Calculating Forex Profits and Losses.

A Guide To Calculating Forex Profits and Losses.
By David Shephard

The first thing that the newcomer to the world of Forex needs to realize is that in Forex trading currencies are traded in much smaller divisions than is the case for normal cash transactions. Although the smallest cash division in the US is the penny (US $0.01), US currency can be traded on the Forex market in divisions of as low as US $0.0001. This smallest division is known as the pip, which is short for Price Interest Point and is also sometimes referred to as 'points'.

As currencies are traded in large lots (typically US $100,000), small movements in the value of the currency can produce substantial profits and losses. For example, in a lot of US $100,000 one pip is worth $10 so an increase of just 40 pips (or 4/10 of one cent) can generate a profit or loss of US $400.

Although the standard lot in Forex trading is 100,000 units of the base currency, currencies can be traded in lots of various sizes. When talking about a lot, the term ‘unit' is the currency name, so that for the US dollars one unit is one dollar.

Different currencies also have different sized pips. The US dollar, for example, is expressed in pips of 0.0001 while the Japanese yen is expressed in pips of 0.01. The value of a pip will depend on the currency pair being traded and the size of the lot. Currency pairs involving the US dollar (USD) with USD as the quote, or second, currency (for example CAD/USD) always have a pip value of $10 for a standard lot. For other currencies a pip value calculator should be used.

There are various different types of order that can be placed by a Forex trader and these order types will have an effect on the profit of loss made in each transaction.

Market Order. A market order is an order to buy or sell at the current market price and be used to either enter or exit a trade. Market orders need to be used carefully because, in fast-moving markets, there can be a significant difference between the price displayed at the time a market order is made and the actual price when the transaction is made. This gives rise to slippage, which is the amount by which the market moves in the time (often just a few seconds) between placing an order and its execution. Slippage can result in a gain or loss of several pips.

Limit Order. A limit order is an order to buy or sell when a certain limit is reached. Limit orders are often used to either buy a currency below the market price or to sell a currency above the market price. If you are buying, your order is executed only when the market falls to the price stated in your limit order. Similarly, if you are selling, your order is executed when the market rises to the price specified in your limit order. In the case of limit orders there is no slippage.

Stop Order. A stop order is an order to buy above the market or to sell below the market. They are most frequently used as stop-loss orders to limit losses if the market moves against the trader's expectation. A stop-loss order will sell the currency if the market falls below the point set by the trader.

One Cancels the Other (OCO). An OCO order is used when placing a limit order and a stop-loss order at the same time and simply means that if either order is executed the other is cancelled. This is useful as it allows a trader to make a transaction without having to monitor the market. Should the market fall, the stop-loss order will be executed, but if the market rises to the level specified in the limit order, the currency will be sold at a profit.

Here is an example of an OCO Transaction:

Buy: 1 standard lot EUR/USD @ 1.3248 = $132,480

Pip Value: 1 pip = $10

Stop-Loss: 1.3223

Limit: 1.3348

This is an order to buy US dollars at 1.3348 and to sell them if they fall to 1.3223 (resulting in a loss of 25 pips or $250) or to sell them if they rise to 1.3348 (resulting in a profit of 100 pips or $1,000).

Let's look at another example:

The current bid/ask price for US dollars and Canadian dollars is

USD/CDN 1.2152/57

This means that you can buy $1 US for 1.2152 CDN or sell 1.2157 CDN for $1 US.

Now, if you believe that the US dollar is undervalued against the Canadian dollar, you will buy US dollars (at the same time selling Canadian dollars) and wait for the US dollar to rise.

Here is the transaction:

Buy USD: 1 standard lot USD/CDN @ 1.2157 = $121,570 CDN

Pip Value: 1 pip = $10

Stop-Loss: 1.2147

Margin: $1,000 (1%)

In this standard lot transaction you are buying US $100,000 and selling CDN $121,570. If the price of the dollar falls below then your stop-loss order will be executed and you will lose $100.

However, let's assume that the USD/CDN rises to 1.2192/87. You may now sell US $1 for CND $1.2192 or sell CDN $1.2187 for US $1.

Because you entered the transaction by buying US dollars, you must now sell US dollars and buy back Canadian dollars to realize your profit. So, you sell US $100,000 at the current USD/CDN rate of 1.2192, and receive CDN $121,920 for which you originally paid CDN $121,570. Your profit is CDN $350 or US $287.19 (350 divided by the current exchange rate of 1.2187).

Forex strategy

Famouse system strategy that professional trader used
I have copied that system from any forum forex

1. System name : Daily swing
Time Frame : 15 and 30 minute
Indicator : EMA 5
EMA 10
RSI 14
Stochastic 10,3,3

Buy signal if : EMA 5 Cross over and above EMA 10
RSI must above 50
Stochastic Turned up

Sell signal if : EMA 10 Cross over and above EMA 5
RSI must <50> 50
MACD Crossed and must >0

2. System name : MACD strategy
Time frame : 5 minut dan 15 minut
Indicator : WMA 5
WMA 13
Slow stochastic 8,3,3
RSI 13
MACD 3,34,7

Buy signal if : WMA 5 cross over and above WMA 13
stochastic turned up
RSI > 50
MACD Crossed and must >0

Sell signal if : WMA 13 cross over and above WMA 5
Stochastic turned down
RSI <50>
MACD Crossed and histogram <0

3. System name : chandlestick strategy
did you know just the chart can tell you when to buy and sell with simple click. when I Look thr chandlestick chart I look if the chart is uptrend and the trend will be offer. the chandlestick will show you the pattern. just with 3 chandles you can sell or buy before your indicator tell. if you want to use the strategy, you must understand and save in your memory some of pattern. download the chandlestick e-book in the e-book download zone. enjoy....... All of trading strategy will make profit if you are dicipline to use the strategy, because decipline is a key to be a succses.

4. VOLATILE STRATEGY
This strategy was not use tehnical analysis but use fundamental analysis only. this strategy only uses if news come, which that news can be do to market moving (fundamental announcements). news have to prospect good news, and bad news. but that news was given to you become 1, good news. the first step is you must read the news from currency taht you want to trade. for example usd country America, you must read an America news. bloomberg, forex factory, and other are a website which given to you some news (forex calendar/routine news) that day. but you must to understand that news, bad news or good news to it currence. for the function of same news to the market moved, you can download at this site in the download zone.
The little keys are : 1. Interest Rate 2. Unemployment Reports 3. Fed speaking 4. Consumer Price Index (CPI) 5. Gross Domestic Product (GDP) 6. Money Supply 7. Treasury Budget 8. Producer Price Index (PPI) 9. Retail Sales 10. International Trade

Forex trader Tips

If you wan to become the Forex trader then you should know the ways of analyzing the market. You should also know about the risks that are associated with trading. You should try to understand the economic, social dimension and the political issues that would have an effect on the Forex and it would also have the effect on the working system of Forex. If you want to get success after becoming the trader then you need to trade carefully in the market and should also know about the exchange rate of the particular currency. You should get assurance about the security about the route that you have adopted for exchanging the currency rate of the particular currency. If you are good Forex trader then you would not take time in recognizing this factor. You would not take time to react to the random ways that are used in the Forex market.
The following are some points that would help you to earn the fruits that you want to earn:
If you are a beginner then you should stay from the margin trading because in this high risk is involved. If you are not a smart investor then you would lose money. If you don’t know about the margin trading then you should not invest in it.Beginners should trade in Micro Forex. This would help you to earn huge profits in the market of Forex.You should try to find about the long term trends of the currency in which you want to trade. Before investing in the market you should try to examine the market in which you want to invest. You should take proper decisions about the investment.You should not take hap – hard decision about investing in Forex market. Before investing in the market you should know the rules of investing in the currency. If you record in demo account is not good then you need to improve your record. This way you can take the maximum benefit of Forex. In this situation you should open a mini –account that would give you required practice of dealing in Forex.You should know the ways of cutting the short term losses that are made by you. If you want to remain in market for long term then you need to make sure that your gains are more then your losses. This way you would be able to remain competitive in the market.If you want to collect more details about the Forex then you can look at internet. There are many websites that can help you to collect the necessary information and it can also help in selecting the best trader. You would also come to know about the different ways of investing in Forex market. You can make comparison and then select the trader as per your requirements and demands. You should be careful in selecting the trader.

LWMA 55

One of my favorite indi is LWMA 55. I dont know why but the price seems to react a lot of this line. People say that MA is a lagging indicator and I agree with them 100% but do not use MA as a signal generator, instead use them as a dynamic support and resistance.

For those of you who love to experiment, try putting LWMA 55 on a chart and see how price actually interact with the line. Its not magic but its a mathematical calculation.

Dont get me wrong, you may not be able to trade using MA 55 alone. Try putting LWMA 13 in there as well and remember they are not signal generators. Treat them as dynamic support and resistance.

Put it into a simple formula. If price > LWMA 13 & LWMA 55 = long. If price < LWMA 13 & LWMA 55 = short.

Try it, you may like what you find. Just needed to add in a filter to improve accuracy.

Forex Pips

How many pips you make daily? How can I make many pips per each trade in forex trading? Forex trading revolves around making pips. Almost every trader wants to make as many pips as he/she can per trade. Pip is an extremely important concept in the foreign exchange trading. A forex pip is the smallest unit of price movement in the exchange rate of a currency pair. Pip stands for “Percentage in Points” or some refer to it as “Price interest point”.

Pip is almost similar to the tick found in other financial markets like the futures market. Earnedpips are the reward for a good trade. Traders trade foreign exchange in order to make as many pips as they can. And lost pips are the punishment for a bad trade.

Every currency’s price is always expressed relative to another currency. There is no absolute currency price for US Dollar. However, you can express US Dollar price relative to Euros, British pounds, Yen, Swiss Franc and so on. It is the same with every other currency pair. Most of the currency pair exchange rates are expressed up to four decimal places. Forex pip refers to one point change in the fourth decimal place of the most major currency. Why most? Because there is a currency that is expressed up to two decimal places relative to the other currencies. Yes, Japanese Yen!

The convention is to express for most of the currency pairs the exchange rate like x.xxxx where a change of 0.0001 would constitute one pip. A pip would be the equivalent of 1/100th of one percent or one basis point. You must be familiar with the concept of basis points used in calculating the interest rate changes. You must have often heard that the FED or for that matter any other central bank has increased or decreased the interest rate by 15 basis points. Pip is almost similar to a basis point.

We said almost all the currency pair’s exchange rates are expressed in term like x.xxxx except those that involve Japanese Yen on either side of a currency pair. The exchange rate format would look like xxx.xx where a change of 000.01 would constitute one pip, for the handful of currency pairs featuring the Japanese Yen like GBP/JPY or USD/JPY.

Learn the Simple Forex Market

Forex trading is a market which is both complex and simple. How to make money is the simple part, but the implementation of the process to learn forex market can be a little difficult. Forex education can prove to be a boon for all those who are willing to try their luck in forex trading. Therefore it is very important for them to understand the ways and methods of forex trading before actually getting into it. Even if one is well experienced in trading, there is always a room for improvement even for the experts.

The forex market is surely not a game for a fresher in this field and they need to improve their skills before getting their hands wet. The fact is that many individuals who make money online keep losing money in the forex market and very few are earning millions annually. This major difference is caused by two main reasons, namely, forex trading skills and the trading system being used.

Forex trading gives a whole new option to the beginners to succeed financially. To learn Forex market and list Forex trading into one of your financial plans is a must. When an investor adapts the right trading skills, the limit to earn profits is left far behind. In other words there is no such limit defined to earn profits if the trading skills are absolutely apt. There are many trading systems that provide you with the facility of making money online. But what is required by us is to identify and understand that which one will suit the best to our requirement.

1. Note the values of the currencies
2. Know the trend ending time
3. Affect of current economy
4. Use of long term trading strategies

To succeed at currency trading, one needs to learn the right forex trading strategy which can be possible if and only if the traders follow these winning tips and to move ahead and reap huge benefits or profits.

Investing in Forex

Investing in foreign currencies is a relatively new avenue of investing. There are considerably fewer people are aware of this market than there are people aware of several other avenues of investing. Trading foreign currency, also known as forex, is the most lucrative investment market that exists. There are several factors that make this true among which, successful forex traders earn realistic profits of one hundred plus percent each month. Compared to some of the better known investment markets such as corporate stocks, this is an unheard of return on investment. It's very necessary to mention here that a person who invests in forex must, without exception, make it a point to learn the detailed, but simple strategies and information surrounding the market. This very fact is what makes the difference between successful forex traders and other traders.

A few additional points, which create such powerful leverage for investors within the forex market are: The amount of capital required to begin investing in the market is only three hundred dollars. For the most part, any other investment market is going to demand thousands of dollars of the investor in the beginning. Also, the market offers opportunities to profit regardless what the direction of the market may be; In most commonly known markets investors sit and wait for the market to begin an up trend before entering a trade. Even then, investors, as a rule must sit and wait some more to be able to exit the trade with a nice profit. Given that the forex market produces several up, down, and sideways trends in a single day, it can easily be seen that forex stands head and shoulders above other markets. Additionally there are trading strategies, which are taught that provide for compounded profits; these are profits on top of profits. In addition, free demo accounts are available within the industry of forex trading, which facilitate the sharpening of skills without the risk losing any capital. And the advantage regarding the time factor in trading foreign currency is a very attractive point for any investor. Compared to one of the most sought after avenues of investing, which often requires forty or more hours each week, namely in the real-estate market, the forex market requires a much smaller demand on the investor's time. Forex trading requires approximately ten to fifteen hours each week to earn a full time income. It's easy to see that the advantages and great leverage that exist in the forex market, make it among the most lucrative, time liberating, and easy to enter by far.

I hope this information gives you a clear understanding of how you can turn your investing into a true method of making your money work harder for you.

TIPS ON HOW TO START TRADING FOREX

If you've decided to jump in and check out the Forex, or foreign currency market, there are a number of things you should keep in mind as a beginning trader. Your experience with Forex can be a long and profitable one, and it is essential to be prepared at the onset so you can start leveraging your tools and resources at once, and start building experience.

To get started, once you've located a brokerage you would like to work with, you should open up a demo account, so you can start making practice trades. When you are ready to open a real account, its a good idea to also keep your demo account open. You'll be able to test alternative trades with your demo account, which gives you the ability to keep learning and testing strategies. You'll also be able to see if you are being too liberal or conservative in your real account, by testing out different trade amounts in your demo account and comparing the outcomes.
To become more successful with Forex, research is the name of the game. If you tend to jump in first and ask questions later, you may want to be a little more deliberate, and start by understanding the basics of how the market works, such as the trading terms and terminology that are used in Forex. There are many tutorials available on the Internet, and much of the basic information can be accessed at no cost.

You should also stay informed with current events, such as political, social and economic factors that can effect a country's currency rates. While you don't want to feel overwhelmed by a barrage of information, Forex trading is fluid, and these external factors play a part in currency fluctuations that impact your trading.

Probably the most important piece of advice is to have a money management plan in place. You should only use money you can afford to lose when you invest in the Forex market, and have only a set amount of money at risk. There are no guarantees in Forex trading, and you don't want to get wiped out. In addition, you should be especially careful when trading on margin, which is borrowed money to trade with. Margin money is not free money, and if you can accumulate bigger losses if you are trading on too much.

Forex trading can be fun and profitable, but it does carry a number of risks and uncertainties. By doing your research, practicing and shadowing with a demo account, and carefully managing your money, you'll be able to minimize your risks and increase your success with Forex.

What Is Forex Broker
What Is Forex

What is a forex broker?

Have you ever felt intrigued by the many advertisements on high leverage and great profit potential involved in currency trading? The golden gate of the kingdom of money, we are told, is reached by the road of forex. Are forex brokers highway robbers infesting that road, or honest dealers making our journey easier? We'll discuss the brokerage business in this article.

A forex broker is the mediator between the retail and wholesale forex markets The wholesale market is comprised of banks and similar large institutions, and the retail market, of course, includes individual traders who are seeking to acquire speculative gains. Forex brokers are not traders themselves, but occasionally they will have their own staff trading the market on their behalf.

Forex brokers allow retail traders to interact with the markets, and are compensated for their services through the bid-ask spread which is the difference between the price a trader must accept to sell (bid), and the price he must pay to buy(ask) a currency. Since forex traders suffer losses often, brokers make the utmost effort to protect themselves. First, they net out the positions of their clients with entries on the opposite side. Since the vast majority of forex traders lose money, by entering the opposite order they usually make profits. And they also protect themselves by activating margin calls in case that a trader's account value falls below a threshold level (margin requirement).

At the inception of the forex brokerage business, retail trading was largely unregulated as authorities did not possess the expertise and background for effective oversight. Today, however, numerous regulatory bodies which include the CFTC in the U.S., the BaFin in Germany, and the FSA in the U.K. ensure a healthy, legal and competitive environment by maintaining strict regulation of the business. As such, one of the most important considerations for a beginning forex trader is guaranteeing that the broker is regulated by the relevant national authority.

In general, today's laws and regulations do not protect forex traders in the same way that stock traders are protected. Accounts opened with online stock brokers are usually protected against broker insolvency by up to $100000, and yet there is no equivalent protection for forex traders. UK-based brokers are required to segregate client assets from the firm's own capital, and so, creditors cannot press claims against forex traders if an FSA regulated broker goes bankrupt.

Forex trading is a great, profitable career for the committed individual. And a carefully scrutinized, patiently selected broker can be an excellent partner for a successful forex trader. Ultimately, finding the right broker is not just about screening forex broker lists, but improving our own discipline, and analytical skills in determining what we want from trading. Set your goals right, and you can reach them in due time. Vacillate in defining your aims, and success will likewise hesitate to come your path.

Learn What Is Forex
Tips On How To Start Forex

What is Forex?

FOREX - the foreign exchange market or currency market or Forex is the market where one currency is traded for another. It is one of the largest markets in the world.

Some of the participants in this market are simply seeking to exchange a foreign currency for their own, like multinational corporations which must pay wages and other expenses in different nations than they sell products in. However, a large part of the market is made up of currency traders, who speculate on movements in exchange rates, much like others would speculate on movements of stock prices. Currency traders try to take advantage of even small fluctuations in exchange rates.

In the foreign exchange market there is little or no 'inside information'. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time.

Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar.

Unlike stocks and futures exchange, foreign exchange is indeed an interbank, over-the-counter (OTC) market which means there is no single universal exchange for specific currency pair. The foreign exchange market operates 24 hours per day throughout the week between individuals with forex brokers, brokers with banks, and banks with banks. If the European session is ended the Asian session or US session will start, so all world currencies can be continually in trade. Traders can react to news when it breaks, rather than waiting for the market to open, as is the case with most other markets.

Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to the BIS study.

Like any market there is a bid/offer spread (difference between buying price and selling price). On major currency crosses, the difference between the price at which a market maker will sell ("ask", or "offer") to a wholesale customer and the price at which the same market-maker will buy ("bid") from the same wholesale customer is minimal, usually only 1 or 2 pips. In the EUR/USD price of 1.4238 a pip would be the '8' at the end. So the bid/ask quote of EUR/USD might be 1.4238/1.4239.

This, of course, does not apply to retail customers. Most individual currency speculators will trade using a broker which will typically have a spread marked up to say 3-20 pips (so in our example 1.4237/1.4239 or 1.423/1.425). The broker will give their clients often huge amounts of margin, thereby facilitating clients spending more money on the bid/ask spread. The brokers are not regulated by the U.S. Securities and Exchange Commission (since they do not sell securities), so they are not bound by the same margin limits as stock brokerages. They do not typically charge margin interest, however since currency trades must be settled in 2 days, they will "resettle" open positions (again collecting the bid/ask spread).

Individual currency speculators can work during the day and trade in the evenings, taking advantage of the market's 24 hours long trading day.

Learn What Is Forex Broker

Tips On How To Start Forex