Browsing Category: "Beginners' Tutorials"
1. Understand The Truth
Trading is a game of probabilities.
Imagine we’re flipping a coin. Heads I win one dollar - tails you win one dollar. Simple. Heads and
tails will each come up half the time, and we’ll both neither win nor lose.
However, unknown to me, you have a loaded coin. For every 100 throws, heads comes up 49 times,
and tails comes up 51 times.
You now have a license to print money. Let’s call it the “Tails Trading System”.
All you have to do is sit back and bet on tails forever. Eventually, you’d win all my money (and anyone
else’s who took you on).
All any trading system gives you is an “edge”. A favorable bias. Something that is more likely to
happen than not.
Whatever trading system you use…
Before we go any further we are going to be 100% honest with you and tell you the
following before you consider trading currencies:
1.All forex traders, and I mean all traders lose money on trades. Ninety
percent of traders lose money, largely due to lack of planning and training and
having poor money management rules.
2.Trading forex is not for the unemployed, those on low incomes, who can’t
afford to pay their electricity bill or afford to eat. You should have at least
$5,000 of trading capital (in a mini-account) that you can afford to lose. Don’t
expect to start an account with a few hundred dollars and expect to become a
kazillionaire.
Basic Concepts VII: Margin
What is Margin?
Margin is the amount of equity that must be maintained in a trading account to keep a position open. It acts as a good faith deposit by the trader to ensure against trading losses. A margin account allows customers to open positions with higher value than the amount of funds they have deposited in their account.
Trading a margin account is also described as trading on a leveraged basis. Most online forex firms offer up to 200 times leverage on a mini contract account. The mini contract size is usually 10,000 currency unit, 1/200th of 10,000 equals to 50 currency unit, meaning only 0.5% margin is required for open positions. Compare to future contracts, which require 10% margin for most contracts, and equities require 50% margin to the average investor and 10% margin to the professional equity traders, foreign exchange market offers the highest leverage among the other trading instruments.
Basic Concepts VI: Types of Orders
The forex market provides different kinds of orders for trading. The following are some major types of orders that can be found on forex trading stations.
Market orders - A buy or sell order in which the forex firm is to execute the order at the best available current price. It is also called at the market.
Entry orders - A request from a client to a forex firm to buy or sell a specified amount of a particular currency pair at a specific price. The order will be filled once the requested price is hit.
