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Forex trading may seem simple enough once you get the hang of it. Buy a currency at a low price and then wait a while and sell it at a higher price. This apparent simplicity is deceiving.

While forex trading may seem simple it actually is a demanding professional activity. To trade at a profit over long time periods demands a lot of knowledge, skill, and discipline.

No matter how simple forex trading may be as to the basic mechanics most forex traders make frequent mistakes that cost them money. The reason is that human emotions often get in the way of common sense and judgement. A successful forex trader often has to have the ability to make independent decisions and fade, go against, what the average trader is doing.

At critical times the profitable forex trader has to have the ability to not run with the crowd. He has to be able to step in and sell when it seems like the rest of the world is buying. And to buy when the market has sold off on a wave of selling. Not many people are able to do this as it is against human nature.

So before you get into the business of forex trading, be sure that you have enough information about the forex markets and that you have an understanding of economic and emotional forces that move the market. Above all have a good understanding of your own trading strengths and weaknesses and be able to constantly strive for improvement.

Here are some of the most common mistakes that novice forex traders often commit.

1. Over reacting to the news:

There will be too much news every day. From the television, the newspapers, the radio and the Internet. You will be flooded with news that is related to forex trading in some way. But remember that there is news and there is important news. You have got to know how to separate the facts from embellished background noise and important data from ordinary data releases. When important news does break you if you are inclined to trade it you must be able to react swiftly. Keep in mind that most important news is unexpected news. It is surprises that are major market movers.

This is very crucial in this field because currencies can be highly volatile. A simple news report that catches the market by surprise can trigger a large move. Following daily news stories and reports about currencies is something that forex traders should be careful about. What they should do though is to learn how to read forex charts and learn what are important support and resistance levels.

2. Getting involved in day trading:

Day trading involves the buying and selling of currencies within the same 24 hour day. This takes advantage of the numerous fluctuations of the currencies that happen within a day trading period. Do not do this unless you are a very disciplined skillful trader. For most traders day trading may provide small short term gains but in the long run it will cost you to miss major moves where the real money is made.

3. Entrusting someone with your money:

One of the very common mistakes that people do when forex trading is to entrust one person with your money and follow their advice. This may be good in some cases as having the right mentor in the business to teach you about the ins and outs can be helpful. However, putting your faith in one person and just following their advice like a robot with no thought or effort to learn the business for yourself is not the way to develop your own skills.

Forex trading offers the opportunity to make large amounts of money in a short period of time. But like most professional activities realizing that potential is not as easy as it may at first look. Avoiding common trader mistakes will help you to stay in the game while you develop your trading skills.

Gerald “Taipan” Greene is a retired forex trader and portfolio manager who worked in Asia for over 20 years. The nickname was acquired in Hong Kong and is now used for a number of financial, political and Internet business related blogs. One of them is at http://www.forextradingguru.info/

Many people compare forex trading to gambling. Some who follow the random market theory support this. However some technical analysis experts would argue that technical analysis Forex techniques stack the odds in the favour of the trader. Sound risk management and money management are another ways of stacking the odds in the favour of the trader.

How much do the odds have to be in the favour of the trader for them to make money? Many people think that a trading success rate of 70% to 80% is required to make money. At 70% your gains would be $700 (assuming gains and losses of $100 per transactions) and losses would be $300 resulting in an overall gain of $400. Lets take a closer look at this assumption.

In Forex trading, when the price approaches strong resistance or support, the question is: will the price violate the barrier or bounce back from it? Good channel traders and support and resistance traders will tell you that in general there is a 70% chance of a bounce and only a 30% chance of a breakout. These are important statistics.

The other statistic is that when there is a false breakout (60% of the time) it will only go say 25 pips past the barrier and then be forced back. Knowing this statistic is another big advantage for traders. Most indicators or trading methods have these kinds of statistics.

The risk management tool that good traders use is the risk compared to reward ratio. Many will only enter trades that allow them to gain 200% of what they risk (their stop loss). This is a particularly powerful way of trading as they make $200 on successful deals and only lose $100 on positive deals. This means that if they had a 50% success transaction success rate, on 10 transactions, they would earn $ 1000 on successful transactions and only loose $500 on unsuccessful ones. A gain of $500 in spite of only having a 50% success rate. Much better than the $400 gain calculate above.
Just like card counters who make money from BlackJack you need to develop the skill of stacking the odds in your favour when Forex trading. This means knowing technical analysis very well and knowing the characteristics of the forex market very well.

BlackJack card counters also use money management to make money. When the packs are rich of high value cards they would progressively increase the value of their bets. They would bet very low or not participate when the odds are not favourable. This is one of the most neglected aspects of Forex trading and as a Forex trader you need to develop this skill.

Remember the trader above who achieved a 50% success rate and made money because a 200 to 100 return on risk ratio was used. Now imagine that only 1 lot was used for higher risk trades and 2 lots were used higher probability trades. The gains will now be $2 000 ($200 x 5 x 2) and the losses $ 500 ($100 x 5 x 1). A $ 2000 gain compared to $ 500 loss. Now we talking. Remember this is still at a 50% success rate. This $1500 gain at 50% accuracy compares well with the $400 gain at 70% accuracy.

The above is an introduction of how some traders do not let losses bother them as the have they odds stacked in their favour. Many trading firms (including ours) take their traders through a course of Casino game gambling odds to show them how easy it is to make money on the forex when you stack the odds in your favour.

Learn from Mary McArthur who is a trader at http://www.forextradersupportservices.com Find out how to stack the trading odds in your favour by visiting http://www.expert4x.com Have a look at the Forex trading, Forex alert and Casino games based services which will stack the odds in your favour.

Whenever one currency is traded for another on the global market, this normally involves forex — the foreign exchange market. It is usually referred to as the currency or FX market. It is the largest financial market in the world and involves currency trading on the following levels:

- Central banks

- Currency speculators

- Financial markets and institutions

- Governments

- Large banks

- Multi-national corporations

Over $3 trillion in trading is daily in the global forex and other related currency markets. Unlike the various stock exchanges, the forex exchange operates differently. In a stock market everybody has access to all the same pricing of the various stocks. With forex, it is divided up relevant to levels of access.

In addition to the $3.21 trillion traded daily at forex, it is estimated that another $2.1 trillion is traded in derivatives. Derivatives are another form of financial instrument and their value fluctuates depending on changes in variables that are globally related. Examples of derivatives are forwards, futures, options, and swaps. The primary function or purpose of a derivative is the reduction of risk for a speculating party.

The $3.21 trillion is broken down into the following four groups of transactions:

1. $1.714 trillion in forex swaps an OTC derivative with a short-term interest rate
2. $1.005 trillion in spot transactions purchasing one type of currency with another wherein it is done as immediate delivery rather than in the future
3. $362 billion in outright forwards an agreement between parties to purchase or sell various assets at a future point in time that is pre-agreed upon
4. $129 billion in estimated gaps in reporting

In 1972, the Chicago Mercantile Exchange introduced futures contracts that were forex-exchange traded into the existing mix of financial instruments. These are traded in much the same fashion as futures on the stock market commodities market. According to the Wall Street Journal, the volume forex futures transactions have grown rapidly since their introduction, and now equate to roughly 7% of the daily traded volume.

There are three key factors that directly affect currency trading:

1. economic factors

2. market psychology

3. political conditions

The bottom line is that, just like with anything that is bought, sold, or traded, the aspect of supply and demand rules supreme and is always what most significantly creates price fluctuations in any type of market. For the most part, one has to look at the global currency market as a gigantic melting pot, in that things are always changing and shifting, and never static. It is a mixture of numerous ever-changing events, with supply and demand factors constantly changing as well, therefore resulting in shifts of the pricing of one currency relative to another.

There is an ongoing controversy involving currency speculators, as they are the group primarily responsible for any effects on currency devaluations and national economies. On the other hand, there are those economists who insist that the speculators are one of the more important factors in that they perform the function of providing a market for what are called hedgers — hedging removes or even cancel risk in investments.

Justin Stewart has used software to automatically trade the forex market allowing him to earn a living without lifting a finger, even while he sleeps. You can use the same forex software to get the same results here: http://www.SleepingForexRiches.com

Despite the global significance of the forex market, there are no centrally cleared or unified markets designated for the majority of forex trading. Additionally, there is very little regulation involving cross-border rulings. Instead, one will find quite a variety of interconnected markets allowing the trading of different currency instruments.

This is due largely in part to the Over-the-Counter (OTC) fashion in which currency markets conduct the majority of their trading activities. The implication follows that there will be a variety of different prices (rates) rather than a single monetary entity, depending on which bank or “market maker” is conducting the trading.

Suffice it to say, the rates are kept fairly close so as to deter and eliminate the activities of the arbitrageurs — one who engages in the act of arbitrage. Arbitrage is defined by Dictionary.com as “In finance – the simultaneous purchase and sale of the same securities, commodities, or foreign exchange in different markets to profit from unequal prices.” Last year (2007) saw the Chicago Mercantile Exchange and Reuters engage in a joint venture called FxMarketSpace which is a centralized clearing mechanism used by the forex market.

There are four primary trading centers in the forex market:

1. Hong Kong

2. London

3. Singapore

4. Tokyo

But banks globally participate in the market, and currency trading continues throughout the day on a 24 a day basis (except on weekends) as a result. As the Asian trading ceases, the European market opens. Finally the North American market follows suit, and then the cycle starts all over again, creating the around-the-clock scenario.

The forex market provides the trader or brokers with little or no “inside information” and fluctuations in the exchange rates are normally the result of monetary flows, as well as the expectation (or speculation) in the directional changes of these monetary flows. Such changes can be caused by any (or a combination) of the following factors:

* Budget

* GDP (gross domestic product) growth

* Inflation

* Interest rates

* Large cross-border merger and acquisition transactions

* Trade deficits and surpluses

* Other macro-economic conditions

Active individuals in the forex market have access to any pertinent news about the market based on the fact that media information is released on scheduled dates on a publicly displayed basis. This becomes the only type of inside information that is ever available to participants in the forex market. However, due to fact that the banks are visually made aware of their customers’ order flow, this gives the larger financial entities a decided advantage over the other market participants.

The standard practice is for the different currencies to be traded against one another. Each pair of currencies is normally designated as “XXX/YYY”, with the XXX or the YYY being the 3-digit ISO 4217 currency code (the ISO is the International Organization for Standardization). As an example, if you wanted to see how the Euro was priced in United States dollars, then you would look for the EUR/USD notation. Normally, the first one of the paired currencies is the base or stronger of the two, and the second is the weaker one based on where the monetary amounts stood on the market at the creation of the particular pairing of currencies.

Justin Stewart has used software to automatically trade the forex market allowing him to earn a living without lifting a finger, even while he sleeps. You can use the same forex software to get the same results here: http://www.SleepingForexRiches.com

When people hear of currencies changing, they are often confused. When they hear of the dollar gaining or losing on other types of currency, that do not realize that the currency is actually being bought, sold, and traded. The forex market, also known as the foreign exchange market, is a way for companies, banks, and individuals to trade currencies to try to gain on their initial investments. The forex market is different and unique; the three markets (US, Europe, Asia) have at least one running at all times during the weekdays; this makes this a 24 hour a week-day market, working constantly on the week days to make sure currencies can be traded. All currencies have the opportunity to be traded, but there are obviously major players that are traded the most on the forex market. There are 10 players on the market that find themselves a part of a majority of the trades that happen on the forex market.

The Norwegian Krone, the Hong Kong Dollar, and the Swedish Krona

The Norwegian Krone is the number 10 most traded currency in the forex market, as it is a part of nearly 1.5 percent of the daily transactions that happen. The Hong Kong dollar is the number 9 most traded currency as far as the forex market is concerned. Hong Kongs Dollar is a part of nearly 2 percent of the daily transactions. The Swedish Krona is a part of over 2 percent of the daily trades on the forex market.

The Canadian Dollar, the Australian Dollar, and the Swiss Franc

The Canadian Dollar finds itself at number 7 on the forex most traded list with over 4percent of the daily transaction on the forex market. The Australian Dollar finds itself with over 5 percent of the daily forex transactions and at number 6 on the list, and the Swiss Franc finds itself at number 5 with over 6 percent of the daily transactions.

The British Pound and the Japanese Yen

The British Pound, often compared to the Us dollar, finds itself at number four on the forex most traded list by being apart of nearly 17 percent of the daily transactions. The Japanese Yen comes in at number 3. The Yen is featured in slightly over 20 percent of the daily transactions on the forex market.

The Euro, and the United States Dollar

The Euro is an interesting currency, as it is the currency for multiple countries. This includes countries like Germany. Germany has the bank that does the most trading in the forex market. The Euro is the number two most traded currency on the forex market, as it is a part of nearly 37 percent of the daily transactions. The United States Dollar is easily the most powerful currency on the market, as it is a part of nearly 90 percent of the transactions that occur daily. As the number one most traded currency, it has 5 of the top 10 most active traders on the forex market.

Justin Stewart has used software to automatically trade the forex market allowing him to earn a living without lifting a finger, even while he sleeps. You can use the same forex software to get the same results here: http://www.SleepingForexRiches.com