How to Earn money from Forex Trading

LESSON NO 18

How to Earn money from Forex Trading

It is the most important question for new traders as well as for old and experienced traders.  If you don't know the art of earning profits from Forex Trading then this nothing else but just a waste of time and money to indulge in Forex Trading.  So let's learn how can we earn money from forex trading.

In forex trading either a currency is bought or sold.  For example if price of EUR/USD is 1.3033 and you assess that price of Euro will increase and you buy this pair, after few hours as per your assessment and analyses price increases and hits 1.3083 and you close your trade, you have earned 50 pips and if your one pip is equal to 1 dollar then you have earned 50 dollars from one trade.

Likewise, GBP/USD price is e.g 1.6087 and you evaluate that price of pound will decrease and you sell that currency pair and after few hours its price decreases and hits 1.6037 and you close your trade, you have earned 50 pips and if your one pip is equal to 1 dollar then you have earned 50 dollars from one trade.

How to read a Currency Pair:

                             GBP             /                       USD :           1.51258

 

                        Base Currency    /     Quote Currency

Currency at the left side is called base currency while the currency at right side is known as counter or quote currency.  During trading base currency is kept in mind for example in currency pair GBP / USD if you want to buy you will buy GBP and if you want to sold you will sold GBP.

What is Long or Short:     If you intends to buy a currency pair I mean if you are going to buy a base currency it will called Buy or Long and if you intends to sell a base currency it will called Sell or Short.

Things to Kept in Mind during Forex Trading:          Following important things are to be kept in mind while executing forex trading.

Before starting any trade, market is analyzed, there are two main types of analysis:

Ø  Fundamental Analysis

Ø  Technical Analysis

What is Fundamental Analysis: We will try to learn with following few examples that what is fundamental analysis:

Examples of Fundamental Analysis

For a currency pair EUR/USD, if we see that there is increasing ratio of unemployment in USA, GNP is decreasing or there is downfall in exports then it means that dollar has become weaker, if dollar is weaker it means Euro has become stronger with regards to dollar so definitely we will buy Euro (I mean EUR/USD Pair) and if the situation is against (employment opportunities are increased, GNP and Exports are also increased) the it means that dollar has become stronger and Euro has become weaker so in this case we will sell EUR/USD.

Which Session Starts at which time

Lesson No 16

Tokyo Session:      Tokyo session starts first, which is also called Asian session.  Japan is third economic power of the world, and Japanese Currency Yen has 16.50% share in forex market and 21% trading of yes is made during Asian session.

Characteristics of Tokyo Session:        Following are the salient features of Tokyo Session:

Ø  In Tokyo Session (also called Asian Session), trading is not limited to Japan only, but forex trading shifts in millions of dollars to Singapore, Sydney, Hong Kong and China which is connected to Tokyo Session.

Ø  In Tokyo Session major partners are Exporter and Central Banks.  Although economy of China and Japan mainly depends on exports but even then volume of forex trading remains very low sometimes it looks that market is even closed.

Ø  Besides above, even then in Asia Pacific currency pairs like NZD/USD, AUD/USD a quick movement is quite visible.

Ø  Due to limited volume of trades markets runs on sideways which at the end become the cause of breakout and make opportunities for trading.

Ø  Market move more quickly when central banks and governments announce economic reforms and policies.

Currency Pairs in Asian Session:         When there is any political upset or announcement of economic policies in Japan, New Zeeland, Australia and China then there is fast flow of trading of JPY, AUD, NZD which is called news trading, but to be very truthful at that time trading is very dangerous it can even washout your accounts if you don't know good money management skills, very few traders have the skills to deal with this type of trading.

London Session:    When Asian traders close their trading at that time London's traders start their trading.  In Europe there are many other financial departments dealing with financial activities and investments but most of the traders focus on London market.  Historically, due to its geographical location, London remained an attraction for the traders.  And this is not an astonishing fact that in London session, in one minute, thousands of traders take part.  Overall 30% of forex trading occurs during London session.

Salient Features of London Session:   Followings are some characteristics of London Session:

Ø  London session overlaps Tokyo and New York sessions due to which there is a fast flow of trading in this session of volume of trades remain very high during London Session.

Ø  Most of trends occurs during London session which remains continue till the start of New York Session.

Ø  In the middle of London session flow of trading decreases, as traders take rest and wait for New York Session.

Ø  Sometimes, at the end of London Session, there are reverse trends as mostly traders lock their profits and close their trades.

LESSON No 17

What are Trends:   Movement of price in any direction is called "Trend".  Price always moves from left to right.  There are three possible trends / movements of price:

 

ü  Upward Trend                      

ü  Downward Trend                

ü  Sideways Trend                  

Suitable Pairs for Trading:          It is very important to know that which currency pairs are to be traded during forex trading.  Specially new traders should know about these currency pairs so that they can earn good profit for the trades and time.

According to flow and volume of the market trading of major pairs is very important i.e EUR/USD, AUD/USD, USD/JPY, GBP/USD, USD/CAD, USD/CHF, NZD/USD, because their spreads (difference between buying and selling price) remain very low.  You can trade cross currency pairs but their spreads are vey high.\

New York Session:            At about 12PM or 1PM London time New York Session starts. 

Characteristics of New York Session: Following of salient features of New York Session:

Ø  During first few hours of New York Session market flow remains very high due to overlapping of London Session.

Ø  In starting few hours mostly important news are released those effects the market in any way.

Ø  On Friday at noon flow of market decreases as London and Tokyo markets are already closed.