How to Use Pivot Points in Forex and Stock Trading?

I already knew that some traders use nothing but Pivot Points to trade but I had never used it because I had been stuck to my own trading system(s). This weekend I spent some time to research about Pivot Points and see how others use this indicator for their intraday trading and I found it really useful to have the Pivot Points on your charts even if we have a different trading system.

Most traders who use Pivot Points are intraday traders. I mean Pivot Points can be used mainly for intraday trading.

What are the Pivot Points?

Pivot Points or Pivot Levels are nothing but some support and resistance levels that you can calculate and plot on your charts very easily. Some platforms support Pivot Points but if you use a platform that doesn’t support it, you can easily calculate and plot them.

Pivot Levels are calculated using three types of information from the previous trading day:

* High price
* Low price
* Close price

Even in forex market which is a 24 hours market we have high, low and close price for each day. The easiest way to find the high, low and close price of the previous day is checking the previous day candlestick in the daily chart. Each candlestick in the daily chart takes 24 hours to become completed and then the next candlestick comes. So if you want to trade today which is - for example - Feb 3th, you need to check the Feb 2th candlestick in the daily chart and find the high, low and close price.

If you don’t know what high, low and close prices can be found in a candlestick, please read my candlestick article:
The Language of Japanese CandleSticks - The Only Real Time Indicators

So the Pivot Points that should be used for today trading are plotted using the high, low and close price of the previous day. You can plot the Pivot Points (levels) on smaller time frames like one hour or five minutes chart. Pivot Levels tell you that when and how the price will reverse and change the direction.

Like all other indicators and signals, Pivot Points is a not 100% guaranteed indicator and sometimes they don’t work but as I explained at the beginning of this article, it is good to have them on your charts even if your trading system is not based on the Pivot Points.

The first and most important Pivot level is the Pivot Point which is the average of the high, low and close price of the previous day:

Pivot Point = ( Yesterday High + Yesterday Close + Yesterday Low )/3

Then we have Resistance 1 and Support 1 or R1 and S1:

Resistance 1 = ( Pivot Point x 2 ) - Yesterday Low

Support 1 = ( Pivot Point x 2 ) - Yesterday High

Pivot Point, R1 and S1 are the most important Pivot Levels but we can also calculate the Resistance 2 and Support 2 or R2 and S2.

Resistance 2 = Pivot Point + ( Yesterday High - Yesterday Low )

Support 2 = Pivot Point - ( Yesterday High - Yesterday Low )

So we will have 5 horizontal lines on our chart:

Resistance 2
Resistance 1
Pivot Point
Support 1
Support 2

These are the levels that the price may show reactions to them during the day.

Now let me show you the 5min chart that the Pivot Levels are calculated and plotted on it. I have chosen the 29 January 2008 high, low and close price to plot the Pivot Levels for the next day (30 January 2008) on the EUR-USD five minutes charts.

Here is the 29 January 2008 high, low and close prices:

High = 1.4787
Low = 1.4737
Close = 1.4787

and here is the calculated Pivot Points according to the above formulas:

R2 = 1.4820
R1 = 1.4804
Pivot Point = 1.4770
S1 = 1.4754
S2 = 1.4720

and here is the plotted levels on the 5min chart:



As you see it is very easy to calculate and plot the Pivot levels.

Now lets see how the price reacted when it reached any of the Pivot levels. To do that I will show you the 30th January chart with a higher magnification and will change the candlestick chart to a line chart for more simplification.

Follow the blue ovals and numbers on the below chart and read my explanations.



1- This is the beginning of the day. The price starts moving under the Pivot Level (1.4770) and goes a little down.
2- Then the it goes up to retest the Pivot Level (1.4770) as a resistance. As you see here the Pivot Level works as a strong resistance and the price can not break up and so it goes down.
3- The price is stopped almost by the S1 level (1.4754).
4- Then goes up to retest the Pivot Level and this time succeeds to break up the Pivot Level.
5- Then it goes down to retest the broken Pivot Level as a support but fails and goes up.
6- It tests the R1 level and break it up.
7- It goes down to retest the broken R1 but fails and goes up.
8- It goes down to retest the R1 and goes up and goes down immediately and completes the triple top pattern, retests, breaks down the R1 and goes down.
9- It is stopped almost by the Pivot Point as a support. It goes up and down around that level and then …
10- Goes up to retest the R1, fails once, goes down and then goes up to retest, breaks up the R1 level and goes up.
11- It doesn’t show any reaction to the R2 level and goes much higher.
12- It goes down to retest the R2. This time R2 works as a support and the price shows a reaction to it. It fails to break down the R2 and bounces up and the day is finished.

Now you can plot the Pivot points for the next day (31 January) using the high, low and close price of the 30 January and this process can be repeated day after day.

see how the price went up and down between the Pivot Level and Resistance 1 on 31 January:



As you see, the Pivot Levels are important and sometimes the price shows strong reactions to them.

How to trade using the Pivot (Points) Levels?

The main Pivot Level is the most important level [( Yesterday High + Yesterday Close + Yesterday Low )/3] . In a trading day, if the price opens under this level, it means the price has a stronger tendency to go down and Bears are stronger. So we can take a short (sell) position. If the price opens above the Pivot Level, it means Bulls are stronger and we can take a long (buy) position. All other levels may work as support and resistance and so we have to be careful when the price reaches them.

As you see at the above chart (31 January 2008), the price is opened a little above the Pivot Point while it had already started going up. It goes up as high as the R1 level and then goes down. Those who use Pivot Levels to trade, would go long at the beginning of the day but for me it will be a little different.

For me, the Pivot Levels will be considered as the potential support/resistance levels and I will not take any position just because the price is opened below or above the main Pivot Level. I use my technical analysis, find patterns and pennants and will have an eye on the Pivot Levels to close my trades on time before I lose my profit. I consider this rule that if the price is opened above the main Pivot Level, it may go up and visa versa. Then I wait for a breakout and will take the proper position.

For example at the above example, I would consider that the price was opened above the Pivot Level and it had a stronger tendency to go up. Then I would wait for the price to break up the wedge and then I would go long. Then I would have an eye on it and as soon as it showed some reactions to the R1 level, I would fix my profit. So Pivot Points are just some help. They don’t generate buy/sell signals.

I hope you enjoyed this article and learned something from it. Please use the below comment submission form to let me know if you need anything to be explained more.

Members login: Forgot your password? When You Will Be A Professional Fo

I received a comment on the December 24 report from a gentleman, Sambhunath, that made me write and post this article. Sambhunath says,

” While moving around aimlessly in the internet, I have chanced to come across your site. It appeared so attractive that I have gone through as many pages as I could and finally come to the conclusion that I must visit this site regularly.

As for myself, I am relatively new in the field of currency-trading. I had read a lot of e-books and practiced my acquired skills in some demo-accounts. Enthused by consecutive and relatively consistent success I started to believe that I had mastered all the skills necessary to become a successful currency trader. I then opened a real account with all the savings I had and started my real journey. The consequence of my endeavor proved to be fatal !!!!

I have lost all my money. I do not understand why for some days I remain puzzled and behave most irrationally and lost my all.

This blow has proved to be an eye-opener. I have realized that my knowledge about both the market and about myself is far from satisfactory. I am yet to learn a lot before even thinking of playing with real money. I have to learn everything afresh from a real master. I still believe that I can learn the subject and in course of time I must be a successful trader.

I have wrote so many things just for the new-comers. This is not just as it appears. It is purely a game of applied psychology- controlling impulses of fear and greed- applying earned knowledge judiciously.

I cannot sufficiently express how happy I am meeting you. You are the person I am looking after.

You have started an excellent work. Countless people around the world will remain thankful to you for ever. “

I appreciate his kindness and I am happy that my efforts could be any of help. Unfortunately, this happens to more than 95% of the beginners and he is not alone. Something that changes a beginner to a professional trader should happen after this stage but unfortunately 99% of those who come through this stage, give up and never think about forex or any other kind of investment and trading. They will complain that they are not for trading and they can not become traders.

I have explained in one of my other articles that you have to have three things to become a good and successful trader:

1. Knowledge
2. Experience
3. Suitable mental and psychological condition

If you lose your money as soon as you start working with the real account you should ask yourself that “Do I have enough knowledge? Do I have enough experience? Am I mentally and psychologically ready to trade with my money?”

If you answered no to any of the above questions, you should not trade with the real account.

You can learn everything about forex trading through the internet. Internet is full of free and invaluable information about forex. There are also free videos that you can watch and learn a lot. They all talk about trends, patterns, indicators, candle sticks, fundamentals and … and you can learn all of them word by word.

Then you sign up for a demo account and start trading. Sometimes your first trades are very good and it deceives you that you have learned everything and now you can trade with real money but you don’t know that forex market is like an ocean. Sometimes it is calm. Sometimes it is stormy and sometimes there is a Tsunami because of an earthquake. Someone who has experienced sailing when the ocean has been calm may think that he is a sailor but he is not aware that the storm is on the way and he is not experienced enough to face a real storm. He goes to ocean and becomes trapped by the storm.

Beginners should keep in their mind that a few successful trades with the demo account doesn’t mean that they are good traders and a few successful trades with the real account, doesn’t mean that they can increase the amount of the trades.

Beginners have to keep on trading with the demo at least for few months. The other thing is that they have to have a system. Trading with the demo account without an especial and well-described system is wasting of time. You have to know what kind of signals you should be waiting for before you buy and sell and you should know that you only buy and sell when you see the signals not when you think that you are seeing the signals. Like waiting behind the red light. You start moving only when you see the green light.

So you have to trade with the demo account at least for few months. You have to learn to get stuck to your system. You have to learn to control your emotions. You have to learn to control your fear and greed before you start working with real money.

Unfortunately some greedy brokers push the beginners to open real accounts. They are not smart enough to understand that they have to have long term traders not one day traders. Most beginners who lose their money, will never reload their accounts and so the brokers will lose them for good.

When you work with the demo account for few months, you feel a confidence in your heart. This confidence is not a false confidence because it is gained through practicing and experiencing. If you don’t feel a true confidence, keep on practicing with the demo account. It doesn’t matter for how long. One year or even two years. Nobody has determined a deadline for you. So don’t rush. The market is always there waiting for your money.

Then open a real account but please note that after opening a real account, you are at the BEGINNING of a new stage. Yes! Working with the real account is different from the demo account.

Why? Are the signals, charts, indicators, currency pairs and … different?

Absolutely not. They are all the same but something that is different is that you know that you are playing with your real money. The money that you have been working to the bone to collect. You don’t like to lose it. You want to increase it.

What will happen then?

You trade with more fear and greed. You don’t close the trade that goes against you because you don’t want to lose. You wait for the price to change the direction but it won’t and finally you decide to close your trade when you have lost a lot.

Or you keep a good trade to make more profit. You ignore the reversal signals and so you lose all the profit you had in your hand.

Sounds familiar, doesn’t it? :)

So what should you do?

1. Start learning first and complete your knowledge. Learn everything that you should know about the trends, patterns, support, resistance, candle sticks, reversal and continuation signals and … . There are a lot of websites that have these information for free. You have to spend at least three months to learn all these things.

2. Decide that if you want to be a swing trader or an intraday trader. As a beginner you should choose one of them because you have to be focused on one thing first.

3. Choose a system (strategy). Your system should be as simple as possible. Complicated systems are not applicable. You can only lose with them. A System should be as easy as 1, 2, 3. Also choose a system that works according to technique and knowledge not according to superstitions. In an e-book I read about a strategy that says you should buy when you see the price has gone up for 80 pips before noon!!!

4. Start trading with the demo account using the system you have chosen. If you see that you don’t like your system or it is not good, change it. Find a better and simpler system. Get stuck to it and test it over and over and over. Spend several months to one year with the demo account. Do not be fooled by some of the forums members who say “I have started working on forex two months ago and now I make 100 pips everyday”. This is not true.

5. Forget that the account you are working with it is a demo account. Consider it as a real account. When you see you are losing, think that it is your REAL money that is burning. And when you see that you are making profit think that it is going to your real bank account. Keep in your mind that if you rush and trade emotionally you lose your money. This will help you to experience your fear and greed before trading with the real account. If you experience them, you will learn to control them. Don’t let them show themselves right when you start trading with your real money.

6. Then start working with a real account BUT trade with a very very small amount of money. I don’t care if you have a $500k account or a $100 account. Start trading with the minimum amount that you can place an order. Keep on working with this amount of money for a few weeks. If you saw that you are trading exactly like when you have been trading with the demo account, increase the amount of the money gradually. Do not play with a huge amount of money after a few successful trades.

7. Don’t give up! Don’t get disappointed when you lose. Everybody loses at the beginning. Even the best traders lose in some of their trades. Learn from your mistakes. Keep in your mind that losing is part of the game. We do not practice to learn not to lose. We practice to learn how to lose small amounts and win big amounts. Your stop loss will be triggered in some cases. This is natural. It should not prevent you from entering to another trade.

If you work in the way I explained above, you will become a professional trader in about one year without losing your money and without having to reload your account.

Happy trading :)

Trading Only With Moving Average

At the moment I am rather busy. Moving to a new place and house. The house still needs a lot of work. As a result, I do not have time to update this blog. Trading is still going on but on a shorter timeframe. Result is consistent now. AudUsd is very kind at the moment with no sudden movement.

In the next few weeks I will show you how to trade using only MA. As usual what works for me may not work for you. This is because some of you may not be able to follow the rules of the game.

RULES OF THE GAME
1. Trade based on your capital and the time that you have. The bigger your capital the longer the TF. The more time you have the longer the TF. Vice versa.

2. Only trade at the direction pointed by the MA pairs. If the MA pairs is showing mixed direction, do not trade. The MA pairs must be pointing at the same direction.

3. If a trade suddenly change direction, do not hesitate to close it at a loss and turn the trade. This is the hardest part where most of you failed. Free your mind or become a loser all your life.

4. Keep in mind, there is no such thing as winning all the time. Just make sure you win a lot more than you lose. In the end your profit will grow along with your confident.

Simple system with simple rules. I like to keep it simple. No point of having the most complex system when simple system can have the same result. With this system you will be out of the market most of the time. This is because you will only be taking the big move and avoiding the small move and market noise.

Last advise. Do not anticipate. Forex is not a game of inteligence eventhough this system at full swing will show you possible turning point. I am having a possible turning point for audusd at 0.7200 but I will not take it coz there will be market swing before the actual turn. Why wast time waiting for the big move when you can actually see when its going to move.

In the mean time, good luck for all of you. I will be back once my pc is online again. At the moment I am posting this on a laptop. I dont like laptop, too small keypad, makes it hard to do speed typing.

The best times to trade forex

The best times to trade currencies
The currency market is the market working over 24 hours and there could be the best settings for the lucrative trade in the periods of Asian and European and American, and plans to return to the old historical prices can feel the best of times during the day, which can be seen when the market is working, and the aim is to trade on the Trade over the average useful and well away from the market when the market is moving in a narrow range.
Euro - dollar EUR / USD
During the meeting, the Asian trading, on average, are 15% of the total volume of exchanges, but still good, and 39% of the total volume of exchanges in each market while meeting the European currency
Alpound - dollar GBP / USD. Often be Alpound in light trading before and during the Asian session, but they remain good movements, and the market can be a quiet period in the mid-Asian, and at the European trading volume is 23% of the total volume of each market currencies.
Dollar - Yen USD / JPY
During the Asian session, the 78% of the total volumes of the currency market, and decreases to 17% during the European session, but trading remains encouraging.
Began and the end dates of the meetings:
Asian meeting starting at 0.00 GMT, after midnight, or 7 pm EST and close at 9.00 am Greenwich Mean Time or 4 o'clock guess
Meeting the European Union, the largest market and opens in the timing of 7.00 am GMT, or 2 EST and close at 17.00 GMT or mid-afternoon U.S. Eastern Standard Time.
Of America meeting in GMT or 8 am EST and close at 22.00 GMT and 5 pm Eastern Standard Time America, and the best trade in the first three hours

Forex Trading Analysis: Does it Really Work and How

Forex Trading Analysis: Does it Really Work and How?
By: Hillel Ful............I Will recommend first you forex forex forex forex forex forex forex forex forex forex forex forex forex=changed the course Of your Life...........


dWhen it comes to Forex trading, the million dollar question occupying all traders across the globe is how to best predict future movements of the market. Now, before we proceed, it is very important and crucial to emphasize the point that there really is no one way that can predict what will happen in the market with 100% certainty and accuracy. Having said that, there are various ways to analyze the Forex market and draw conclusions about the different currencies, both in the short and long term periods. The two primary methods are what are known as technical and fundamental analysis. Just as there is no one method to predict what will transpire in the market, so too there is no absolute answer to the question which is better, technical or fundamental analysis. Many experts, who base their trading on technical analysis of the market, might tell you it is the ultimate method, and vice versa. So how do you determine what is right for you? Before we discuss the ins and outs of the technical and fundamental schools of thought, it is important to understand one point. The best option is obviously to try and incorporate both types of analysis in your day to day trading. If you could take the best of both worlds and implement the principles properly, you are going to see the best results. However, most traders cannot focus equally on technical and fundamental analysis, so they do need to eventually choose which will be their primary method of market analysis. Fundamental: “Forex fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic, political, environmental, and other relevant factors, as well as statistics that will affect the basic supply and demand of whatever underlies the financial instrument.” Fundamental analysis is a more traditional tool than its competition, it has always been around, it was just referred to differently. Fundamental analysis means exactly as it sounds. You draw your market conclusions based on the fundamental principles driving the currencies. This can include the political developments of the country at hand. It will almost always include the economic happenings, and might even include environmental factors. Fundamental analysis is based on the premise that where one currency or another will go is not random, and if we know the “action”, we are sure to be able to predict the “reaction”. Fundamental analysts will therefore trade with their eyes glued to the news, and will pay much less attention to what their currency did in the past. They will identify and quantify factors that determine the intrinsic value of a currency based on its supply and demand. If the supply is on the decrease and the demand increasing or staying the same, the value of the currency will obviously rise, and vice versa. To just give a more concrete example, a Forex fundamental analyst will study the level of supply and demand of a given country’s currency, as well as its export and import numbers, its government stability and popularity, as well as the countries economic indicators. Based on all those factors and more, the analyst will draw certain conclusions about the strength of that currency and whether it is a wise investment for the average trader. This is obviously a very thorough way of analyzing the market and is sure to see accurate results. The big question is, can everyone be a professional fundamental analyst or does it require vast knowledge in numerous complex issues? Advantages:
Thorough and comprehensive
Relatively simple to decipher the relevant information Disadvantages:
Endless information to analyze
Difficulty in measuring the relationships among the variables, how much attention should be paid to the political arena, as opposed to the economic or environmental? Technical “Forex technical analysis is a method of predicting price movements and future market trends by studying charts of past market action, which take into account price of instruments, volume of trading, and, where applicable, open interest in the instruments.” Technical analysis is a much more scientific and objective method of analyzing the market. Before we get into the details of technical analysis, we should say that the basic and most elementary principle upon which all technical analysis is based is the sentence “The trend is your friend”. Technical analysts do not dispute that there are forces that drive the Forex market, they just add another factor that fundamental analysts do not hold by. Technical analysis is based on the concept that what was yesterday paints a clear picture of what will be tomorrow. Technical analysts will not have the news open while they trade, instead, they will pay close attention to the daily, weekly, and monthly charts. If there is a pattern to be found in the charts, technical analysts will find it. Technical analysis has the advantage of focusing on one or two charts and analyzing them, whereas fundamental analysts have to consume and analyze tremendous amounts of complicated data, and there is no indication what types of information are more important than others. When it comes to technical analysis, there are 3 underlying principles:
Although many factors affect the market and its currencies, including politics and economics, when it comes to technical analysis, the driving forces are irrelevant. What is important are the movements of the currencies themselves and not the reasons behind them.
As I stated above, technical analysts will claim that if you look long and hard enough at the charts, you will notice a trend, or a certain pattern. Follow that trend, and you will come out on top.
Trends are based on human psychology of how people trade the market, and will therefore continue. To simplify the concept of technical analysis, we will say that it involves the gathering of historical data (there is over 100 years of recorded data in the Forex market), inputting it into a computer, which then searches the data for a pattern, later displaying it in graphical format. OK, so we have concluded that technical analysis is a more focused and defined method of analyzing the market, but that does not answer the question, is it a more accurate method? Advantages:
Enables you to focus on one topic or chart and not analyze tremendous amounts of complicated data. .............I Will recommend first you forex forex forex forex forex forex forex forex forex forex forex =Changed the course Of your Life.......... Clear definitions of what information is the most crucial.
Most trading platforms have built in technical analysis tools.Disadvantages:
Technical analysis completely ignores the driving force behind the currencies.
The information is sometimes presented in a highly technical (hence the name) fashion making it hard to comprehend. There is no one answer to the questions we have posed, but in order to cover your tracks, it is recommended to trade the Forex market making use of both methods, which each, as we have seen, have their own advantages and disadvantages. ...........I Wil recommend first forex forex forex forex forex forex forex forex forex forex forex forex forex = Changed the course Of your Life

Forex Trading Tip - Be Flexible

Forex traders get into trouble when they are rigid in their beliefs.

The problem for inflexible minded traders is that the markets they trade aren't rigid. They do trend, but they can turn the other direction leaving a rigid trader with a hard decision to make... To stay and hope the market will rebound or to get out and cut loses short.

Part of this stubbornness in a trader is the obsession to always be right no matter that the evidence proves they are wrong. Such a trader may even know they are wrong but still insist otherwise. They have a hard time admitting defeat and don't want to lose face.

Until something catastrophic happens, for example getting a margin call, these rigid thinking traders will not change their set in stone beliefs.

You may be one of these traders and don't even realize it. Having to be right just overcomes your ability to think clearly. Rigid thinking prevents you from taking corrective action on your trades so you can cut your losses and be ready for another opportunity, whether it's reversing directions from long to short.

Be determined not to have a rigid view of the markets. Being flexible in your thinking is better than being right about the direction of the market. They say the market doesn't care what you think. It doesn't matter if thousands of other traders agree with your view... The market decides which direction it will go.

The only belief you should hold is that you must be flexible and adapt to change.

Copyright © 2009 L Chan

Want a solid foundation to build upon your Forex trading success? Discover the insider information you need to trade the Forex market with confidence. Visit http://www.ForexTradingBasicsGuide.com and take the first step to becoming a winning Forex trader.

Forex Trading - A Maze Of Misinformatio

If you want to get into something that will totally confuse you and send you to the poor house at the same time then try getting into Forex trading which is the buying and selling of currency. An associate of mine has this horror story to share. For the sake of protecting his already fragile shattered ego because of this horrible experience we'll call him Joe.

"Hi, my name is Joe. I wanted to get into Forex trading or the buying and selling of currency. For example, buying Japanese Yen at one price and selling it at another price to make a profit. Sounds simple, but trust me, it is far from it.

For starters, if you know nothing about forex trading, you at least want to get some kind of an education about it that won't cost you anything. Therein lies the first problem. Try doing a search engine lookup on "what is forex trading" or "forex trading definition" and you'll find a zillion links to all these places that will teach you about forex trading, for a fee. So in other words before I can even learn about forex trading I have to invest money just to find out what it is? If that doesn't sound fishy to begin with.

Well, eventually I found enough of a definition of forex trading to know what it was and what it involved. The next problem was how to get into it. Do I go to an online broker? Which one? So I did another Internet search. Let me tell you, there are more places online that will be more than happy to take your business so you can't possibly know which one to go to unless you know someone who knows someone.

Then, to compound the problem even more you run into these listings that talk about forex scams. Huh? I guess I shouldn't have been surprised but how can you run a forex scam? Well, let me clear that one up right now. A bogus company acts as a broker for your money. You buy your currency at whatever price and then what happens is the company essentially runs off with your money and closes their site down, opening it up someplace else. You're now out your investment. That's only one of many ways that companies are scamming people getting into forex trading, but I'm sure you get the idea.

Once you find a legitimate company there are all the complex strategies you have to learn. There's looking for exit and entrance signs. In other words certain indicators that supposedly tell you when to buy the currency and when to sell. This is, of course, all guess work as nobody can really predict what a currency is going to sell for at any given time. You know this is the case when you see web sites with the following advertisement, "Trade forex with up to 80% accurate forecasts." In other words 20% of the time I'm going to lose money. This is what they admit to. You know it's never that good.

But here's the worst part of forex trading and the thing that most people don't realize. The percentage that your purchase goes up before you sell is so minuscule that the only way to make any decent amount of money is to invest hundreds of thousands of dollars. People who think they can invest $25 or even $250 are dreaming if they think they will make anything worth talking about. With that kind of investment we are talking about pennies in profit.

Bottom line. After everything I learned, which took me weeks of my time, I eventually ended up chucking the whole idea of forex trading. That's my horror story. Weeks of my valuable time wasted on something that I had no business getting into in the first place, given the poor rate of return and the possibility of being scammed.

So unless you have a lot of money to burn my suggestion is to stay away from forex trading. I just wish I knew that before I ever started."

Michael Russell
Your Independent guide to Forex Trading

The Use of Requote in the Forex Market

The Forex market holds the largest financial market trading in the world. There are more than $3 trillion value trades per day. Did you know that everyone plays a vital role in the trade of currency? Being a citizen of your country that has a currency automatically makes you as an investor of your countries currency. You decide whether you will hold on with the currency of your country or you want to trade it to other foreign currency. Currency trading is done at the Foreign Exchange market otherwise known as Forex or simply FX market.

The Forex market operates in a global electronic network which consists of financial institutions, banks and Forex traders which all involved in buying and selling national currencies. Unlike the stock exchange, the Forex market does not have any central location instead it involves an inter-bank system of trading. The Forex market transactions are done in real time which operates 24 hours a day. With a colossal number of traders around the world, the Forex is the busiest trading market in the world. Trades are made over an electronic network worldwide or by telephone. Sydney, London, Tokyo, New York and Frankfurt are the main centers of trading.

During the earlier years of the Forex market, access to trading was only made available for large business institutions and banks but later was made available for individual Forex traders and money managers. Traditionally, access to the Forex market has been made available only to banks and other large financial institutions. However, with advances in technology over the years along with the industry's high leverage options, the Forex market is now available to money managers and individual Forex traders. This was made possible through the use of computers and internet connection. Currency trading is basically instantaneous buying and selling of one currency to another. Example of trade are; Euro – US Dollar, GB Pound – Japanese Yen. This process is called cross trading.

Another type of trading which can be done is in the spot market which involves the largest volume and the most important trading in the Forex market. These trades are done on the spot which means that it doesn’t take two banking days. There are many advantages in trading in the Forex market compared to other trading systems. The major advantage is that trades can be made 24 hours a day which allows traders to immediately decide and react on breaking news which greatly affects the market price. Another great advantage for investors is that trades which are done in the Forex market do not charge any commission. With the Forex market there are always opportunities to gain a profit. Currencies sometimes weaken and sometimes strengthen. When you trade currencies, they exactly work against each other. For example, if you think that the Euro will decline against the US Dollar or vice versa, you would sell your Euro and later buy Euro again at lower price to earn a profit.

However requotes occur which may lead to decrease of profit and even lose of your investment. Requotes happen when a broker quotes one price but then quotes another. Brokers might even fill your order at a different price commonly higher when you attempt to trade. So before investing your money, make sure to check the policy of the broker regarding requotes.

Why Forex Trading

If you want to know why the Forex trading market is superiors to other investor options such as Equities or the futures market, then you can rest assure that you'll find the answer in this page.

The best way to clarify the advantages of the Forex market is through a real example. In 1929, the stock market collapsed, causing many people and businesses from around the world to go broke. This also happened when the high tech bubble burst. The fear of a market crash is a concern that constantly dwells in the minds of investors, both professional and beginner ones.

In the online Forex trading market, There is no way for the market to crash. If you have read about what is the Forex trading market, then you know that when you buy a certain currency, you are at the same time selling another currency. When some currencies' price false, others' price rise.

So this is the most important advantage of Forex day trading. Unlike other markets, where in some cases all traders lose money, with Forex trading there are always traders that make a profit, at any given time.

Here are some other advantages of the Forex trading market:

* No commissions. Only in the Forex trading market are there no government fees, brokerage commissions, exchange fees and other unnecessary losses of cash. There are also low transaction costs between the bid and ask price.
* No middlemen. In this market there are no investors that take a percentage of the investment or the profit, and you transact directly with the pricing market agent.
* You can choose the size of your investment. The Forex trading lot is dynamic, and is set according to your preference. This lot can vary between large lots worth $10,000 to mini lots worth $25.
* High liquidity. In the Forex trading market you can buy and sell your currency at any time and place, regardless of the currency position, when the trade itself is done almost instantaneously.
* Trading in the margin. Forex trading consists of margin investments that increase your chances for higher profits by increasing your money's worth.
* Opened 24 hours a day. Because it's worldwide and operates in several time zones, the Forex trading market is the only market that you can trade in 24 hours a day.

With all of these wonderful advantages, there is no wonder more and more investors choose Forex trading as there main fund for investment. Because all transactions can be done online, you don't even have to leave your house!

Tania Raven, Market Analyst

Why Trade the FOREX?

My purpose for writing this article is to demonstrate to you the advantages of trading on the Forex market. However, there is one myth that I want to dispel before I go further. The myth is that there is a difference between trading and investing. To dispel that myth I quote from Al Thomas, President of Williamsburg Investment Company, who wrote "If It Doesn't Go Up, Don't Buy It". He said "Everyone who invests is a trader, only the time period is different." It is a lesson that I took seriously after taking a beating in the stock market in 2000.

So now, let's compare features of currency trading to those of stock and commodity trading.

Liquidity — The Forex market is the most liquid financial market in the world around 1.9 trillion dollars traded everyday. The commodities market trades around 440 billion dollars a day, and the US stock market trades around 200 billion dollars a day. This ensures better trade execution and prevents market manipulation. It also ensures easily executable trading.

Trading Times — The Forex market is open 24 hours a day (except weekends) which means that in the US it opens at 3:00 pm Sunday (EST) and closes Friday at 5:00 (EST), allowing active traders to choose the times they want to trade. Commodities trading hours are all over the board depending on which commodity you are trading. Including extended trading times US stocks can be traded from 8:30 am to 6:30 pm (ET) on weekdays.

Leverage — Depending on your Forex account size, your leverage may be 100:1, although there are Forex brokers that offer leverage of up to 400:1 (not that I would ever recommend that kind of leverage). Leverage in the stock market can be as high as 4:1, and in the commodities market, leverage varies with the commodity traded but it can be quite high. Because the commodity markets are not as liquid as the Forex market, its leverage is inherently riskier. Although I was never shut out of a commodity trade by the day limit, the fear was always in the back of my mind.

Trading costs — Transaction costs in the Forex market is the difference between the buy and sell price of each currency pair. There are no brokerage fees. For both the stock and the commodity markets, there are transaction costs and brokerage fees. Even when you use discount brokers, those fees add up.

Minimum investment — You can open a Forex trading account for as little as $300.00. It took $5,000 for me to open my futures trading account.

Focus — 85% of all trading transactions are made on 7 major currencies. In the US stock market alone there are 40,000 stocks. There are just over 200 commodity markets, although quite a few are so illiquid that they are not traded except by hedgers. As you can see, the fewer number of instruments allows us to study each one more closely.

Trade execution — In the Forex market, trade execution is almost instantaneous. In both the equity and commodity markets, you count on a broker to execute your trades and their results are sometimes inconsistent.

While all of these features make trading the Forex market very attractive, it still requires a lot of education, discipline, commitment and patience. All trading can be risky.

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