Sunday, January 29, 2012

Theory of Retail Forex Trading

This is a site to assist the new forex trader by pointing at relevant chart formations, significant technical levels, and forthcoming news events focussing on the EU,AU,NZDUSD & GU Pairs.

Utilize the adjacent news column when planning your trades - if your trade does not involve the particular news event, you must always remain aware of it because the event can impact considerably on your position in the market and even knock you out completely in the blink of an eye.

In the FX market, you buy or sell currencies and your broker gives you leverage of up to 400-1, which allows you to make the profits.

The object of Forex trading is to exchange one currency for another in the expectation that the price will change, so that the currency you bought will increase in value relative to the one you sold.

How it Works
                                                                    EUR        USD
You purchase 10,000 euros
at the EUR/USD exchange rate      
of say...1.55                                         +10,000    -15,500

Some time thereafter the exchange rate moves to
1.56 and you exchange the euros for American
dollars which gives you 15,600 USD and a $100
profit in return for risking $50. In this example 
your broker would require you to put up $50
to control a $10,000 lot should you be leveraged
at 200-1 which is typical for mini accounts.
It is this principle of leveraging that allows 
retail traders to make profits, however, leveraging
can facilitate losses just as quickly.