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Trend lines are probably the most common form of technical analysis. They are probably one of the most underutilized ones as well.

If drawn correctly, they can be as accurate as any other method. Unfortunately, most traders don't draw them correctly or try to make the line fit the market instead of the other way around.

In their most basic form, an uptrend line is drawn along the bottom of easily identifiable support areas (valleys). In a downtrend, the trend line is drawn along the top of easily identifiable resistance areas (peaks).

To draw trend lines properly, all you have to do is locate two major tops or bottoms and connect them.

There are three types of trends:

1. Uptrend (higher lows)
2. Downtrend (lower highs)
3. Sideways trends (ranging)

About trend lines:

1. It takes at least two tops or bottoms to draw a valid trend line but it takes THREE to confirm a trend line.

2. The STEEPER the trend line you draw, the less reliable it is going to be and the more likely it will break.

3. Like horizontal support and resistance levels, trend lines become stronger the more times they are tested.

4. And most importantly, DO NOT EVER draw trend lines by forcing them to fit the market. If they do not fit right, then that trend line isn't a valid one.

Support and resistance is one of the most widely used concepts in trading. Strangely enough, everyone seems to have their own idea on how you should measure support and resistance.

Look at the diagram above. As you can see, this zigzag pattern is making its way up (bull market). When the market moves up and then pulls back, the highest point reached before it pulled back is now resistance.

As the market continues up again, the lowest point reached before it started back is now support. In this way resistance and support are continually formed as the market oscillates over time. The reverse is true for the downtrend.

One thing to remember is that support and resistance levels are not exact numbers.

Often times you will see a support or resistance level that appears broken, but soon after find out that the market was just testing it. With candlestick charts, these "tests" of support and resistance are usually represented by the candlestick shadows.

There is no definite answer to this question. Some argue that a support or resistance level is broken if the market can actually close past that level. However, you will find that this is not always the case.

If you had believed that this was a real breakout and sold this pair, you would've been seriously hurting!

Looking at the chart now, you can visually see and come to the conclusion that the support was not actually broken; it is still very much intact and now even stronger.

To help you filter out these false breakouts, you should think of support and resistance more of as "zones" rather than concrete numbers.

One way to help you find these zones is to plot support and resistance on a line chart rather than a candlestick chart.

That price should theoretically accurately reflect all available market information. Unfortunately for us traders, it isn't that simple. The markets do not simply reflect all the information out there because traders will all just act the same way. Of course, that isn't how things work.

Each trader has his own opinion or explanation of why the market is acting the way they do. The market is just like Facebook - it's a complex network made up of individuals who want to spam our news feeds.

Kidding aside, the market basically represents what all traders - you, Pipcrawler, Celine from the donut shop - feel about the market. Each trader's thoughts and opinions, which are expressed through whatever position they take, helps form the overall sentiment of the market.

The problem is that as traders, no matter how strongly you feel about a certain trade, you can't move the markets in your favor (unless you're one of the GSs - George Soros or Goldman Sachs!). Even if you truly believe that the dollar is going to go up, but everyone else is bearish on it, there's nothing much you can do about it.

As a trader, you have to take all this into consideration. It's up to you to gauge how the market is feeling, whether it is bullish or bearish. Ultimately, it's also up to you to find out how you want to incorporate market sentiment into your trading strategy. If you choose to simply ignore market sentiment, that's your choice. But hey, we're telling you now, it's your loss!

Being able to gauge market sentiment can be an important tool in your toolbox. Later on in site, we'll teach you how to analyze market sentiment and use it to your advantage like Jedi mind tricks.

Fundamental analysis is a way of looking at the market by analyzing economic, social, and political forces that affects the supply and demand of an asset. If you think about it, this makes a whole lot of sense! Just like in your Economics 101 class, it is supply and demand that determines price.

Using supply and demand as an indicator of where price could be headed is easy. The hard part is analyzing all the factors that affect supply and demand.

In other words, you have to look at different factors to determine whose economy is rockin' like a Taylor Swift song, and whose economy sucks. You have to understand the reasons of how and why certain events an increase in unemployment affect a country's economy, and ultimately, the demand for its currency.

The idea behind this type of analysis is that if a country's current or future economic outlook is good, their currency should strengthen. The better shape a country's economy is, the more foreign businesses and investors will invest in that country. This results in the need to purchase that country's currency to obtain those assets.

For example, let's say that the U.S. dollar has been gaining strength because the U.S. economy is improving. As the economy gets better, raising interest rates may be needed to control growth and inflation.

Higher interest rates make dollar-denominated financial assets more attractive. In order to get their hands on these lovely assets, traders and investors have to buy some greenbacks first. As a result, the value of the dollar will increase.

Later on in the course, you will learn which economic data drives currency prices, and why they do so. You will know who the Fed Chairman is and how retail sales data reflects the economy. You'll be spitting out interest rates like baseball statistics.

But that's for another post for another time. For now, just know that the fundamental analysis is a way of analyzing a currency through the strength or weakness of that country's economy.

Technical analysis is the framework in which traders study price movement.

The theory is that a person can look at historical price movements and determine the current trading conditions and potential price movement.

The main evidence for using technical analysis is that, theoretically, all current market information is reflected in price. If price reflects all the information that is out there, then price action is all one would really need to make a trade.

Now, have you ever heard the old adage, "History tends to repeat itself"?

Well, that's basically what technical analysis is all about! If a price level held as a key support or resistance in the past, traders will keep an eye out for it and base their trades around that historical price level.

Technical analysts look for similar patterns that have formed in the past, and will form trade ideas believing that price will act the same way that it did before.

In the world of trading, when someone says technical analysis, the first thing that comes to mind is a chart. Technical analysts use charts because they are the easiest way to visualize historical data!

You can look at past data to help you spot trends and patterns which could help you find some great trading opportunities.

What's more is that with all the traders who rely on technical analysis out there, these price patterns and indicator signals tend to become self-fulfilling.

As more and more traders look for certain price levels and chart patterns, the more likely that these patterns will manifest themselves in the markets.

You should know though that technical analysis is very subjective.

Just because Ralph and Joseph are looking at the exact same chart setup or indicators doesn't mean that they will come up with the same idea of where price may be headed.

The important thing is that you understand the concepts under technical analysis so you won't get nosebleeds whenever somebody starts talking about Fibonacci, Bollinger bands, or pivot points.

There are three basic types of market analysis:

1. Technical Analysis
2. Fundamental Analysis
3. Sentiment Analysis

There has always been a constant debate as to which analysis is better, but to tell you the truth, you need to know all three.

It's kind of like standing on a three-legged stool - if one of the legs is weak, the stool will break under your weight and you'll fall flat on your face. The same holds true in trading. If your analysis on any of the three types of trading is weak and you ignore it, there's a good chance that it will cause you to lose out on your trade.

Mini forex accounts are used mostly be people who are just starting in the forex market and don’t possess enough funds to operate a regular account. The difference could be understood from the fact that a regular account could be opened with at least two and a half thousand dollars or more while the minimum for a mini forex account starts from $25.

CONTRACT SIZES

Another advantage of mini forex account is its contract sizes. For a regular forex account, the lot sizes must be about hundred thousand while for a mini forex account the contract sizes are ten thousand. This means that mini forex contract comes out to be one tenth of the regular contracts.

ADVANTAGES OF FOREX MINI ACCOUNT

Well, there are a lot of advantages of a forex mini account. The best thing is that with a forex mini account you get to enjoy benefits that are enjoyed by the holders of regular forex accounts. Some of these benefits are small spreads, free trading platforms etc.

USING $50 TO TRADE 10,000

There is a term that is very commonly used in the world of forex mini account. It is leverage. It could be understood as a facility that allows you to trade more than your deposits. For a mini forex account, the margin deposit needed for every $10,000 lot traded is $50. Now, you do the math. A simple calculation of dividing the two quantities

would tell you that the leverage here would be 200 to 1. If you deposit just $250 in your mini forex account; it means that you can trade a maximum of five lots. Increasing the deposit to $1000 would allow you to trade a maximum of 20 and so on.

Compare this with a regular forex account. The leverage there is just 4 to 1 for account holders having $25,000 or more in their account. This means that the leverage of someone having mini forex account is fifty times higher than a regular forex account. It is true that higher leverage could not always be used but what it does is that you get some distinct advantages in terms of flexibility in changing the strategies as per the changes in forex market.

Free Forex ‘demo’ or practice accounts

Free Forex practice accounts are a service that are loved by some yet hated by others, why is this so? Surely a free practice account can be nothing but a good thing?

Not exactly so, it does have its benefits but also has it's pitfalls, in this section we will examine the pros and cons of such an account.

Lets start off by looking at the practice account. For those who may not be aware, the free practice account does exactly what it says on the tin, it lets you practice Forex trading for free, sounds great for a newbie trader and in many ways it is.

The brokers who offer a free forex practice account do so to help get people interested in Forex, nothing wrong with that since they exist to expand the number of traders in the market and on their platform. It's also a great way for the new trader to begin to learn Forex trading.

Currency trading is no simple click and go experience, several brokers have introduced no frills platforms with low minimum deposits to get the virgin trader started and one or two have taken it a step further and allowed people to open a free practice account where you can begin trading with make-believe money until you have the confidence and knowledge to risk your own hard-earned cash.

That's were the main pro of the practice account lies, in being able to learn the Forex market and key functions of trade without risking a penny! However, this is not always good news.

When trading with 'virtual' money suddenly the risk becomes less, in fact risk is nonexistent as you have an endless stream of make-believe money this means you may be more likely to risk on trades you know you shouldn't and wouldn't make in the real world.

This can lull you in to a false sense of security.

Lets say you make en extravagant risk with practice money and it comes off, so you make another big risk and that comes off too, all of a sudden your confidence is up and you feel you can start playing with your own money and taking uncalculated risks.

The Forex market has suddenly become very very appealing, if you can make this much money in the practice area imagine how well off you would be if you were using real money? This is where things go wrong, you then go ahead and open a real Forex account and deposit your own cash.

Your confidence is up and you feel like you know what you are doing. You make a risky trade with your own cash and it fails, suddenly your Forex career is over and you are sat looking at a significant loss, it seems when its your own 'real' money the practice you got with virtual cash counted for nothing.

Of course if you take things slowly and carefully you can avoid this and become a successful trader, but you have to have that self control. Practice accounts are very useful, but only if you carry out trades exactly as you would if it was real money. Never make a trade in a practice account that you wouldn't make with your own cash!

To help get around this several brokers now offer mini-accounts with deposits as low as $25. This is virtually a practice account anyway with such low deposits, however, it’s still your own cash so you are more likely to make realistic trades and not risk big time trades.

At Invest wise we feel this is the best option, sure use a free practice account for a week or two while you learn the basics of Forex trading, but then open an account and start with low funds, never jump both feet first into currency trading, success comes from patience, awareness, and discipline

The retail forex market is so competitive that just thinking about having to sift through all the available brokers can give you a major headache.

Choosing which broker to trade with can be a very overwhelming task especially if you don't know what you should be looking for.

In this section, we will discuss the qualities you should look for when picking a broker.

1. Security

The first and foremost characteristic that a good broker must have is a high level of security. After all, you're not going to hand over thousands of dollars to a person who simply claims he's legit, right?

Fortunately, checking the credibility of a broker isn't very hard. There are regulatory agencies all over the world that separate the trustworthy from the fraudulent.

Below is a list of countries with their corresponding regulatory bodies:

• United States: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
• United Kingdom: Financial Services Authority (FSA)
• Australia: Australian Securities and Investment Commission (ASIC)
• Switzerland: Swiss Federal Banking Commission (SFBC)
• Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
• France: Autorité des Marchés Financiers (AMF)

Before even THINKING of putting your money in a broker, make sure that the broker is a member of the regulatory bodies mentioned above.

2. Transaction Cost

No matter what kind of trader you are, like it or not, you will always be subject to transaction costs.

Every single time you enter a trade, you will have to pay for either the spread or a commission so it is only natural to look for the most affordable and cheapest rates. Sometimes you may need to sacrifice low transaction for a more reliable broker.

Make sure you know if you need tight spreads for your type of trading, and then review your available options. It's all about finding the correct balance between security and low transaction costs.

3. Deposit and Withdrawal

Good brokers will allow you to deposit funds and withdraw your earnings hassle-free. Brokers really have no reason to make it hard for you to withdraw your profits because the only reason they hold your funds is to facilitate trading.

Your broker only holds your money to make trading easier so there is no reason for you to have a hard time getting the profits you have earned. Your broker should make sure that the withdrawal process is speedy and smooth.

4. Trading Platform

In online forex trading, most trading activity happens through the brokers' trading platform. This means that the trading platform of your broker must be user-friendly and stable.

When looking for a broker, always check what its trading platform has to offer.

Does it offer free news feed? How about easy-to-use technical and charting tools? Does it present you with all the information you will need to trade properly?

5. Execution

It is mandatory that your broker fill you in the best possible price for your orders.

Under normal market conditions (e.g. normal liquidity, no important news releases or surprise events), there really is no reason for your broker to not fill you at, or very close to, the market price you see when you click the "buy" or "sell" button.

For example, assuming you have a stable internet connection, if you click "buy" EUR/USD for 1.3000, you should get filled at that price or within micro-pips of it. The speed at which your orders get filled is very important, especially if you're a scalper.

A few pips difference in price can make that much harder on you to win that trade.

6. Customer Service

Brokers aren't perfect, and therefore you must pick a broker that you could easily contact when problems arise.

The competence of brokers when dealing with account or technical support issues is just as important as their performance on executing trades. Brokers may be kind and helpful during the account opening process, but have terrible "after sales" support.

The first step in choosing a broker is finding out what your choices are. You don't just walk into a restaurant, knowing what to order right away, do you? Not unless you're a frequent customer there, of course. More often than not, you check out their menu first to see what they have to offer.

There are two main types of brokers: Dealing Desks (DD) and No Dealing Desks. Dealing Desk (NDD) brokers are also called Market Makers, while No Dealing Desks can be further subdivided into Straight Through Processing (STP) and Electronic Communication Network + Straight Through Processing (ECN+STP).

What is a Dealing Desk Broker a.k.a. Market Maker?

Forex brokers that operate through Dealing Desk (DD) brokers make money through spreads and by trading against their clients. Also called market makers, Dealing Desk brokers literally create a market and artificial forex exchange rates for their clients. While you may think that there is a conflict of interest, there really isn't. Market makers provide both a sell and buy quote, which implies that they are indifferent to the decision of the trader.

Since market makers control prices, it also follows that there is very little risk for them to set FIXED spreads (you will understand why this is so better later). Also, clients of dealing desk brokers do not see the real interbank market rates. Don't be scared though, the competition among brokers is so stiff that the rates offered by Dealing Desks brokers are close, if not the same, to the interbank rate.

Trading using a Dealing Desk broker basically works this way:

Let's say you place a buy order for EUR/USD for 100,000 units with your Dealing Desk broker. To fill you, your broker will first try to find a matching sell order from its other clients or pass your trades on to its liquidity provider, i.e. a sizable entity that readily buys or sells a financial asset.

By doing this, they minimize risk, as they earn from the spread without taking the opposite side of your trade. However, in the event that there are no matching orders, they will have to take the opposite side of your trade. Take note that different brokers have different risk management policies, so check with your broker regarding this.

What is a No Dealing Desk Broker?

As the name suggests, No Dealing Desk (NDD) brokers do NOT pass their clients' orders through a Dealing Desk. This means that they do not take the other side of their clients' trade as they simply link two parties together.

NDDs are like bridge builders: they build a structure over an otherwise impassable or hard-to-pass terrain to connect two areas. NDDs can either charge a very small commission for trading or just put a markup by increasing the spread slightly.

No Dealing Desk brokers can either be STP or STP+ECN.

What is an STP broker?

Some brokers claim that they are true ECN brokers, but in reality, they merely have a Straight Through Processing system.

Forex brokers that have an STP system route the orders of their clients directly to their liquidity providers who have access to the interbank market. NDD STP brokers usually have many liquidity providers, with each provider quoting its own bid and ask price.

Let's say your NDD STP broker has three different liquidity providers. In their system, they will see three different pairs of bid and ask quotes.

Their system then sorts these bid and ask quotes from best to worst. In this case, the best price in the bid side is 1.3000 (you want to sell high) and the best price on the ask side is 1.3001 (you want to buy low). The bid/ask is now 1.3000/1.3001.

Will this be the quote that you will see on your platform?

Of course not!

Your broker isn't running a charity! Your broker didn't go through all that trouble of sorting through those quotes for free!

To compensate them for their trouble, your broker adds a small, usually fixed, markup. If their policy is to add a 1-pip mark-up, the quote you will see on your platform would be 1.2999/1.3002. You will see a 3-pip spread. The 1-pip spread turns into a 3-pip spread for you.

So when you decide to buy 100,000 units of EUR/USD at 1.3002, your order is sent through your broker and then routed to either Liquidity Provider A or B.

If your order is acknowledged, Liquidity Provider A or B will have a short position of 100,000 units of EUR/USD 1.3001, and you will have a long position of 100,000 units of EUR/USD at 1.3002. Your broker will earn 1 pip in revenue.

This changing bid/ask quote is also the reason why most STP type brokers have variable spreads. If the spreads of their liquidity providers widen, they have no choice but to widen their spreads too. While some STP brokers do offer fixed spreads, most have VARIABLE spreads.

What is an ECN Broker?

True ECN brokers, on the other hand, allow the orders of their clients to interact with the orders of other participants in the ECN.

Participants could be banks, retail traders, hedge funds, and even other brokers. In essence, participants trade against each other by offering their best bid and ask prices.

ECNs also allow their clients to see the "Depth of Market." Depth of Market displays where the buy and sell orders of other market participants are. Because of the nature ECN, it is very difficult to slap on a fixed mark-up so ECN brokers usually get compensated through a small COMMISSION.

The Forex currency pairs are usually traded and quoted with a ‘bid’ and ‘ask’ price. The ‘bid’ is the price at which the broker is willing to buy and the ‘ask’ is the price at which he is willing to sell.

For example, if the USD/EUR currency pair is quoted as - USD/EUR = 1.5 and you

purchase the pair, this means that for every 1.5 euros that you sell, you get US$1. If you sold the currency pair, you receive 1.5 euros for every US$1 you sell.

Base Currency

This is the first currency quoted in a Forex currency pair. It is also known as domestic currency or accounting currency and sometimes referred to as the primary currency of a Forex currency pair. For example, CAD/USD currency pair. Here the Canadian dollar is the base currency while the U.S. dollar is the quote currency.

The price represents how much of the quote currency is needed to get one unit of the base currency.

Quote Currency

This is the second currency quoted in a Forex currency pair. This is also referred to as the foreign currency, secondary currency or counter currency.

If you look at the quotation structure of Forex currency market, you will see something like USD/EUR or GBP/USD. These are the Forex currency pairs.

All Forex trades that involve buying of one currency and selling of another, are done in Forex currency pairs. E.g. you buy Euros with US Dollars anticipating that the price of Euro will increase in value relative to the US Dollar. So, when the Euro rises relative to Dollar, you sell it and make profits.

Common trading pairs

The Forex currency pair is a single unit, an instrument that is bought or sold in the forex market. Though there are many currency pairs available in a Forex trading system the most commonly traded Forex currency pairs are:

EUR/USD – Euro vs. U.S. Dollar

GBP/USD: British Pound vs. U.S. Dollar

USD/JPY: U.S. Dollar vs. Japanese YEN

USD/CHF: U.S. Dollar vs. Swiss franc

In the Forex currency pairs, the value of one currency is determined by its comparison to another currency. When the Forex currency pairs are quoted, the first currency is referred as base currency and the second currency is called counter or quote currency.

The base currency is always equal to 1 monetary unit of exchange (e.g. 1 EUR, 1 GBP, 1 USD). The currency pair shows how much of the quote currency is needed to purchase one unit of the base currency.

The U.S. Dollar

The United States dollar is the world's main currency. All currencies are generally quoted in U.S. dollar terms. Under conditions of international economic and political unrest, the U.S. dollar is the main safe-haven currency which was proven particularly well during the Southeast Asian crisis of 1997-1998.

The U.S. dollar became the leading currency toward the end of the Second World War and was at the center of the Bretton Woods Accord, as the other currencies were virtually pegged against it. The introduction of the Euro in 1999 reduced the dollar's mportance only marginally. The major currencies traded against the U.S. dollar are the Euro, Japanese yen, British pound, and Swiss franc.

The Euro

The Euro was designed to become the premier currency in trading by simply being quoted in American terms. Like the U.S. dollar, the Euro has a strong international presence stemming from members of the European Monetary Union. The currency remains plagued by unequal growth, high unemployment, and government resistance to structural changes. The pair was also weighed in 1999 and 2000 by outflows from foreign investors, particularly Japanese, who were forced to liquidate their losing investments in Euro denominated assets. Moreover, European money managers rebalanced their portfolios and reduced their Euro exposure as their needs for hedging currency risk in Europe declined.

The Japanese yen is the third most traded currency in the world; it has a much smaller international presence than the U.S. dollar or the Euro. The yen is very liquid around the world, practically around the clock. The natural demand to trade the yen concentrated mostly among the Japanese keiretsu, the economic and financial conglomerates.

The yen is much more sensitive to the fortunes of the Nikkei index, the Japanese stock market, and the real estate market. The attempt of the Bank of Japan to deflate the double bubble in these two markets had a negative effect on the Japanese yen, although the impact was short-lived

Until the end of World War II, the pound was the currency of reference. Its nickname, cable, is derived from the telex machine, which was used to trade it in its heyday. The currency is heavily traded against the Euro and the U.S. dollar, but has a spotty presence against other currencies. The two-year bout with the Exchange Rate Mechanism, between 1990 and 1992, had a soothing effect on the British pound, as it generally had to follow the deutsche mark's fluctuations, but the crisis conditions that precipitated the pound's withdrawal from the ERM had a psychological effect on the currency.

Prior to the introduction of the Euro, both the pound benefited from any doubts about the currency convergence. After the introduction of the euro, Bank of England is attempting to bring the high U.K. rates closer to the lower rates in the Euro zone. The pound could join the euro in the early 2000s, provided that the U.K. referendum is positive.

The Swiss franc is the only currency of a major European country that belongs neither to the European Monetary Union nor to the G-7 countries.

Although the Swiss economy is relatively small, the Swiss franc is one of the four major currencies, closely resembling the strength and quality of the Swiss economy and finance. Switzerland has a very close economic relationship with Germany, and thus to the euro zone. Therefore, in terms of political uncertainty in the East, the Swiss franc is favored generally over the Euro.

Typically, it is believed that the Swiss franc is a stable currency.

Actually, from a foreign exchange point of view, the Swiss franc closely resembles the patterns of the euro, but lacks its liquidity. As the demand for it exceeds supply, the Swiss franc can be more volatile than the Euro.

A pip is the smallest unit by which a Forex cross price quote changes. So, in Forex trading, if EUR/USD bid is quoted at 0.9767 and it moves up Forex 2 pips, it will be quoted at 0.9769.

The spread is the difference between the bid and asking price. You will note that while trading the currency market, there will also be a difference between the current value of the currency and what you pay for it. That is spread and that is where the forex brokers make their profit. Remember, because of this profit the brokers can offer you a forex account for free - without any fees!

Let's say the current EUR/USD price is 1.27237 and your forex broker has a Forex 2 pip spread, then you will pay 1.2739 when you buy. You will also note that the Forex 2 pip spread is usually available for major currency pairs like EUR/USD, USD/JPY, EUR/JPY etc.

Look at another example of Forex 2 pip spread: the GBP/USD pair is quoted at 1.9346 Bid and 1.9348 Ask, meaning that it would cost you 1.9348 to buy this contract (at this moment) but you would only get 1.9346 if you sold it (at the same moment). These quotes change frequently, as trades are made and new price levels are established. Sometimes the changes are only seconds apart.

In the above example there is a 2 Pip difference in the Bid and Ask price, representing a Forex 2 Pip spread. The spread in this contract is likely to remain the same for a very long time; the spread difference does not normally change for a given foreign exchange market.

Spread is accepted as a cost of doing business in Forex market. When your entry transaction is made you have already sustained a paper loss equal to the spread. If you are a buyer, your contract must appreciate by 2 Pips (in our example above) before you break even. This is how the market maker makes money from the transaction. However, without such a dealer facilitating the trade, you would never be able to trade.

Forex 2 pip spread can be offered by those brokers who have huge monthly trading volume in forex market and have established liquidity relationships with the world’s top forex banks. With the banking relationships in place the company can have access to over $1 billion in market liquidity. Consequently the company is able to pass along even smaller spreads like Forex 2 pip to most active trading customers.

The Fx market, established in 1971, was created when floating exchange rates began to materialize. The Fx market is not centralized, like in currency futures or stock markets. Trading occurs over computers and telephones at thousands of locations worldwide.

The Foreign Exchange market, commonly referred as FOREX, is where banks, investors and speculators exchange one currency to another. The largest foreign exchange activity retains the spot exchange (i.e.., immediate) between five major currencies: US Dollar, British Pound, Japanese Yen, Eurodollar and the Swiss Franc. It is also the largest financial market in the world. In comparison, the US stock market may trade $10 billion in one day, whereas the FX market will trade up to $2 trillion in one single day. The Forex market is an opened 24 hours a day market where the primary market for currencies is the 24-hour Inter bank market. This market follows the sun around the world, moving from the major banking centers of the United States to Australia and New Zea land to the Far East, to Europe and finally back to the Unites States.

Until now, professional traders from major international commercial and investment banks have dominated the FX market. Other market participants range from large multinational corporations, global money managers, registered dealers, international money brokers, and futures and options traders, to private speculators.

There are three main reasons to participate in the FX market. One is to facilitate an actual transaction, whereby international corporations convert profits made in foreign currencies into their domestic currency. Corporate treasurers and money managers also enter the FX market in order to hedge against unwanted exposure to future price movements in the currency market. The third and more popular reason is speculation for profit. In fact, today it is estimated that less than 5% of all trading on the FX market is actually facilitating a true commercial transaction.

The FX market is considered an Over The Counter (OTC) or ‘Inter bank’ market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange, as with the stock and futures markets. A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.

Spot Deal: A deal taking part between two parties who can deliver a certain amount of different currencies to each other within 2 business days of each other (excluding Canadian dollar where the trade is executed within 1 business day) Market Order This is the execution you make when deciding to buy a currency. In other words you see a currency exchange rate quote on screen and you place a ‘market order’ when you click the button to execute the trade.

Entry Orders:This is basically and advance order, you decide at what price you want to buy or sell a currency and you place an ‘entry order’. As soon as the currencies reaches this rate your trade is exacted.

Stop-Loss Order: This is a function offered by some brokers which is aimed at reducing your risk, you can decide the maximum and minimum amount of profit or loss you want to exit a trade at. In other words if you decide you are happy to make $1,000 from one trade but don’t want to lose anymore than $1,000 should the trade go the other way you can place this safety net on your trade.

Bid: This is the currency rate that you wish to buy or sell at.

Offer: This is the currency rate you will actually get when buying or selling

Spread: The difference between the bid and offer rates

Pip: This is the last decimal of the exchange rate with the exception of the Japanese Yen where it is the second decimal.

Lot: The amount of units of the base currency when you enter the market.

Margin: The minimum amount of money you need for each lot to trade, for example the margin may be 1 lot for $100 and therefore you would need $300 in your account to trade 3 lots.

Trend: The direction the market is currently moving in.

Long Position: This is used to describe a market in a long-term buy trend

Short Position: This is used to describe a market in a short-term sell trend

Liquidity: In the FOREX market there is always a buyer and a seller. The FOREX absorbs trading volumes and per trade sizes which dwarfs the capacity of any other market. On the simplest level, liquidity is a powerful attraction to any investor as it suggests the freedom to open or close a position at will 24 hours a day.

Access: The FOREX is open 24 hours a day, any individual trader can react to news when it breaks, rather than waiting for the opening bell of other markets when everyone else-has the same information. This allows traders to take positions before the news details are fully factored into the exchange rates.

Two-Way Market: Currencies are traded in pairs, for example dollar/yen, or dollar/Swiss franc. Every position involves the selling of one currency and the buying of another. If a trader believes the Swiss franc will appreciate against the dollar, the trader can sell dollars and buy francs (“selling short’). If one holds the opposite belief, that trader can buy dollars and sell Swiss francs (“buying long”). The potential for profit exists because there is always movement in the exchange rates (prices). This is what helps make the Forex unique since it is possible to profit from both rises or falls in the price of any given currency!

Trends: Over long and short historical periods, currencies have demonstrated Substantial and identifiable trends. Each individual currency has its own “personality,” and each offers a unique historical pattern of trends, providing diversified trading opportunities within the spot FOREX market. There are many, many other advantages of trading the Forex and we recommend that you choose your broker wisely since the broker you choose can be critical in determining your success (or otherwise) when trading currencies online.

You select the pair of currencies with which you wish to make a Forex deal. You

determine the volume (the amount of the deal). You deposit the "margin" (collateral needed to facilitate the deal. Usually - only a very small portion of the whole deal, say:1% or 1:100).

Before you finally activate the deal, you can still "freeze" it for a few seconds (only

available at selected brokers). That enables you to either change the terms, or accept it as is, or altogether regret the whole idea.

When your Forex deal is running, you can monitor its status and check scenarios online, whenever you wish. You may change some terms in the deal, or close it. Ultimately, you remain in control, only you can decide when the time is right to cash in your profit!

Some Forex brokers will even let you determine a "take-profit" rate, with which the deal will close automatically for you, when and if such rate occurs in the market. Meaning:

you do not have to stay near your computer waiting for the right moment, you can go to work, go shopping, or even got to the beach while the money is rolling in!