Learning Forex: What Are Pips and Spreads?

As you begin to learning about Forex trading, you're bound to come across many new terms. Two of the most commonly used Forex words are "pip" and "spread." These have unique definitions in relation to currency trading, and for beginners, we wanted to help you better understand what each of these 

mean.

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What is a Pip?

In Forex trading, a pip - which is short for "price index point" - is a numerical value that represents the amount an exchange rate has changed over a period of time. So a currency pair gains or losses pips over time.

In the majority of currencies, pips are priced to four decimal points, meaning one pip is .0001 and two pips is .0002. So if you closed a trade in USD/CAD at 1.3320, after a 20-pip gain, the new value would be 1.3340.

Japanese yen, though, is an exception, as JPY is not priced to four decimal points. JPY is priced to two points. So a JPY currency pair, like USD/JPY, might be 122.50. In this scenario, one pip is .01 and two pips is .02.

Finally, some brokers offer fractional pip values out to 3 or 5 decimal points, which are referred to as pipettes. Pipettes are equivalent to 1/10 of one pip.

Calculating Pip Value

When we talk about currency pairs, we might say that USD/CAD has gained 20 pips over a certain period. But what is the monetary value of those 20 pips? This requires some basic calculations, but the math is pretty straightforward. To determine the pip value, you'll need the:

Currency pair

Size of trade

Closing exchange rate

So for example, if you closed a $100,000 GBP/USD trade at 1.5188 after a 20-pip gain, you would calculate the pip value by first determining the number of U.S. dollars each pip represents. In this case, the equation is 100,000x.0001 or each USD equals 10 pips. Then, you would calculate the price per pip in GBP using the closing exchange rate - or 10/1.5188 = 6.58 GBP per pip. Finally, calculate the value in GBP the currency pair has changed to determine profit or loss - in this example, it would be 20x6.58= 131.60 GBP.

What is Spread?

In Forex lingo, the "spread" refers the difference between the buy and sell prices for the currency which are set by brokers. These values are often referred as the "bid" and "ask" price, and in the simplest terms, these are the prices that brokers are offering to buy and sell currencies to a trader.

Brokers always offer lower bid prices than ask prices, because this is where the broker makes money. So for example, the bid/ask prices for EUR/USD might be 1.0757 and 1.0761; the currency pair is said to have a 4-pip spread. That means if you entered into a trade and immediately liquidated that trade at the same exchange rate, you would record a loss and lose money. In general, close spreads are better for traders, because it's easier for a trade to become profitable. For example, if the spread of a pair was 55 pips, a 20-pip gain would lose the trader money; but if the same pair had a 4-pip spread, that trader would be up 16 pips after closing the trade.

Want to learn more about becoming a day trader? The Learn to Forex course from Learn To Trade is designed to help novice and intermediate traders build a base of knowledge in Forex, learn to develop Forex trading skills and strategy, and minimize their trading risks. Enroll today and get started.

Visit Us

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Forex And Simple Ways For You To Succeed With Forex Trading Education

While many people have heard of Forex trading education, not everyone is willing to try it. It could be intimidating or appear difficult to most people. When spending your money, it doesn't hurt to be cautious! Before investing in trading, educate yourself. It is important to keep up with information about Forex. Here are a few tips that will help you do that.

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Avoid emotional trading. You can get yourself into deep financial trouble if you allow panic, greed, and other emotions rule your trading style. It's impossible to completely remove emotion from the equation, but if they are the primary driver of your trading decisions, you are in trouble.

If you want to be a successful Forex trader, you need to be dispassionate. This will reduce your risk level and prevent you from making poor decisions based on spur of the moment impulses. It is impossible to entirely separate emotion from business, but the more you are able to control your emotions, the better decisions you will make.

To succeed in Forex trading, sharing your experiences with fellow traders is a good thing, but the final decisions are yours. Tapping into the advice of those more experienced that you is invaluable, but in the end, it is your own instincts that should guide your final decisions.

For instance, you could lose more moving a stop loss than leaving it be. Always follow the plan you created.

When a Forex trader wants to minimize their potential risk, they often use a tool called the stop order. After an investment falls by a specific percentage,determined by the initial total, an equity stop order halts trading activity.

Research your broker when using a managed account. The broker should be experienced as well as successful if you are a new trader.

Some people think that the stop losses they set are visible to others in the market. They fear that the price will be manipulated somehow to dip just below the stop loss before moving back up gain. There is no truth to this, and it is foolish to trade without a stop-loss marker.

When it comes to Forex trading, there are some decisions that are going to have to be made. It's not surprising that this may cause some people to shy away from Forex trading education entirely. If you have already been trading, or are ready to begin now, take the tips you have learned here and apply them for your own benefit. It's important to stay current with the latest news. Think about your purchases before spending money. Be smart about your investment choices.

Greg discovered very early on that trading Forex required a serious approach to Forex trading education for it to be of long term profitability. Since Greg began speculating on the currency market his account and confidence have grown exponentially and he now uses his skills to teach others to be profitable through BOAFX Trading Signal Solutions and their forex trading strategies.

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Forex Trading Analysis, Systems and Platforms - Teach Yourself Forex

<Patterns often repeat themselves, and a good technical trader will be able to learn from history and their own experiences. In some ways, they are making an educated guess about the price movement. They make these educated guesses by method of technical indicators, Forex trading tools that offer suggestions or insight about market trends. There are a great number of these indicators and range in variety. There is no real consensus about

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which indicator is best, so technical Forex analysis is ultimately decided by individual traders (their preferences and their strategies). Nevertheless, there are some very common technical indicators, such as the Relative Strength Index (RSI) or the Moving Average Convergence Divergence (MACD).

A technical trader uses these methods to determine buy and sell points on the chart, and keep a close watch on any opportunities that may arise. Many also use Expert Advisors (EA) in order to help make these orders when the buy and sell points are reached. This can make the process more efficient.

Fundamental:

A fundamental trader focuses on finding the true intrinsic value of a currency or stock. When using fundamental Forex analysis, a trader is considering a variety of factors that can offer insight into the true value of what is being traded. These factors include: the economic, financial, qualitative and quantitative reasons for what an objects value is.

For example, if a country A's unemployment levels were rising, this may be taken as a sign that the economy is worsening. Country B on the other hand had an increase in its GDP, this may be taken as a sign that the economy was improving and investors would wish to buy into the market. If that were the case, the currency level would be expected to fall as demand for that currency would decrease compared to country B's currency. This would be a basic breakdown of how a fundamental trader makes their decisions.

Ultimately, the goal for a fundamental analysis trader is to calculate an estimated true value for a security/currency, then to open a position based on that decision. Many consider this to be an opposite method to technical analysis.

Sentiment:

Although price movement should theoretically reflect the market information available, this is not true in practice. Traders often form their own opinions on the market and can also base their decisions on those opinions (regardless of whether that opinion is founded on technical or fundamental analysis). As such, due to these opinions, the market is also affected and can move based on these thoughts and views. This is what creates the 'sentiment' of the market.

Therefore, a sentiment trader bases their decisions on what they feel is the current 'sentiment' of the market. There is no set method to do so and is often left up to an individual to make their own decisions based on their feelings. Methods to gain insight into the current climate of a market's sentiment may be: reading news, watching the news, studying the political and economic climates of the world, talking to people and thinking about how events may affect all these factors.

Ultimately, there is no right method. The best traders use Technical, Fundamental and Sentiment Analyses and incorporates them into their own personal strategies.

Forex Trading Systems:

A trading system in Forex is a set of specific rules, parameters and guidelines that determine a trader's entry/exit points which are known as signals. These signals are often marked on a trading chart and are the points at which trades are opened (often automatically).

A trader chooses their own trading system, which include a number of methods. Some popular systems are moving averages, stochastic, oscillators and relative strength. Some popular trading platforms have a number of these kinds of 'indicators' or can be downloaded and installed to help a trader with their personal strategy. Traders using trading systems tend to spend most of their time managing and mitigating risk.

There are a number of advantages that a trader can enjoy from using Forex trading systems. Firstly, it removes emotion from the trades. Secondly, it can save time and increase efficiency. Finally, it's easier to let an automated system perform the trades for you (especially for beginner traders).

Despite the advantages, there are some drawbacks to consider when using trading systems for Forex. Number one, some trading systems are quite complex and difficult to understand or use properly. Number two, a trader needs to be able to make realistic assumptions in order to properly utilise systems (ie. they are required to make impartial, educated decisions). Finally, development of a personal trading system can be difficult and time-consuming.

Forex Trading Platforms:

There are a number of trading platforms available on the market today. Some brokers even have their own proprietary trading platforms (developed by themselves).

When selecting a trading platform, there are a number factors to consider. Firstly, what features are offered through the platform by your Forex broker? Even if the trading platform can offer a service, doesn't mean that your Forex broker is offering the service.

Secondly, the design and layout of how the trading platform should be considered. Is the layout intuitive and suitable for your preference (ie. the Graphical User Interface, GUI)? Furthermore, can you efficiently and easily navigate throughout the features and platform windows? Often familiarity with a platform will come with time, but testing and getting an initial impression of an interface can be important in the decision.

Finally, the cost of the platform may be considered. Many platforms are offered free by brokers. However there are some designed platforms with extra features that are offered at a price (or have a requirement to fulfil). Ultimately, testing out demo accounts with a number of trading platforms would be the optimal way of deciding which platform is right for you.

Zeba Warsi is doing branding for http://www.blackbullmarkets.com this is an STP + ECN Forex broker. BlackBull Markets, a leading foreign exchange (Forex / FX) brokerage based in New Zealand. has partnered with Myfxbook Auto Trade https://www.blackbullmarkets.com/myfxbook-auto-trade, an automated Online Forex Trading software that links your MetaTrader4 account and automatically trades for you.

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Trading Signals for Forex and Indices - How To Pick Them

How many times have you read an advert or a website that has been thrown together and states some really astonishing facts:

"Mother of 4 makes $6,432 a week trading these signals"

"Absolute beginner has a strike rate of 80% and makes $4,132 every day on autopilot"

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Because of the above stats, let me give you a well known industry stat.

"90% of traders lose 90% of their money trading in the first 90 Days." 

The above stat demonstrates why people look for trading signals / tips / ideas.

These are VERY popular. So much so that people like to use them instead of using a standard stockbroker or a professional investment manager. You can see why as brokers charge more than the stock price just to buy into their idea, every single time.

So people are more tech savvy and frugal thanks to the advances of technology, Forex has exploded on to the scene for investors as a way to trade themselves.

You should always consider the value of your services:

If you are paying for it, is it worth it? Is it £5 or £100 a month? What do you get?

If your receiving them for free, is it worth it? Are the signals good quality? Are they frequent?

Whether you pay or not, at the end of the day you are looking for the research to make your money work harder. Paying for a service that is to a premium adds weight behind the signals purely because if they were too expensive, no one would buy their signals.

Check out below, what are the best things to look for in a signal service provider.

Now, don't get me wrong - Trading Signals can work - at the end of the day, to buy or sell is 50/50.

This article is not to discredit the services out there but to be wary of the kind of promotions and what people are selling. They are unregulated, so people can literally put what they want. Which will not do you any justice for your hard earned cash.

Just need to make ONE thing VERY CLEAR:

PLEASE NOTE THAT NO PROVIDER DOES NOT TAKE IN TO ACCOUNT YOUR FINANCIAL STATUS AND INVESTOR PROFILE; YOU ARE LIABLE FOR THE TRADING SIGNALS YOU SELECT TO TRADE AND FOLLOW.

So today, I will show you how to pick an appropriate provider.

How To Pick A Trading Signals Provider

Website - does it actually look clean and professional, or does it look as is it has been developed in a rush to quickly sell the service? Website can play a big factor as this is face of the business over the Internet.

Do they have a LIVE track record? Anyone can set up a demo, add a their signals to it and select the winning trades from the demo account and post them as a track record. Make sure they have a verified track record.

Are they regulated, or part of a regulated entity? If so then their promotions and everything you hear and see about the Signals HAVE to be SIGNED OFF by a compliance officer before any promotions can be made public. As it is an unregulated area, many providers are not regulated. This is a bonus.

Do they make wild claims? Give you an exact figure how much X can make in Y days? These kind of promotions are a huge red cross.

Do they have risk warnings, disclaimers and terms of service? These are necessary with every investment service.

Do they encourage you to trade? The providers do not give financial advice. No Signal provider should be encouraging you to trade. You have full control and execution - the signal provider only gives you trade ideas. It should be entirely up to you if you want to place the trade or not.

Pick a Trading Signal service that specialises with a select few instruments. If they provide quality service and quality signals, it'll be down to the face they are focused and experts on the financial instruments they are using.

Try them out first. ALWAYS do this, never go in straight away.

Price point. If they seem too cheap, and too good to be true - all they want is your money. If they can bring in 100 clients for £5 a month and lose 99 the next month they won't mind. Costly trading signals are there because they actually have value and provide a service.

If they claim to be ex-hedge fund traders, fund managers etc. quite simply leave the website, they are imposing someone else.

Do they trade the signals themselves? If they back their own signals and share their success with you, this is a no brainer.

Okay, so now you understand what to look for in a trading signal provider, you can look all over the internet for some high quality trading signal providers.

One in particular that offers Indices and Forex services is Alphaseekr Trading Signals.

You can get a 30 day trial by clicking here today.

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Understanding Forex Trading Systems

As you begin to learning about Forex trading, you're bound to come across many new terms. Two of the most commonly used Forex words are "pip" and "spread." These have unique definitions in relation to currency trading, and for beginners, we wanted to help you better understand what each of these terms mean.

hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh

What is a Pip?

In Forex trading, a pip - which is short for "price index point" - is a numerical value that represents the amount an exchange rate has changed over a period of time. So a currency pair gains or losses pips over time.

In the majority of currencies, pips are priced to four decimal points, meaning one pip is .0001 and two pips is .0002. So if you closed a trade in USD/CAD at 1.3320, after a 20-pip gain, the new value would be 1.3340.

Japanese yen, though, is an exception, as JPY is not priced to four decimal points. JPY is priced to two points. So a JPY currency pair, like USD/JPY, might be 122.50. In this scenario, one pip is .01 and two pips is .02.

Finally, some brokers offer fractional pip values out to 3 or 5 decimal points, which are referred to as pipettes. Pipettes are equivalent to 1/10 of one pip.

Calculating Pip Value

When we talk about currency pairs, we might say that USD/CAD has gained 20 pips over a certain period. But what is the monetary value of those 20 pips? This requires some basic calculations, but the math is pretty straightforward. To determine the pip value, you'll need the:

Currency pair

Size of trade

Closing exchange rate

So for example, if you closed a $100,000 GBP/USD trade at 1.5188 after a 20-pip gain, you would calculate the pip value by first determining the number of U.S. dollars each pip represents. In this case, the equation is 100,000x.0001 or each USD equals 10 pips. Then, you would calculate the price per pip in GBP using the closing exchange rate - or 10/1.5188 = 6.58 GBP per pip. Finally, calculate the value in GBP the currency pair has changed to determine profit or loss - in this example, it would be 20x6.58= 131.60 GBP.

What is Spread?

In Forex lingo, the "spread" refers the difference between the buy and sell prices for the currency which are set by brokers. These values are often referred as the "bid" and "ask" price, and in the simplest terms, these are the prices that brokers are offering to buy and sell currencies to a trader.

Brokers always offer lower bid prices than ask prices, because this is where the broker makes money. So for example, the bid/ask prices for EUR/USD might be 1.0757 and 1.0761; the currency pair is said to have a 4-pip spread. That means if you entered into a trade and immediately liquidated that trade at the same exchange rate, you would record a loss and lose money. In general, close spreads are better for traders, because it's easier for a trade to become profitable. For example, if the spread of a pair was 55 pips, a 20-pip gain would lose the trader money; but if the same pair had a 4-pip spread, that trader would be up 16 pips after closing the trade.

Want to learn more about becoming a day trader? The Learn to Forex course from Learn To Trade is designed to help novice and intermediate traders build a base of knowledge in Forex, learn to develop Forex trading skills and strategy, and minimize their trading risks. Enroll today and get started.

Visit Us

Article Source: http://EzineArticles.com/expert/VS_Singh/2182324

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Forex Strategy: Fundamental Vs Technical Currency Analysis

Chances are, if you're just getting started analyzing currencies, you have a long list of questions: What is currency analysis? What are the different ways to analyze Forex assets? And how will my analysis inform my trading efforts? These are important questions to answer, and it's probably best to start with a quick definition of currency analysis.

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In the simplest terms, currency analysis is the research of economic factors that affect exchange rates, as well as researching historical market data. Essentially, a day trader's goal is to extrapolate the future movement of a particular currency by analyzing market factors and economic data. This will help a day trader make better guesses as to whether a currency pair will lose or gain value.

Fundamental Currency Analysis

There are many different macroeconomic factors that can affect the value of a currency and its exchange rate. Fundamental analysis looks at these factors to determine the overall well-being of a country's economy, because economic standing is a strong determinant of currency value. Some factors a fundamental analysis might consider include:

Inflation rates

Trade balances

GDP

Interest rates

And job growth

In effect, the goal is to get a gauge of the overall economic factors that may affect that country's currency. For example, a country with an increasing inflation rate may experience a decrease in currency value. A Forex trader might then enter a trading position betting on the downward trend of that currency. It's important to note, though, that it's difficult to trade on fundamental analysis alone. Most frequently, a trader will also need to conduct technical analysis.

Technical Currency Analysis

With the advances in technology, day traders have access to a wealth of Foreign Exchange market data. Technical analysis is the process of digging into this data to reveal market behaviors and price patterns. This analysis can be carried out over long periods of time - say a year or more - or in short, 4-hour time periods.

Forex trading software can be a useful tool for improving the insights yielded by technical analysis. For example, many Forex trading applications today are designed with advanced algorithms that measure these behaviors and price patterns in real-time, effectively automating the process of picking trades. One advantage of this type of analysis is that day traders have better knowledge of when to enter and exit a particular position.

Fundamental vs. Technical Analysis: Which is Better?

Ask any day trader what they prefer, and they'll likely say they use a combination of both. When used together, fundamental and technical analysis yield greater insights into the market, as another layer of data is added into the equation.

We can break it down further. For example, let's say a country just elected a politician who wants to enact a quantitative easing program. This program has the potential to weaken the value of the currency - that's a valuable piece of fundamental analysis. Combining this data with a technical analysis of that country's currency - long-term and short-term trends - will help you best determine the positions that will be most beneficial to you.

Interested in learning Forex trading? Enroll today in the Learn Forex course from Learn To Trade; you'll polish your fundamental and technical analysis skills, learn new strategies for minimizing your trading risk, and develop better knowledge of the Foreign Exchange market.

Visit Us

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Forex Technical Indicators Can Damage Your Trading

The majority of Forex traders rely on technical indicators, and have been doing so since retail Forex trading was introduced. Typical indicators like fibonacci, stochastics, and RSI type indicators have been around for many years, and are in widespread use, but are totally worthless. This is because these indicators measure the wrong quantities.

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Forex traders use these indicators because they are readily available on their trading platforms, so they presume that these indicators are valid. But Forex traders need to move on from these antiquated indicators and start evaluating smarter systems that represent what is actually going on in the Forex market. Smart trading systems that operate in real time give Forex traders the intelligence they need are available now that are far superior to the standard technical indicators in wide use. Forex traders need alternatives but most traders don't know about these systems.

It is now possible to have a real time Forex system that points you to the correct pair to trade, improves accuracy, and will turn you into a profitable trader. These "smart Forex trading systems" are available to any trader to use and are much easier to interpret than the standard indicators.. Thorough techniques for performing the proper analysis and evaluation of the Forex market across a wide range of pairs can supplement these smart trading systems. If you combine both you can have a powerful trading system for leveraging the trends of the market, while having accurate entry signals. Real time intelligence for Forex traders is here now, but very few Forex traders have been exposed to these types of systems.

These newer Forex trading systems will far outperform the widely used technical indicator systems which are not only outdated, but can be combined into an infinite number of combinations. All of these combinations of technical indicators can take years to properly test and properly demo trade, causing frustration for most traders. Standard technical indicators have various time frames and period adjustments which results in thousands of possible combinations.

Forex traders are in desperate need of better choices for their trading system, they need effective trading systems. Using standard technical indicators for Forex trading is widespread but these methods are antiquated. Forex traders know these systems are only valid for scalping a few pips here and there. Traders are looking for choices and alternatives to these systems. We suggest you make sure your trading system is reliable and accurate before trading the leveraged spot Forex market. The best Forex indicators is the market itself, not indicators.

Mark Mc Donnell is the owner of Forexearlywarning.com. We provide trend based trading plans and live trading signals for 28 currency pairs. We trade with the trends of the Forex market and use smart tools like The Forex Heatmap to guide our trade entries.

http://www.forexearlywarning.com/

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