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Phidcon Guide to Forex

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Phidcon Guide to Forex PHIDCON GUIDE TO FOREX 1 TABLE OF CONTENT INTRODUCTION TO FOREX HISTORY OF EXCHANGE AND MONEY WHAT IS FOREX WHAT IS TRADING CURRENCY PAIRS OPENING A TRADING ACCOUNT CANDLESTICKS INTRODUCTION TO INDICATORS HOW TO TRADE FOREX INTRODUCTION TO TRADING SIGNAL WHY SIGNALS TYPE OF ORDERS HOW TO TRADE OUR SIGNAL HOW TO MANAGE OPEN TRADE (WINNIING AND LOSING) RISK EXPOSURE FOR FOREX TRADING RISK DISCLAIMER FOR FOREX TRADING 2 INTRODUCTION TO FOREX Money! Money has been one of the major measures of value and financial success, and is known to be generally accepted as a means of exchange of goods and service in the world today. Currency being its tool of exchange since the early days, following the post-barter age is very important and highly regarded by all countries. However, in the market of finances, some currencies are stronger and highly valued than others due to economics trend, political conditions and market psychology - this is one of the basis on which Forex is built. Then, what is Forex? Ever paid some worthy amount of money to an imported shoe seller in a shopping mart or an online market to get an Italian pair of shoes because you feel you would derive some comfort and confidence from it? Oh yes! That’s what Forex is like, and much more. Don’t worry, it’s not rocket science. However, unlike commodity buying, Forex does not thrive on ‘feelings’ – you have to keep your emotions in check while trading.’ Forex also known as Foreign Exchange Market is one of the most legit and largest financial market in the world which involves trading currencies on an online market with an eye on the value of currencies and trends of the world’s finances. 3 Until the late 90’s, Forex was a financial instrument wielded by banks, large institutions, and of course, the big boys with high net-worth and this is because you really need a rock- sized amount of money to get started. Forex wasn’t traded with peanuts. Who says technology has done more harm than good, hasn’t read of how individuals with few bucks can become retail traders. With the emergence of the internet and smart devices, Forex Trading just became easier and more accessible than ever! Individuals with small capital can bank on leverage provided by brokers and can conduct trades with a small amount of money. But! It’s not a sea you can navigate alone, and that’s why we are committed to educate, train and guide you through the essentials of Forex Trading. You sure don’t want to see your fingers get burnt. We too! You need a great deal of know- how and consistency of practice to become a seasoned trader and we’re super-ready to feed you with more knowledge on forex trading. 4 HISTORY OF EXCHANGE AND MONEY Since the inception of age, humans have had need for goods produced by people in their neighborhoods and other geographical areas which later developed into nations. Also, the need to trade out excess or surplus goods for the ones they lacked was identified. In a bid to exchange these goods from one nation to another, the bartering system was adopted. The bartering system was simply based on the premise of exchange of value. One, who wanted coal to keep his house warm, cook and drive activities, would be willing to give out a basket full of a bag full of wheat grains. Sounded funny right? The system worked for the ancient man until the system was faulted, as the commodities could not be divided into units of equal amounts and the exchange value depended on the quality of the 5 commodities, which mostly depreciates over time. A good example is animals which decline with time to a state of loss. Think of it as wanting a bowl of ice cream and giving out two large bunches of plantains, the value of the two goods aren’t the same; hence, commodity barter was not an even form of exchange. Another fault in the barter system was that you needed to find someone who’s in need of the commodity you have in excess or are willing to give out for the one you need. Barter evolved from commodity exchange, in the late ‘BCs into money, coinages being the first official currency minted by King Alyattes of Lydia (Now Turkey). In order to make trading easier, money was created, and as one would have thought, if money was made from papers or metals, as in the case of the olden days, then, why is money scarce? 6 This is because one of the characteristics of money is that it has to be valuable: unlike barter, money can serve as a better unit of exchange and as a store of value. If not, there would be no essence of business today and exchanging goods would have been more difficult in this new age. In the ancient ages, a common form of money, usually precious metals such as gold, bronze or silver and cowrie shells, where used to transact businesses (buying and selling). For ages, the currencies of the world were endorsed by gold, in which a piece of paper currency is given by any world government to represent a real amount of gold stored in an underground safe by that government. At this point, countries had issues with the value of gold and were affected by inflation at another time. This problem saw the beginning of what later metamorphosed to Foreign Exchange. 7 Thus, Foreign exchange can be seen as a stream of solutions which provides for each country to produce their own currency and to implement policies to guide their monetary decisions and activities. The beautiful view is that it avails countries with the room to participate in international trade by providing a system of exchanging one currency for another relative to their exchange rate. 8 WHAT IS FOREX? I can almost hear your heart yearning to know more about forex and delve into trading. Wait! Let’s take our first baby steps. What is Forex? If you live in the United States, and you’re travelling to Japan to purchase electronic goods, or see a cousin who just gave birth, you’ll be surprised that the new shiny $1000 notes in your wallet will take you no farther than your 9 country’s airport. What do you do in this case? Here comes forex! The green light is on, and you think of exchanging your dollars into the equivalent value of the local currency of Japan - YEN, so that you can buy your electronics and also perform transactions. What more? You won’t get stranded on the streets of Japan before the new mother comes pick you up. The rate at which you exchange the currencies (USD to YEN) is known as the exchange rate, and all of this forms the basis of foreign exchange. Forex commonly referred to as ‘FOREX,’ ‘Retail Forex,’ ‘FX,’ or ‘Spot FX’ is a blend of the words financial currency and exchange. It’s a financial instrument that exchanges money from one country’s currency to another country’s currency for example, exchanging US’ dollars for Britain’s pounds. This means forex is the simultaneous buying of one currency and selling of another. Unarguably the largest and most liquid market in the financial world, Forex trading volume exceeds $4 - $5 trillion USD per day. Comparing this to the trading volume of the New York Stock Exchange a day, about 28 USD billion, forex exchange market is indeed large. 10 Foreign Exchange Market (Forex Market) is a decentralized global market unlike other commodity trading and other financial markets, which has a centralised market for transactions, and is run at specified time of the day. Forex market runs electronically (online), over-the-counter, and exchanges national currencies over a 24-hour period. Wow! It’s interesting to know that it doesn’t matter whether you’re a nighthawk or a day lark; Forex is just a market for all times. FOREX TRADING: What it is and what it is not Forex Trading is not a Get-Rich-Quick Scheme! Looking for a Ponzi scheme or money making pyramid that doubles your money in two weeks? If yes, sorry to disappoint you, as sweet and as profitable as Forex trading may be, it is pertinent to know that it’s not an investment for people looking for quick ways to get rich. It’s a trade that requires patience, skill and commitment to learning. 11 Forex trading is not a trade for people who have an anti-loss skin. In Forex, there’s no 100% win-win situation. Just like many other investment/trade, it has its own level of risk involved, even experienced traders still run into losses once in a while but with proper planning, adequate training and signals from seasoned brokers, the risk can be put to the barest minimum. Forex trading is not a trade for those who lack the discipline required for trading. If you can’t stick to a diet or your exercise routine, it might be a little difficult to trade. This simply means trading requires discipline. You need to be disciplined enough to allow your funds grow before you stop trade or take profit. You must be ready to really spare few bucks. Forex trading is not for lazy people. It is a skill that takes time to learn and requires diligence. There’s no shortcut to forex trading, you have to commit yourself to the required skills and strategy to make you a 12 seasoned trader.
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