Methods to perfect practice fx trading

Starting currency traders are suggested to trade on a practice account as opposed to staking cash on a real account. Article gives you a couple of methods how you can perfect your practice trading experience:

Imagine you are trading for real money

What if you were trading your hard earned cash and not some fake demo money? Imagination will make you treat this activity as a business, not as some gambling experience. And you will not risk so much as bankrupting your account right away.

Trading with fake money gives you an illusion that trading is easy, this is really not. You have to change your mental attitude to make your demo trading work.

Some traders do that by using various punishments on themselves. They might force themselves to put significant amount of money to a saving box when they lose on a demo. This would sober them up and make more careful next time.

On the other hand you can self indulge if you win on a demo trade. Allow yourself to do something that you really like when you have a few consecutive winners.

Evaluate yourself.

Although trading is not some kind of university, you can make it similar to it. At the end of the day try to give yourself a grade. Chose the scale of your evaluation: A, B, C, D, E. Or any other way you want. Then give yourself an evaluation if you made a trade that day. See if you get better at your trades after some time.

Remember that this business is a never ending learning. You need to improve all the time. Do not forget that you will always have losses and those will be changed by profits, so make the most of it by continually perfecting your trades. Work about your mistakes till your profits become much bigger than your losses.

Global overview of today’s markets

Asian stock exchange index rose on Tuesday morning. Investors welcomed the American manufacturing sector indicator increase.

Gross regional MSCI Asia Pacific Index on Tuesday, July 2., 10:46 pm. Tokyo time notable rise was 0.6%. For shares that got cheaper accounted almost five shares with higher prices, calculated Bloomberg news agency.

"Key economic indicators are improving in most regions. Thus, the potential markets emerged from the resist. On the other hand, there is enough and nervousness, as the Federal Reserve [the Fed] continue to talk about the fact that the economy can be promoted more slowly, "- comments Angus Gluskin," White Funds Management's CEO.

It is reported that the Institute for Supply Management runs the U.S. Purchasing Managers' Index in June surged to 50.9 points. In May, the index was 49 points. Most analysts Bloomberg surveyed had expected the index to increase to 50.5 points. Greater than 50 reading means that the sector is growing.

U.S. Department of Commerce estimated that in May construction grew by 0.5%.

Japan Bank said that for the first time in seven quarters index of the nation's largest manufacturers grew in a positive way and the bank is positive about the economy for the future. This showed the quarterly Tankan index, which came in June at 4 points. In March, the index was minus 8 points.

Japan's Topix index rose 0.7%, while the Nikkei 225 Stock Average "grew by 0.5%.

South Korea's Kospi Index notable rise was 0.2%. Australia's S & P / ASX 200 index jumped 1.5% and New Zealand by NZX 50 index had 0.9%. Taiwan's Taiex.

Hong Kong's Hang Seng Index notable rise was 0.1%. China's Shanghai Composite lost 0.2% of the value.

Disadvantages of Forex trading

It is not nice, but one discussing a topic has to look at it from different angles. The same should be said about Forex trading. Being the biggest financial market in the world it attracts scams, spam and other quick rich scheme lovers from all corners of the world.  Even Forex brokers are guilty in promising easy profits and excellent opportunities. It is not like that at all. I do know that. I lost my first deposit account trading currency market and can speak to you with authority.

What Forex dealers and brokers should write at the top of their websites, not at the bottom of them is that it is a very risky business. Beginner traders often lose their money in a few months, some even in a few weeks. Anyone coming to trade Foreign Exchange Market should understand that. There are no short cuts, secret formulas or the Holy Grail in Forex business. You learn to trade with time and it takes away a lot of patience. Not good news? But it is the truth.  

Leverage, which is often considered a huge advantage, can really become one of the greatest disadvantages if you increase your risk in trades. I have recently read about a guy who was able to make one million dollars with only one thousand bucks in his account. And the most amazing thing is that he did that in a matter of two weeks. How? He would risk all of his capital every single day and was successful. However, after reaching the sum of one million he lost it back in a matter of one week. Lady luck was not smiling to him anymore. Why should it? You learn to create success and you won’t need this luck. Discipline is far more important than luck.

So, as you may see failing to control risk and using too high leverage are two biggest disadvantages in Forex trading. The same can be said about stock trading and trading Futures markets.

How can you improve on that? Decide not to risk more than one percent of your capital on a trade. And do not open more than one trade! Following these two simple rules can save you from emotional type of trading and preserve your capital till you learn how to trade and develop your own trading strategy. For the time being be armed with patience and do not deviate from your rules!

Currency trading in simple words

The blog is about one of the biggest financial markets in the world – Foreign Exchange Market. As you probably remember, or maybe know that before 1973 this market did not exist. Changing currencies was not easy at the time and getting good conversion rates too. Most currencies were pegged to gold, some to silver, yet others to a basket of other currencies. Creation of Forex liberated the world from these practices and enabled countries, banks, funds and now individual traders to trade in this market for both economic and speculative purposes. Breton Woods opened the door to one extra market that quickly outgrew all stock markets combined together and even Futures market.

In the spot market you trade one currency against another. For example, if you buy usd/jpy currency pair you automatically buy US dollar and at the same time you sell Japanese Yen. If you sell usd/jpy, you automatically sell US dollar and buy Japanese Yen. There are up to ten currency pairs that traders call: major pairs and over a hundred, which traders call crosses. These are less popular pairs that have smaller volume, are less liquid, but also present good reward opportunities.

There are lots of participants in the market; some have already been mentioned above, some I will probably mention in my future posts.

Brokers who make money by giving opportunity for buyers and sellers to trade make their compensation by means of what we call: spreads. What is spread? It is a difference between sell price and buy price or as we know it between bid price and ask price. In majors, the spread might be as low as one pip during hours with lower volatility and grow to ten pip or more when some Forex news is released. Brokers do not want to lose money and hedge themselves by expanding spreads for a few minutes.

The daily volume in Forex is huge. It can reach around 4 trillion dollars per twenty four hours. No wonder so many speculators are interested in it.

You can participate in the market with as low as one hundred dollars. How is that possible? It is possible because of leverage. What does that mean? It means you will have to give one hundred of your dollars and a bank or a broker will give you one hundred times more. This is called leverage. In such a way just by pledging your one hundred dollars you will be able to operate with ten thousand dollars, or one mini lot. A standard lot is one hundred thousand dollars.

The best part of Forex market is the liquidity. You can open a position with one hundred million dollars and close it in a few minutes.

There are disadvantages too. But I will discuss them in my future posts. Good bye for now.