Forex trades involve the exchange of one currency for another, one currency's hard times opens the door for a profit in another currency. The market is not adversely affected by rising interest rates. When a nation raises rates, normally the currency is strengthened, while rising interest rates tend to depress the stock market.

The number of different stock issues on the New York Stock Exchange and NASDAQ exceeds 8000. That is a lot of stocks and it is time consuming to keep up with even a portion of them. Opposed to it, there are four major currencies, and only about 34 second tier currencies, to consider in the Forex Market. Brokerage firms do not stand between you and profit in the Forex. Not only are the brokerage and commission fees almost non-existent, but analysts in the Forex tend to actually analyze in the currency market and not dictate or control the rise and fall of the market.

Short-term currency trading offers some unique attractions to private investors, like 24-hour trading, volatile markets offering profit opportunities, the ability to profit in rising as well as falling markets, leveraged trading with low margin requirements, options for zero commission trading.

To summarize it, when the two markets are compared, Forex currency trading certainly looks like the better investment choice, even under the present world economy conditions.

An Introduction To Forex Trading

The currency trading market is the biggest and fastest growing market on earth, although most people outside of the financial world consider the New York Stock exchange to be the pinnacle of financial trading. The Foreign Exchange Market is in fact the true leader. The Forex Market, as this currency exchange is known, has a volume of around 1.5 trillion United States dollars daily. This staggering amount is over one hundred times larger than the volume of the New York Stock Exchange.

The forex market is over thirty years old as it was established in the early 1970's. It is not based on any one business or investing in any one business, but the trading and selling of currencies. What is traded, bought and sold on the forex market is something that can easily be liquidated, meaning it can be turned back to cash fast, or often times it is actually going to be cash. From one currency to another, the availability of cash in the forex market is something that can happen fast for any investor from any country.

The market is world wide. It is what is known as an “interbank” market where trades are conducted OTC (over the counter), which means they take place directly between the parties involved in the trade rather than through a central exchange. The main centers for the Forex market are located in New York, Tokyo, Frankfurt, Sydney and London. This allows the market to operate virtually 24 hours a day.

Put simply, the Forex market is based on trading the currency of one country for the currency of another country. The ratio of the value of one currency to the other rises and falls, and this ratio is what fuels the market. The trades consist of the simultaneous buying of one currency, for example, United States Dollars (USD), and the selling of another, i.e. The European Euro (EUR).

The most important market in Forex trading is called the “spot market” because trades are executed at once, or "on the spot". There are other elements of Forex trading, such as futures trading, and Forward Outrights, which are slightly more complex than spot trading.

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