Dangers Of Getting Emotional About Forex Trade

Getting emotional in the stock market is the worst thing that can happen to investors. The same goes for Forex traders as well. Seeing paper losses in everyday trade is pretty common.

Once to take a decision to buy something and make losses, you still hold on even if situations turn from bad to worse, only because you feel that things might turn back in your favor once again. The main problem here is that, the decision to stick to a losing trade for a long time is an emotional one, since you are in no mood to accept a loss and get out of the trade.
Forex market is largely influenced by the general market and you must always trade on what the indications based on the market are, and not just initiate one since your heart tells you to. At times, you might be so emotionally attached to a given currency in the Forex market, that most of your exposure to the Forex market would be in that particular currency.

Nothing wrong with it, as if you have reasonable grounds to believe that the currency will do well, then you will actually profit from the exchange. The 'wrong' thing is opening up a trade in a currency just because your heart tells you to.

In the case, if you strongly feel about any given currency, then it's better to check the reality by having the look at what the market is indicating. That will give you a clear picture of whether or not you should trade in that currency.
The basic thing that is needed to be remembered is that once you have initiated a trade, and are incurring paper losses, and by all indications, things are likely to get even worse for you, then it is much better to book losses and come out of it rather than sticking to it till a time you ultimately are able to see some gains from it. Remember, the markets have little room for emotions. Forex trading is not a win-win situation. Be prepared to lose on some trades as well.

That's the precise manner in which the market works. It is not really a question of whether you are right or not, the fact remains that markets move in an unexpected way and they have a knick of surprising people when they least expect it. All the fundamentals and even experience may be thrown into the air when the markets decide to do something.

So just follow the indications that the market gives you. If you feel that after initiating a trade, things are not going the way you had foreseen, book your losses and get out of it. You can invest the amount in some other trade and make good gains rather than sticking to your losing trade.

Foreign Exchange Market

The Foreign Exchange market, also referred to as the "Forex" or "FX" market, is the largest financial market in the world, with a daily average turnover of well over US$1 trillion -- 30 times larger than the combined volume of all U.S. equity markets. "Foreign Exchange" is the simultaneous buying of one currency and selling of another. There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency. The other 95% is trading for profit, or speculation. For speculators, the best trading opportunities are with the most commonly traded (and therefore most liquid) currencies, called "the Majors." Today, more than 85% of all daily transactions involve trading of the Majors, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night. The FX market is considered an Over The Counter (OTC) or 'interbank' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network. Forex Trading is not centralized on an exchange, as with the stock and futures markets.

The foreign exchange market is not a "market" in the traditional sense. There is no centralized location for trading as there is in futures or stocks. Trading occurs over the telephone and on computer terminals at thousands of locations worldwide. Foreign Exchange is also the world's largest and deepest market. Daily market turnover has skyrocketed from approximately 5 billion USD in 1977 to a staggering 1.5 trillion US dollars today; even more on an active day. Most foreign exchange activity consists of the spot business between the US dollar and the six major currencies (Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar) The FOREX market is so large and is controlled by so many participants that no one player, governments included, can directly control the direction of the market, which is why the FOREX market is the most exciting market in the world. Central banks, private banks, international corporations, money managers and speculators all deal in FOREX trading.

What is FOREX?

Foreign Exchange (ForEex) trading is simply the exchanging of one currency for another - Each Forex trade can theoretically be viewed as a 'spread ' trade where to buy one currency you must sell another. Convention dictates that currencies are measured in units per 1 USD. For example, 1 USD is worth approximately 125 JPY (Japanese Yen) or 1 USD is worth approximately 1.5000 CHF (Swiss Francs). As a result, when USD/JPY appreciates in value, it is the USD that has appreciated in value relative to the JPY and not vice-versa. Position-wise, to own or be 'Long' USDJPY means that you are long the USD and concurrently short the JPY. USD, therefore, is the default 'lead' currency.

Industry Experts are Talking About Track 'n Trade!

Dr. Scott Brown
PhD in Finance, University Finance Professor
Author of The Wallet Doctor's Survival Guide to the Stock Market and Rock Solid Foundations of Investing “The reason I believe so strongly in Track ‘n Trade is that you can come and use the simulator, not risk a dime of your money, and see if you’re a great trader. And if you’re not a great trader, you didn’t lose anything. You didn’t lose anything at all, that’s what’s so fantastic about this. But what if you are a great trader? You didn’t miss the opportunity to become successful at this either.”

Learn to Trade Forex

Learn to Trade Forex is designed to provide novice currency traders with a broad overview of the Forex market. The course covers everything from reading forex quotes to trading on margin, using technical analysis to identify market trends and opportunities, and much more.

Developed by GAIN Capital Group, Learn to Trade Forex encompasses the extensive experience of GAIN's traders and market analysts in one complete forex training course.

Learn forex trading

FXacademy: - your guide to understanding forex.

Teach yourself forex trading now! It will be the most important step towards your financial freedom. One of the secrets to successful trading is ” millionaire traders are ordinary people like you”.
The only difference is they have taken time to learn and understand how forex works. Placing profitable trades and making money with forex is easy once you learn and develop the required skills.

FXacademy has forex tutorials aimed at explaining the forex market concepts to beginners.
It is a simple guide meant to explain concepts of forex using easy to understand tutorials. Tutorials range from basic to advanced and caters for beginners and experienced traders.
Why should I Learn Forex ?
Forex is the largest market on planet earth. Gross daily turnover is over US$2.5 trillion. That’s many times bigger than all equity markets. It is no secret that you can make huge profits in currency markets.

Many individuals are successfully investing in day trading and generate a turnover of US$50 Billion daily. Internet technology makes online trading the best home business opportunity available.
Anyone can teach themselves and start trading forex online immediately from their home computer.

How You Make Money Trading Forex Online?

The goal of forex market trading is to exchange one currency for another in the expectation that the currency you bought will increase in value compared to the one you sold.
Most investors are day traders, they enter and close their positions in a single day (EST).
Learn more…

What are the requirements for trading?

Below is a list of things needed to start currency trading.
1. Learn how the market works.
Profitable trading requires good knowledge and skills. One needs to understand how to read quotes, place trades, stop losses… Many online forex resources and trading guides are available to individuals who wish to learn how forex works.

2. A forex trading strategy.
Many online brokers allow you to open practice accounts before trading with real money. This allows you to develop and test forex strategies,You can then pick the best one , that allows you to place more profitable trades. You should develop a trading strategy that works otherwise you will not make profit in forex trading.

3. An online broker.
You need to open a trading account with a online broker. For $25 000 + you can open a managed account. Mini forex accounts require a minimum of $25 depending on your broker.
A managed forex account allows you to relax while experienced investors trade on your behalf.
With ‘minis’ you do trading, money management..everything by yourself.

The broker will provide a trading platform which is an application for conducting trades. It is important to learn how to correctly use the platform provided by your chosen online broker.There is no room for mistakes in forex trading.

FXAcademy has two tutorials . Going through both of them will greatly assist any individual wishing to teach themself forex concepts.

Fast-track introduction..
This is an easy guide on forex market basics for newbies. The fast track intro is for forex beginners. Experienced traders should skip this simple tutorial .

Advanced Forex.
This is an introduction to advanced forex concepts. A greater part of this tutorial goes into introducing technical and fundamental analysis.Teach yourself advanced concepts such as money management, risk management ….
- Understanding fundamental analysis:
- Learn technical analysis.
More…

Our goals:

To provide education for beginners hence give everyone an opportunity to learn profitable forex trading.

To promote the best forex trading platform.

To endorse the best tools for learning and trading - software, forex education and training ,online brokers, courses, traders’ groups and books.

‘Lets Play The forex game.’

Forex Glossary Terms

American-style option An option contract that may be exercised at any time before it expires.

Ask The quoted price at which a customer can buy a currency pair. Also referred to as the 'offer', 'ask price', or 'ask rate'.

Base Currency For foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. For example, in a USD/JPY currency pair, the US dollar is the base currency. Also may be referred to as the primary currency.

Bid The quoted price where a customer can sell a currency pair. Also known as the 'bid price' or 'bid rate'.

Bid/Ask Spread The point difference between the bid and ask (offer) price.

Call A call option gives the option buyer the right to purchase a particular currency pair at a stated exchange rate.

Counterparty The counterparty is the person who is on the other side of an OTC trade. For retail customers, the dealer will always be the counterparty.

Cross-rate The exchange rate between two currencies where neither of the currencies are the US dollar.

Currency pair The two currencies that make up a foreign exchange rate. For example, USD/YEN is a currency pair.

Dealer A firm in the business of acting as a counterparty to foreign currency transactions.

Euro The common currency adopted by eleven European nations (i.e., Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain) on January 1, 1999.

European-style option An option contract that can be exercised only on or near its expiration date.

Expiration This is the last day on which an option may either be exercised or offset.

Forward transaction A true forward transaction is an agreement that expects actual delivery of and full payment for the currency to occur on a future date. This term may also be used to refer to transactions that the parties expect to offset at some time in the future, but these transactions are not true forward transactions and are governed by the federal Commodity Exchange Act.

Interbank market A loose network of currency transactions negotiated between financial institutions and other large companies.

Leverage The ability to control large dollar amount of a commodity with a comparatively small amount of capital. Also known as 'gearing'.

Margin See Security Deposit.

Offer See ask.

Open position Any transaction that has not been closed out by a corresponding opposite transaction.

Pip The smallest unit of trading in a foreign currency price.

Premium The price an option buyer pays for the option, not including commissions.

Put A put option gives the option buyer the right to sell a particular currency pair at a stated exchange rate.

Quote currency The second currency in a currency pair is referred to as the quote currency. For example, in a USD/JPY currency pair, the Japanese yen is the quote currency. Also referred to as the secondary currency or the counter currency.

Rollover The process of extending the settlement date on an open position by rolling it over to the next settlement date.

Retail customer Any party to a forex trade who is not an eligible contract participant as defined under the Commodity Exchange Act. This includes individuals with assets of less than $10 million and most small businesses.

Security deposit The amount of money needed to open or maintain a position. Also known as 'margin'.

Settlement The actual delivery of currencies made on the maturity date of a trade.

Spot market A market of immediate delivery of and payment for the product, in this case, currency.

Spot transaction A true spot transaction is a transaction requiring prompt delivery of and full payment for the currency. In the interbank market, spot transactions are usually settled in two business days. This term may also be used to refer to transactions that the parties expect to offset or roll over within two business days, but these transactions are not true spot transactions and are governed by the federal Commodity Exchange Act.

Spread The point or pip difference between the ask and bid price of a currency pair.

Sterling Another term for British currency, the pound.

Strike price The exchange rate at which the buyer of a call has the right to purchase a specific currency pair or at which the buyer of a put has the right to sell a specific currency pair. Also known as the 'exercise price'.