Published by:
MERRITT HOUSE PUBLISHING INC. TORONTO, ON
CANADA
www.merritthousemedia.com
Author’s Contact Information www.ivancavric.com
The Author of this book has strived to be as accurate and informative as possible with the sole intention of describing some of the key aspects of Currency Trading. However, this book is strictly for research and educational purposes only and the author does not warrant or represent at any time that the contents within are to be taken as a recommendation to invest in the Forex market.
The Author will not be held responsible for any profits and losses of any sort one may incur as a result of following the advice contained in this book. The readers assume responsibility for use of the information found in the book.
The information in this report is not intended to convince the reader to invest money in the Forex market nor does it guarantee that a certain amount of money can be made trading currencies. Neither is implied by the author in any way, shape or form. The readers are advised to seek the assistance of a professional financial advisor prior to investing some money in the Forex market.
The readers may, however, reproduce and and redistribute this book. Readers are free to give this book away to friends, family and acquaintances. Readers are encouraged to give this away as a promotional material for blogs, websites and other online channels as long as the contents remain original and unedited.
This book is strictly for educational purposes only.6.1 - The Role Of The Forex Broker
6.2 - Lots And Mini-Lots
6.3 - Order Types
6.4 – Spreads
7.1 - An Account With A Forex Broker 7.2 - Forex Charting Software
Chapter 8: Different Ways To Analyze The Forex Market
8.1 - Technical Analysis 8.2 - Fundamental Analysis
Chapter 9: You Must Learn How To Use Leverage Properly
Chapter 10: Surviving Your First Months Of Forex Trading
Chapter 11: Summary
Forex is an intriguing and exciting subject that attracts numerous new traders every day. Many are enticed by the sheer daily turnover of Forex that is reputed to exceed over three trillion dollars. They hope that if they can just acquire even a small portion of this staggering sum then they can improve their lifestyles significantly.
Perhaps you were influenced to join the ever-swelling ranks of Forex traders by the endless bombardment of publicity surrounding this subject proclaiming promises of quick riches. However, you must adopt care during your early trading days because Forex harbors a steep learning curve that you must master before success is ensured.
For instance, you may not be aware that 95% of all Forex novices lose their entire equity within months of startup. Why is this, you may well ask? To gain an answer, you need to realize that the 95% of those who fail tend to be small retail traders, while the 5% winners are institutional investors. The former tend to underestimate the complexities of Forex and are prone to gambling while the latter adopt a very disciplined and business-like approach to their trading.
If you are new to Forex, how can you best advance your skills from those associated with the first group to those associated with professional traders? Basically, you need help and you must locate quality training from experts whom you can trust.
This booklet will definitely set you on the correct path by introducing you to the basic concepts of Forex and then identifying methods that you can use to help you survive your initial months of Forex trading. You are also advised to seek additional quality information about all aspects of Forex during this period.
You can study various Forex strategies by visiting my personal blog at www.ivancavric.com. In particular, I have successfully traded Forex since 2002 using trading strategies that I have personally developed. In addition, I have designed a number of financial management systems which I consider to be the cornerstone of my Forex success. I have become a well-respected figure in Forex and dearly hold a number of prominent positions in the business and Forex arena. For instance, I am the President of the Association of Professional Forex Traders as well as a prime member of both the Alliance of Global Forex Traders and Global Forex Association.
FOREX FRONTIERS: The Beginners’ BookletOn my blog you will find many free Forex resources such as articles, videos,tutorials, as well as hidden strategies and tips that will enable you to not just advance your Forex career, but to significantly increase your chances of succeeding. In addition, many Forex tools are provided on the site such as fundamental and technical analysis of all new Forex developments.
The blog also promotes my well-acclaimed trilogy of Forex books that have been designed to specifically advance your Forex skills and experience from that of a novice to those possessed by professional traders of large institutionalized companies. Here are brief descriptions of each of my three books. You will find that all of them achieve their objectives by utilizing straightforward explanations supported by real live examples of trading strategies that are explicitly illustrated by aesthetical and highly relevant charts and diagrams:
FOREX FRONTIERS: The Essentials of Currency TradingThe Essentials of Currency Trading is the first book of this trilogy and is designed to jumpstart anyone’s desire to enter the exciting world of Forex. This book will teach you everything you need to know about how to start trading Forex successfully using an easy-to-follow style. The Essentials of Currency Trading does this by initially explaining why so many beginners struggle with Forex, and then providing you with a solid foundation on which to construct your Forex career. The principal aim of this book is to show you how to design your own successful trading strategies by identifying those Forex concepts of upmost importance.
FOREX FRONTIERS: Proven Strategies for SuccessProven Strategies for Success is the second book of the trilogy and is designed for those who already have a fair grasp of currency trading. This book will improve upon what you already know and will help you take your Forex knowledge to the next level. The focus of this book is to explain methods that you can use to increase your Forex profitability. Proven Strategies for Success achieves this objective by explaining in detail a number of Forex trading strategies. Each one is well-presented and made easy-to-follow using straightforward explanations that are explicitly illustrated by aesthetical and highly relevant charts and diagrams. In particular, this book uses real test results that have been taken from recent trading in order to show you explicitly what you can expect from trading each of the strategies as well as providing you with a means of comparing their merits.
What the Pros Won't Tell You is the final book in this trilogy and is designed to train you to think like a Forex professional. The main aim of this book is to help you evolve your trading psychology and abilities from that of a standard Forex retail trader to those utilized by top institutional experts who trade billions of dollars for their clients. You will learn how this latter group views important Forex topics such as leverage, risks and brokerage fees, etc. What the Pros Won't Tell You will leave you in no doubt about how you should trade Forex so that you always attain consistent profits.
Forex stands for FOReign EXchange and is also known as FX. Today, Forex has grown into probably the biggest fiscal market in the world involving the currency transactions of corporations, governments, large banks, central banks and currency speculators.
Forex has a daily turnover that is reputed to be in excess of three trillion US dollars. The daily turnovers of all the US equity markets combined do not reach 3% of the volume traded on Forex. One of the principal purposes of the Forex is to facilitate international trade and investment.
Forex allows the simultaneous buying of one currency and the selling of another and is simply a marketplace in which different currencies are traded against one another. As countries have their own currencies, Forex exists to make international business possible.
In a similar way to the Stock Market, currencies can be considered to be the commodities that are traded on Forex. For instance, when you buy shares in a particular company you are, in effect, investing your money in its future performance. You hope that it will grow and prosper so that the value of your shares will appreciate.
In just the same way, when you buy the currency of a particular country, you are investing your money in the economy of that nation. If the economy of your host country is healthy and prospers then the value of your Forex trade will increase and you will profit.
When you trade the Forex, you must realize that you are, in fact, making two trades when you back a currency pair. For example, if you trade the EUR/USD long, you are buying the EUR and selling the USD. As such, you would be making a mistake if you viewed this trade just as a single operation. Instead, you must appreciate that you have activated commercial relationships with two currencies. This is important to understand so that you can evaluate the correlation and relationship of each of these two currencies to others.
As currencies are traded against each other on Forex in real time, you can profit from making transactions if you can correctly identify which currency will increase in value against the other. To achieve this objective, you must first purchase a currency and then sell it after it appreciates in value. However, you must realize that the time required to achieve your targeted profit may range from a very short period to a very long one.
FOREX FRONTIERS: The Beginners’ BookletThe Forex is the world’s most traded market and is active 24 hours a dayfrom Sunday 5pm EST to Friday 5pm EST. During each day, Forex trading commences in Sydney and then moves around the globe passing through Tokyo, London and New York.
During this time, investors have the unique opportunity to react immediately to currency fluctuations as they arise. In fact, you could even regard Forex as a huge melting pot of global developments because no other institution embraces the current world’s events at any given time more than Forex.
The Forex market is a unique market and it is without a doubt one of the most liquid and largest financial markets anywhere in the world. Governments, corporations, speculators, central banks, large banks, and various other institutions all trade on the Forex Market. Most of these organizations also use Forex to hedge their risks and invest in currencies in order to increase their profits.
Forex trading can sound very confusing especially if you know nothing about it. However, even if you do not have any experience or knowledge of economic affairs, you can still enjoy and profit from Forex trading. As already discussed, one of your best ways forward is to seek good educational sources on Forex that are well regarded by this industry. You can do no better than to make use of all the free Forex articles, tips on various strategies, and Beginners to Advance courses that you will find by visiting www.ivancavric.com.
This website also promotes my book “ FOREX FRONTIERS: The Essentials of Currency Trading.” By reading the The Essentials of Currency Trading you will discover that it expounds upon all the concepts introduced in this book. It jumpstarts your Forex career by teaching you how to trade Forex wisely and safely.
Before you can start to trade Forex, you need to understand how it works. Although this task may seem complicated at first, after a few trades you will find that it will become second nature.
Forex is unique because of its following features:- Trading volumes
- Extreme liquidity
- Number and variety of traders
- Geographical dispersion
- Trading hours are 24 hours a day except weekends
- The variety of factors that affect the exchange rates
- The use of leverage
Some of the basic rules for trading currency pairs are as follows:
- The first currency of a pair is termed the base. In most major currency pairs, the US Dollar is usually the base
- This second currency of a pair is called the counter or quote.
- The currencies are always quoted in pairs. For example, the USD is the base and the YEN is the counter in the USD/JPY currency pair. If the value of the USD/JPY is 2.5 then you can exchange $1 for ¥2.5.
- If the value of a currency appreciates, it means that the base currency has increased in value compared to the counter. For instance, if the USD/JPY climbed to 2.6 then you would now be able to purchase ¥2.6 for each of your one US dollars.
FOREX FRONTIERS: The Beginners’ BookletOne of the main reasons why people want to trade Forex is to improve theirearning power and, ultimately, achieve financial freedom. With these objectives in mind, is trading the Forex Market a really good choice? Yes it is, because this type of trading presents serious opportunities for achieving good profits.
Fundamentally, there are two main trading sources that generate the daily Forex turnover. The Foreign trade represents only five percent of the total value and results from companies buying and selling products overseas as well as converting foreign revenue into domestic currency. This group of traders includes governments, companies (exporters and importers) and some investors who have foreign exchange exposure.
Consequently, you may be surprised to discover that the remaining 95% of all other Forex trading is done purely for speculative reasons or, in other words, for the sole purpose of investing to profit from potential currency movements. This implies that only a small percentage of Forex activity emulates from the currency conversion needs of governments and international companies.
This is, without doubt, a very exciting opportunity for you to increase your earning power substantially. However, in order to do so you must learn how to treat Forex with the respect it deserves and trade in a business-like and professional manner right from start.
Again, you can achieve this objective by visiting www.ivancavric.com where you can enroll in a totally free Forex training course. You will then be able to access easy to understand lessons that will advance your Forex skills and knowledge from those of novices to ones of professionals.
Similar to other subjects, you must gain an understanding and feel for the many terms that are utilized in Forex trading in order to achieve consistent profits. Some of the most commonly used Forex terms are as follows:
Base CurrencyThe first currency quoted in a Forex currency pair which is sometimes referred to as the primary. For example, in the USD/CAD currency pair, the US dollar would be the base currency
BearA bearish investor anticipates that a currency pair will decline in value.
Bid/Ask Spread
The spread of a currency pair is the difference between its bid and offer prices.
Bull
A bullish investor expects that a currency pair will appreciate in value.
Charting
Forex investors utilize trading charts in an attempt to determine trends and future projections of currency pairs.
Commissions
This is the cost that a Forex broker will charge clients for the buying and selling of currency pairs.
Currency FOREX FRONTIERS: The Beginners’ Booklet
This is a monetary commodity used by its host nation as the basis for trading internationally with other countries
Exchange rate
An exchange rate states the worth of one currency against that of another country
Forex
Forex is the over-the-counter market used for the simultaneous buying of one currency and selling of another
Hedging
A strategy designed to reduce investment risk by investing in alternative instruments that offset the risk of the primary portfolio
Initial margin
This is the amount of cash deposit that is required to trade a currency pair
Leverage
Leverage involves the use of various financial instruments or borrowed capital to increase the potential return of an investment
Long Position
A long position is entered with the expectation that a profit can be achieved because the value of the selected currency pair is expected to appreciate
Lot FOREX FRONTIERS: The Beginners’ Booklet
A standard lot is the smallest unit used in a Forex transaction and is the equivalent to 100,000 units of the base currency
Maintenance Margin
This is the dollar amount of your equity that is required in order to keep your positions open throughout their lifetime
Margin
This is the funds that you must deposit as collateral in order to cover any potential losses from adverse movements in prices
Noise
Price and volume fluctuations in the Forex market can produce noise which can confuse your evaluation of the price direction of your chosen currency pairs
Open Position
This is a currency pair that has been either bought or sold and that has not yet been settled by closure
PIP
A PIP (Percentage in Points) is the smallest price unit of a Forex currency pair and is the minimum amount by which the value of a currency pair can change
Resistance
This is the effective upper bound on price that is created by the many willing sellers at that value
Short PositionFOREX FRONTIERS: The Beginners’ Booklet
A short position is entered with the expectation that a profit can be achieved because the selected currency pair is expected to depreciate in value
Support
This is the effective lower bound on price that is created by the many willing buyers at that value
Technical Analysis
This is a method used to evaluate currency pairs by analyzing statistics generated by historical market activity such as past prices and volume. Technical analysts do not attempt to measure a currency pair's intrinsic value but instead use charts to identify patterns that can suggest future activity.
VolatilityThis is a statistical measure of the tendency of a Forex currency pair to rise or fall sharply within a period of time
You can obtain a better understanding of these important terms as well as the best ways to utilize them in your Forex trading by spending some time at www.ivancavric.com. This is because this website provides you with many free facilities such as Forex articles and tools to get you acquainted with the forex lingo. In addition, you will discover that the book “FOREX FRONTIERS: The Essentials of Currency Trading,” is an easy to read manual that is written with no assumption that the readers have prior exposure to Forex education. In short, you will be introduced to most of the terms used in Forex and while learning their uses at the same time. The book will also show you how to merge such terms into a process for developing your own profitable Forex trading strategy from scratch.
FOREX FRONTIERS: The Beginners’ BookletCurrencies are all traded in pairs and the rate at which they can be exchanged for one another is known as the exchange rate. Most currency pairs use the USD as their base unit. The majority of trades are focused on the biggest and most liquid currency pairs, which are termed the ‘Majors’.
This important group includes US Dollar ( USD), Japanese Yen (YEN), Euro (EUR), British Pound (GBP), Swiss Franc (CHF), Canadian Dollar (CAD) and Australian Dollar (AUD). In fact, more than 85% of all Forex transactions involve these major currency pairs i.e. EUR/USD, YEN/USD, GBP/USD, USD/CHF, AUD/USD and USD/CAD.
Some currencies are more popular than others on Forex. The Dollar has traditionally been very important but what other currencies are traded regularly? The top eight traded currencies are identified in the following table:
Currency Code and Symbol % daily share (approx.)2 Euros EUR € 37%
3 Japanese Yen JPY ¥ 17%
4 Pound Sterling GBP £ 15%
5 Swiss Franc CHF Fr 7%
6 Australian Dollar AUD $ 7%
7 Canadian Dollar CAD $ 4%
8 Swedish Krona SEK kr 3%
FOREX FRONTIERS: The Beginners’ BookletAs such, you can confirm the importance of the USD by studying the above
table. In order to make trading currencies easier, they have been organized into pairs. This is because in every Forex transaction, one currency must be sold while a second is purchased. Abbreviations or nicknames are used to refer to currency pairs especially if they are majors as shown in the following table.
Currency Pair NicknameEven though the majority of currency transactions involve the US Dollar, there are many cross currency pairs such as the following: EUR/GBP, GBP/YEN, EUR/YEN, EUR/CHF, AUD/YEN
Although these currency pairs are quoted independently, you must appreciate that their values are still determined by utilizing the applicable USD pairs. However, crosses have been designed to make it possible for investors to trade in currencies of their choice.
FOREX FRONTIERS: The Beginners’ BookletIn order for you to trade Forex successfully, you must achieve anunderstanding of important terms as explained in the last chapter. For instance, here is a very important one with some examples of its usage.
A PIP (Percentage in Points) is the smallest price unit of a Forex currency pair and is the minimum amount by which the value of a currency pair can change. For example, when the EUR/USD climbs by one pip then its value will rise from 1.2345 to 1.2346.
An important guideline for new traders is to always measure their success or failure in pips as opposed to a monetary value. This is because a one pip gain in a $10 account is equal, in terms of the trader’s skill, to a 1 pip gain in a $1,000 account although the actual dollar amounts are quite different.
Some examples of pip movements using some of the major currency pairs are as follows:EUR/USD
Imagine that this pair is presently posting a value of 1.4850
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