Currency pairs

You know the advantages of FOREX trading, and are excited to begin trading. Now we must learn what it is that market. How does it work? What makes currencies move up and down? Most importantly - how you can start earning, trading on FOREX?
Any successful FOREX investor started with a solid foundation of knowledge upon which to build has started. Let's start with the currency pairs - "bricks" of the FOREX market and how to use them in your trade.
In this first section we will explain the sequence in preparing for your first transaction:

Currencies are traded in pairs

The FOREX market everything is connected. The euro itself is neither strong nor weak. This is in effect on the dollar. Only when compare the two currencies together, you can determine how strong or weak a currency against each other.
For example, the euro may gain against the dollar. Meanwhile, the euro may become cheaper in relation to the British pound. Currencies are always traded in pairs. You just never buy euros or sell dollars only. You trade them as a pair (in pairs). If you think the euro will be appreciated against the dollar, you buy euro and sell dollars same time. If you think the dollar rose against the euro will you buy dollars while selling euros. Always buy a strong currency and sell the weaker

Currency pairs are divided into three main groups:

1.Major currency pairs

Most investors in the foreign exchange market started trading with major currency pairs. Major currency pairs are the currency pairs that include most major currencies on world markets - for example the U.S. dollar (USD), combined with one of the other seven major world currencies - the Euro (EUR), British pound (GBP), Swiss franc (CHF ) Japanese Yen (JPY), Canadian dollar (CAD), Australian dollar (AUD) and New Zealand dollar (NZD).
You can see the major currency pairs in the following table:

2. Exotic currency pairs

Exotic currency pairs are currency pairs that include the most important currency on world markets - the U.S. dollar (USD), combined with any other currency which is not considered essential. Currencies such as the Swedish krona (SEK), South African Rand (ZAR) or the Mexican peso (MXN) are exotic because they are associated as illiquid currencies which may not be available in a standard trading account. Exotic couples are usually not traded and there is often a big difference between buying price and selling price. However, many so-called "exotic" currencies have become increasingly popular and increasingly investors traded with them.
You can see some of the most popular exotic currency pairs in the following list:

3.Currency Crosses

Currency crosses are currency pairs, including any two currencies that do not attend the U.S. dollar (USD). Euro (EUR) in combination with the British pound (GBP) and Australian dollar (AUD) combined with the Japanese yen (JPY) refer to foreign krosove.
The following list includes some of the most popular currency krosove:

Trade of currency pairs

Investors like you earn money every day, trading currency pairs. Forecasting what will happen to a currency pair in the future, investors will open their position to benefit from the looming krosovete movements.
There are three options for the movement of prices:

Before you make a prediction in which direction to move the currency pair, you must find out which currency is stronger and which weakens against other currencies. For example, if the pair are looking at EUR / USD (Euro / Dollar), you must decide whether the euro is stronger than the dollar or the dollar becomes stronger than the euro.

Note: The first currency in the currency pair is called the base currency (base currency), and the second is called quotation (quote currency). When looking at the price of one currency pair, it shows you what amount of quotation currency needed to buy a unit of base currency.
If the base currency is strengthening against the quotation, the currency pair will rise. If the quotation currency is strengthening against the base currency, the currency pair falls. If the base currency and currency quotation are equally strong, the currency pair will move sideways.

This will help you remember more easily in either direction will move the currency pair:

Once you decide what direction to move the currency pair, you can make a deal.

When trading on FOREX, you can choose one of three things:

Buy currency pair (long position)

You can make money, trading on FOREX, if you buy a currency pair where the base currency was stronger against the quotation.

Open Position - To buy a currency pair, simply click "Buy" in your platform.
Close position - Buying the currency pair is only the first step in the commercialization process. To complete your transaction and collect your profit or loss, you must close your position. To close your position, you need to do the opposite of what you did in the beginning. If you bought the currency pair to open a position, you must sell the same currency pair to close the position. For example, if you bought EUR / USD, to open a position, you need to sell EUR / USD to close it.

Selling currency pair (short position)

You mozhete to make money, trading on FOREX, if you sell one currency pair when the second currency (quotation) becomes stronger against the principal.
Open Position - To sell the currency pair, simply click the "Sell" in your platform.
Close position - Selling the currency pair is only the first step in the commercialization process. To complete your transaction and collect your profit or loss, you must close your position. To close your position, you need to do the opposite of what you did in the beginning. If you sold the currency pair to open a position, you must buy the same currency pair to close the position. For example, if you sold the EUR / USD, to open a position, you need to buy EUR / USD to close it.
To wait (do nothing) by currency pair
You can not make money, trading on FOREX, if you buy or sell any currency pair where the first currency in the pair (base currency) is not stronger or weakens against the second currency (quotation). When a currency pair is moved away, it is very difficult to make money, trying to buy or sell one pair. To make money from currency pair, shifting sideways, you need to use FOREX options. You will learn more about FOREX options a little later in the process of learning your trade in FOREX. For now focus on what you identify when a currency pair goes up or down and how you can benefit from these movements.

Principles of operation of foreign exchange trading

FOREX market has many features similar to other markets, we use in our everyday lives - such as supermarkets or markets for cars - where we can buy or sell something at a certain price. But you can also enjoy some unique advantages when investing on the FOREX market. For example, when trading on FOREX markets by Advanced Trader, you can manage and gain significant size of foreign exchange transactions without having to pay the entire amount of the transaction
To fully appreciate the unique capabilities of which you can benefit by investing on the FOREX market, you need to know on what basis the transactions work, which you can conclude. At the outset it is important to learn what each of the following three basic concepts.

Leverage - lending arm

Leverage or credit arm "is probably characteristic of the FOREX market, which excites most individual investors. Leverage is the ability to convert a small force in a large, using the appropriate tool. Imagine that you ask to move a large boulder from the place where it stands. You can try to move to push him with my bare hands, but your job would be much easier if you use a tool like a large lever that you can put into the rock, and this will increase your impact.
The same principle works when investing on the FOREX market. You can win only investing their money, but would achieve much more, the possibilities of using credit arm (leverage), borrowed the money from your broker. It should be noted that higher amounts lead to higher risk of losing money.
You can maximize the investment power of your trading account, using part of their own money to make a deal, and the remainder to borrow from your broker. For instance, FOREX market allows you to manage $ 100 000 only with $ 1 000 from your own funds. This means that you should only pay 1% of the value of the position with your money. You can borrow the remaining 99% of transaction value from your broker, but be sure to check the interest rate to borrow the amount to avoid surprises.
Credit should you use in the FOREX markets is tied to the amount of margin that should be involved in the detection of each transaction.

Margin amount

FOREX market is attractive because of the opportunity to trade multiple larger amount borrowed from your broker and thus achieve higher profits. Before you get additional amount from your broker must show that you have sufficient amount that can cover any losses. Margin amount is the minimum amount required by the broker as your participation in the transaction with which to demonstrate a capacity to cover potential losses.
For example, if you buy a currency pair EUR / USD, will be required to participate by 1% the size of the position as margin amount. This means that if the position is 100 000 Euros, you will be required to participate in an amount equivalent to EUR 1 000 in order to prove your broker that you bear any loss of at least EUR 1 000 if the direction of movement Market proves to be against you.
Various currency pairs have different requirements for the margin amount. Major currency pairs have a lower margin requirement due to high levels of liquidity, making it easier and faster entry and exit from the position - this gives additional security to your broker, it will be possible to close your position with no unexpected losses. So-called "exotic" currency pairs may have a higher margin requirement because of their low level of liquidity, which hampers the rapid entry and exit position.
Many beginner FOREX traders remain with the impression that the margin amount, which attend, was used to purchase foreign currencies. This is not true. You borrow 100 percent of the value of the transaction by your broker. Your margin amount indicates only that you have money with which you can cover any losses.
When you buy a currency pair, you do not need to participate fully in equity. Your broker your loan sufficiently from one currency to buy enough of the other in a given currency pair. For example, if you click on the button "Buy" (buy) to buy 100 000 units of the currency pair EUR / USD, the broker will take enough U.S. dollars (USD), to buy them with 100 000 Euro (EUR). If the momentary rate of EUR / USD is 1.4000, the broker will take 140 000 USD to buy EUR 100 000.

Example of calculating the amount of margin:

Imagine that you have a euro amount in your trading account and want to buy the currency pair EUR / JPY. For this example, do the following calculations:
Pair EUR / JPY is traded on the momentary level 160.00, which means that 160 Japanese yen (JPY) can buy € 1 (EUR).
The size of your position will be 100 000 Euro (EUR).
To determine the amount of margin, which should participate, follow these steps:
Determine how many Japanese Yen (JPY) should take a loan from the broker to secure the 100 000 Euro (EUR).
€ 100 000 × 160 = ¥ 16 000 000
Determine how many Japanese Yen (JPY) you will need to cover the required amount of margin lending arm at 1:100.
¥ 16 000 000 × 1% = ¥ 160 000
Identify how many Euro (EUR) is needed to participate as margin amount to cover ¥ 160 000
¥ 160 000 / 160 = € 1 000

Spread

Spread represents the distance between the price at which you can buy a currency pair and the price at which you can sell the currency pair at any one time.
You should not expect that you can buy a currency pair and immediately sell it at a higher price.
The price at which you can buy a currency pair (price "sale" / "Ask" price), is always higher than the price at which you can sell the currency pair (price "Buy" / "Bid" price).
At the opening of a position always start with a small loss due to current spread. You must overcome spread, holding position for long enough before you leave a profit on this deal.

Foundation

The key to making money through FOREX is understanding what makes currency pairs move. Ultimately, investors are those who make everything run as purchase or sell various currencies, but they do so because of some certain reasons. They either see the fundamental cause of the global economy that leads them to believe that a currency will get stronger, or vice versa - see the fundamental reason which leads them to believe that the currency will become weaker. In other words, they observe the fundamental data and take decisions based on what they saw.
Fundamental data to make currency pairs move. If the economic foundations of the United States is improving, the U.S. dollar (USD) will get stronger because FOREX-investors will start buying dollars. Conversely, if the basic data for the United States worsens it U.S. Dollar (USD) will start to weaken because FOREX-investors to sell dollars.
You can learn how to follow basic economic indicators, as well as legal and institutional investors.
This part will help you build a solid fundamental basis:

 Not all economic indicators are important

Globalization has given us access to diverse kinds of information we receive every day millions of particles. To become a successful FOREX investor should learn how to ignore the majority of news and information that bombards you every day, so it can focus on important information.
Not all economic indicators are important. You'll see a lot of fundamental economic reports, which should not be paying much attention. Example, unemployment in Ireland is not as important as unemployment in the United States. While the Irish unemployment rate is relevant for Ireland, then the U.S. economy is much greater impact on the global economy because investors monitor The U.S. economic reports more carefully. Remember that ultimately the biggest investors are those who give general direction of the FOREX market and why you should follow the same data to ensure that large investors. In this way, you can more accurately determine what the traffic will take and it will get financial benefit from the movement.
A good way to extract profit from fundamental induced price movement is to track news. When finished with the analysis portion of the news, you will learn how to earn from unexpected news.
The most important fundamental economic indicators are divided into three main groups:

In the following pages you will learn more about the indicators of economic forces, monetary and trade flows. This part will explore the interest rates, the most important indicator of fundamental economic FOREX markets.

Base interest rate (Interest Rates) - the most important economic indicator

Base rate is very important for the FOREX market. Currencies representing economies with a higher basic rate should also be stronger than currencies of the economies represented at a lower value for this indicator. Investors are always looking for the best possible return on their investment, but a higher interest rate means a better future returns.
Imagine walking down the street, looking for where to invest their money in banks and see two, one and the other sidewalk. Bank from the right side of the street is willing to give 6% interest, regardless of the amount invested there. Bank on the left side offers 2%. Sure, the bank will prefer a higher rate, and because you want higher returns on investment.
The same principle applies to the basic rates for individual countries. If you can get 6% return on their investments in Britain, while only 2 percent in Switzerland is more likely to invest in Britain.
How it affects the value of the British pound (GBP)?
When most people put their investments in Britain, the British pound demand increases. Economically speaking, with increasing demand is increasing and the cost of the commodity (in this case GBP).
Successful FOREX investors are always tightly monitored central banks (organizations that define key interest rates) to assess whether the value of the indicator will increase, decrease or remain unchanged.
The most important central banks are as follows:

Impact of inflation on the basic rate

Successful currency trading requires not only monitoring of central banks and exported to the data on interest rates, and analysis of the values on which decisions are taken. This can be made largely a future action by the bank.
One key economic indicator, which plays a major role in deciding on the basic interest rate is inflation. Inflation is the general rise in prices for goods and services. Probably often hear people from the older generation, to comment on how much life is expensive nowadays. All face in one form or another with inflation.
Central banks are always alert to rising inflation. When you notice a similar trend do everything in their power to curb this growth. One way to counteract the high levels of inflation is the increase in interest rates.
Higher interest rate makes it difficult both businesses and individuals to borrow money with which to purchase goods, which in turn slows economic growth and inflation from here.
You, as FOREXinvestitori, want to watch the evolution of inflation to get a glimpse beyond this, what are future actions by central banks on interest rate. If inflation rises, the central bank will probably rise and the basic rate, which is good for the typical currency of that economy. It is necessary to observe the following two economic indicators that are typical to determine the levels of inflation.
Consumer Price Index (CPI): Economic indicator that measures the value of a basket - a commodity market. Most of the money given for consumer goods and essential services, a smaller proportion of additional luxury items.
Index of producer prices (PPI): economic indicator, measuring how much the manufacturer must pay for raw materials to produce the final product. If producer prices are rising, it is likely they will try to bring the increase to consumers.

Risk Management

The most important part of the management team is investing the money. It involves determining what proportion of the total portfolio you are willing to risk in each transaction and how many currency units ensure your tolerance for risk. Proper money management can be the difference between a successful account, you can run far into the future and failed account that six months after closing.
If you've ever watched poker tournament on television, you saw money management in action. Will rarely see a player to bet all their chips on one hand. In most cases it will be foolish to do so. If poker players risking only a portion of their money in a bet, they know that to win and lose, you will have money to play the next hand. On the other hand, if you bet all in one distribution, the only way to play and the next is if they are doing. Tension is high and you must have really good cards to be worth this audacious move.
Investors who enjoy the greatest success in his trade are those that have established clearly defined rules to govern their trade. These rules help to avoid failures in the management of money, which had just learned to keep his emotions under control. After four rules for money management, you would like to include in their trade:

 Survive, to trade tomorrow
 
Survive, to trade tomorrow, is perhaps the most important advice you can get for their investment. Whether your analysis is correct or not, if they survive to trade another day, you know that you will have another chance to make money. The next two rules show you exactly what to do to survive every day on the FOREX market, but until you understand and believe in this rule, you will now have an advantage over most investors.
The main factor that makes most investors to exceed their capacity and lose much of their bills is greed. When investors become greedy, they take unnecessary risks. They also spend countless hours trying to find this technical economic indicator or a notice that "Holy Grail" of investing. They believe that if you follow the readings of this indicator or guidance on specific economic data, never worry that will not benefit from trade - they always have done. You will hear this called "secret" of investing.
Unfortunately all this demand and we hope it is counterproductive, simply because no secret. They might be able to identify technical indicator that provides exceptional returns over a period of market history, but the market is changing and soon another technical indicator will come into vogue. They may find an economic note on which markets have been approached by extreme care in the past few months and believe they have discovered the key to investment success. But once again, the market will change and they will remain in search of a new key to success. To help you avoid the disappointment that always comes when you chase your tail, we will show you how to survive to trade another day, so no matter what the market changes to make.

Know what you are willing to risk

Know what you are willing to risk even before you start trading. This rule is the basic principle of survival to trade another day. If you are not risking too much of your account today, you know that you have enough in your account tomorrow. Even if you lose money from their transactions today, tomorrow you will be able to set a new transaction. In other words, it is a good investment practice to put all your money in one or two deals. You never know what will happen in the market and therefore never have to risk everything you have in one position.
The first thing you should do is to determine what percentage of your bill you're willing to lose in any transaction. Once you decide, the rest is a simple mathematical formula. Most investors feel comfortable when risk about 2% of total capital in one transaction. Since this is a general rule, you should determine how aggressive or conservative you want to be an individual account. If you want to be a more aggressive would risk a greater percentage of your account in one transaction. If you want to be more conservative to risk a small percentage of your account in one transaction. It is your responsibility to determine how much you risk, but we would like to tell you one thing - avoid extremes. If you want to be more aggressive, consider the risk to 2 to 5 percent in each transaction. If you want to be more conservative, consider the risk to 1 to 2% in each transaction. If you risk too much probably will not be able to invest much longer. If you risk too little, you probably will not earn much money from their investments.

Once you set a percentage to risk everything you need to do is put the numbers in the following equation:

Total account balance rate risk X = amount at risk

Here is an example how this works. Imagine that you account balance $ 50 000 and want to risk 2% of your account in one transaction. If you replace the equation with numbers, you will see that we should not risk more than $ 1 000 in one transaction.
$ 50 000 X 0.02 = $ 1 000
You must remember that this is the maximum that you want to risk in a transaction. You can take risks and more than all his account if you have more than one transaction. If you have three positions at the same time as you'd like to risk only $ 1 000 per item, but this makes a total of $ 3 000 that risk. Once you determine how much to risk, you are ready to define the size of your transactions.

Know how to set the size of transactions

Know how to determine the amount of transactions to avoid unnecessary exposure to risk. The size of deals is the amount of currency that you buy in each transaction. Once you know how much you want to risk, you should know how to structure their transactions so as not to finish risking more than you will be comfortable. There have been good to know what your tolerance for risk, and then start marketing to expose too much of your account at risk.
To determine the amount of transactions, you must first know where to place your order to limit losses (for which you will learn shortly). Once you determine where to install it, you should see how many pips between a point at which you will enter into trade and the point at which you placed the limiter loss. All you have to do is to replace another simple equation which is derived from the equation you use to specify that you want to risk in each transaction.

X amount of pips at risk value of one pip = change size of deals

Knowing how to determine the size of the deals will help eliminate one of your worst enemies as a trader: fear. Traders who do not define an appropriate amount of their transactions are constantly afraid that too much use of your account. If you can remove the fear of trade, you will take much better decisions.

Orders to limit loss

Order to limit loss order which is set for completion of the transaction, if the currency pair reaches a certain price. Orders to limit losses allow you to keep your account even when you're at your computer - which is significant because it is physically impossible to monitor their transactions 24 hours a day.
If you buy a currency pair, you will place your order to limit the loss somewhere below this price to protect you in case of reversal of direction of movement. If you sell one currency pair, you will place your order to limit the loss somewhere above this price to protect you if the direction of movement of the price change and go up.
Here's how it works. Imagine that you buy EUR / USD of 1.4000. Notice that there is strong support around 50 pips below the price of 1.3950 and concluded that if EUR / USD break below this price will probably continue to move downwards. You bought a currency pair and you will lose money if it moves downward, so you decide that you want to close the position if the EUR / USD break below 1.3950. To keep your account, place an order for reducing the loss of 1.3940, which will close your position if the price reaches that level. Whether in the middle of the night or in the middle of the day if the price falls to 1.3940, the position will be closed automatically for you.
Orders to limit losses provide security and protection, when trade and play an important role in decisions about managing your money. You should never have to deal without such a contract.