Foreign Exchange (Forex) the International

Foreign Exchange (Forex)

The international foreign exchange market, or Forex, is among the largest financial markets in the world for trading foreign currencies but many traders have either never heard of it or are too unfamiliar with it to take the leap into this trading environment. Moreover, in response to the ongoing global economic downturn, some investors have elected to try their hands at managing their own Forex portfolios -- with mixed results. Effective trading strategies have been shown time and again to be the key to success in this international market. Today, London remains the most active Forex market in the world, with a total turnover in the spot market fully six times larger than the market in Frankfurt and eight times larger than the market in Paris (Artis & Weber, 2000). In addition, London's currencies trades are much more diversified than those in Paris or Frankfurt, a trend that is in spite of the fact that 41.6% of cross-trades between European currencies involving the Deutsche Mark and occurring in Europe have originated in London (Artis & Weber, 2000). No matter where a potential trader is located, though, Forex provides a real opportunity for informed traders who want a solid return on their investment with as little risk as possible, and you can read more about Forex below.

Why Forex

Notwithstanding its potential volatility and dynamism, the Forex market represents a promising alternative for many traders today, but this has not always been the situation. For instance, although Forex trading has been around for awhile, a number of retail traders may not be familiar with how it works or what is involved in setting up and operating a Forex account with a reputable Forex brokerage firm. Although the Forex market has been targeted by commercial investors for some time, the Forex market is also attracting a growing number of private traders as well today. As more and more investors have turned to Forex, their success stories are attracting the attention of others to this rapidly growing trading venue. In addition, the Forex market remains active for 5 days a week allowing private Forex traders ample opportunities for trading during the week and reevaluating and reformulating trading strategies while it is closed -- and trading on the Forex is straightforward and easy-to-understand as described below.

How to Trade

Anyone who has ever conducted some type of financial transaction online will likely be familiar with the steps involved in trading in the Forex market. Individuals who want to trade in the Forex typically engage in a series of similar steps to create a Forex account that are comparable to the steps required to open a normal futures account, including the following:

1. Conduct the research that is required to evaluate the services provided by and the reputation of several Forex brokers.

2. Complete a due diligence analysis of the Forex brokerage firms that satisfy the traders' evaluation criteria and select the one the best suits their needs.

3. Complete the necessary account documents that can typically be completed online; however, if the broker requires a copy of a photo identification, traders may have to fax this or mail it to the brokerage.

4. Fund the account. This step can also be completed online in most cases or by using a certified check or other secure payment method (Salcedo, 2004).

Trading Platform

Automated trading system platforms can help traders and their brokers keep track of changes in the foreign currency exchange market and take actions at given points in time that will make them money. The adage, "Prior planning prevents poor performance" certainly holds true in the Forex market, but the time to do the planning needed to achieve profitable trades is not while the market is active, but rather while the investor has the time required for careful analysis in order to formulate a trading strategy that can be executed by an automated trading system quickly to take advantage of ups and downs in the currency market. Although a Forex system can be completely automated, it does not have to be in order to be effective; in fact, these automated systems can consist of mixed inputs or employ discretionary inputs in their calculations.

Irrespective of what trading method is used, the computer-age adage, "garbage in, garbage out" certainly applies to these expert automated trading systems. Traders can elect to predetermine when they want to invest and when they want to sell based on various formulas that have been shown to provide significant predictive ability, but the choice of metrics that are used is critical. In some cases, the calculations that are applied to these metrics are based on support and resistance levels that are derived from published sources which are used for entry and exit points. Likewise, traders can assume a position so that when currencies decline, the automated trading system will sell dynamically by executing multiple enter and exit orders using sophisticated order entry algorithms.

It is also unimportant if a given trading strategy is complemented by expert systems or not, but when they are used, it is essential that any such system:

1. Be robust;

2. Have the capability of taking into account a wide range of eventualities;

3. Have documented and proven performance in real-world settings;

4. Is capable of being executed as programmed (Gelet, 2009).

The automated trading platform used by PIPPOINT, Meta Trader 4, enjoys all of these features and more -- and the expert staff can help you make the most of all of these features to manage your trades in the most effective way possible.

Although a growing number of savvy traders are making real money in the foreign currency exchange market, the market is also fraught with opportunities for failure or less-than-optimal results unless Forex traders possess the tools, information and trading strategies they need to navigate the intricacies of the Forex market. Although novice Forex traders will appreciate the benefits of timely advice from reputable brokerage firms such as PIPPOINT, intermediate and even advanced traders can also benefit by using the trading platform Meta Trader 4 which is a particularly valuable application for Forex trading. In order to become more familiar with the ins-and-outs that are associated with Forex trading, many traders take advantage of the free practice accounts offered by some Forex brokerage houses such as PIPPOINT before creating and funding a live accounts, and these types of accounts are discussed further below.

Practice Account

Just as with learning to play poker for money with more experienced players, practice is important before making the plunge into the Forex market with real money. A free practice account can help novice traders become accustomed to the intricacies of Forex trading without risking any of their real money and can help them learn what automated trading system settings are best suited to their individual trading strategies. In fact, the practice accounts provided by PIPPOINT allow Forex traders to simulate everything about real-world Forex trades, making experimentation with various trading strategies highly informative -- and even fun and exciting! Practice accounts are also executed just as with the real thing, making the experience highly illuminating for newcomers. Furthermore, traders who are new to the Forex market can see what happens when they apply one trading strategy compared to another to help fine-tune their individual approaches.

Live Account

Once traders become sufficiently familiar with a Forex trading platform using their practice account, they will probably be eager to take what they have learned and apply it to real-world trading opportunities using a PIPPOINT live acount. One of the key benefits of setting up a practice account and learning what works and what does not -- and why -- is that preferred accounts from the practice account can be transferred into a live account in a seamless fashion, making the time and energy invested in learning a highly efficient process.

About Us

Today, PIPPoint Forex Brokerage is a leading straight-through processing (STP) provider that does not charge hidden fees or provide services its clients do not want or need and does not use a dealing desk. NEW INVESTORS ARE ALWAYS WELCOME! The highly experienced team of fund managers at PIPPoint Forex Brokerage welcomes new traders who are interested in high returns on their investment with as little risk as possible. The company's professional cadre of highly experienced trading specialists and advisors is readily available to help newcomers to Forex become familiar with the terms and operational details to help them hit the ground running when it comes time to start making real-world trades.

Learning Section

1-

How to work with MT4

The effectiveness of expert automated trading systems such as Meta Trader 4 (MT4) depends in large part on a brokerage firm's expertise with the application and experience in using it for specific purposes. Every Forex brokerage firm will likely use the MT4 platform in slightly different ways depending on a wide range of variables. Because the settings needed to effect a given trade can be confusing, it is important to select a Forex brokerage company such as PIPPOINT to help fine-tune trading strategies and apply the appropriate settings to MT4 to ensure that trades are made when clients want them made. One of the more popular analytical methods that is used with MT4 that is used to coordinate share trades is based on the Fibonnaci series (each number in this series except one is the product of the preceding two numbers; i.e., 1, 2, 3, 5, 8, 13 & #8230;). This Fibonacci series is used in quantitative trading systems such as MT4 to help traders modify their investments in real-time as the market changes as described further below.

2- Fibonacci

The Fibonacci series can be found throughout nature in the way a pinecone grows when viewed from above or the patterns in a seashell such as the nautilus. Humans have a natural affinity for the Fibonacci series which is also known as the "Golden Ratio" because it provides an aesthetic that is pleasing to humans (Gelet, 2009). Also pleasing to humans is the power of the Fibonacci series to help manage Forex trades. The Fibonacci series is used by Forex traders to develop retracement levels on charts, the specific timing of their entries and exits in the market, an approach that is used with the eFibo trading strategy that buys and sells various sizes of lots depending on the behavior of the market. To accomplish this, the eFibo strategy uses a basic indicator that identifies trends and/or countertrends; eFibo's trending function will add additional lot sizes when profit levels increases; conversely, the application's countertrend mode performs the reverse by selling into strength and buying into weakness (Gelet, 2009). The strategy can also be applied as an order entry technique for either a trending or counter trending strategy (Gelet, 2009).

In order to use this function properly, Forex traders have to determine appropriate levels for each new order following the entry of its initial position using a simple trend or countertrend trading strategy. Performed manually, these levels can be determined by analyzing the highest high-low range for the preceding three trading sessions and then adding 20% (Gelet, 2009). Because the Forex market is highly dynamic, trading strategies can take advantage of automated trading systems such as MT4 by setting ranges that will differentiate important movements in the market from transient spikes. Identifying trends or countertrends in the Forex market can be accomplished by using the indicators described in the "Forex Indicators" section below, or Forex traders can formulate the decision to buy or sell based on their experience and their intuitive view of the market's historic performance. Exit strategies using these approaches are also straightforward:

1. A stop loss can be placed on each trade that is one half of the pip level;

2. A total trade take profit can be established that will close the entire trade when a certain profit levels has been achieved or the trader has been stopped out. Many Forex traders take advantage of their practice account feature to experiment with these settings to identify the best way to achieve their investment goals while simultaneously minimizing their risk.

Because traders can be stopped out and their entire trade ended before their profit goal has been reached by automated settings, it is important to manage stops to ensure that the trends identified by the Forex indicators being used do not prevent the full profit goals from being achieved. In many instances, a trade may be stopped out but the price will then continue in the direction that was initially projected, causing the trader to lose out on the additional profits that could be generated. Indeed, managing stop losses effectively represents one of the most salient challenges in Forex trading today (Cofnas, 2003). It is possible, though, to identify a solid balance in stop losses by taking advantage of the guidance available from the experts at PIPPOINT and their powerful MT4 trading system which is discussed further below.