Introduction to FOREX

The Foreign Exchange Market – better known as FOREX - is a world wide market for buying and
selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week.
Daily exchanges are worth approximately $1.5 trillion (US dollars). In comparison, the United
States Treasury Bond market averages $300 billion a day and American stock markets exchange
about $100 billion a day.

The Foreign Exchange Market was established in 1971 with the abolishment of fixed currency
exchanges. Currencies became valued at 'floating' rates determined by supply and demand.
The FOREX grew steadily throughout the 1970's, but with the technological advances of the
80's FOREX grew from trading levels of $70 billion a day to the current level of $1.5 trillion.

The FOREX is made up of about 5000 trading institutions such as international banks, central
government banks (such as the US Federal Reserve), and commercial companies and brokers
for all types of foreign currency exchange. There is no centralized location of FOREX – major
trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Paris, and
Frankfurt, and all trading is by telephone or over the Internet. Businesses use the market to
buy and sell products in other countries, but most of the activity on the FOREX is from currency
traders who use it to generate profits from small movements in the market.

Even though there are many huge players in FOREX, it is accessible to the small investor thanks
to recent changes in the regulations. Previously, there was a minimum transaction size and
traders were required to meet strict financial requirements. With the advent of Internet
trading, regulations have been changed to allow large interbank units to be broken down into
smaller lots. Each lot is worth about $100,000 and is accessible to the individual investor
through 'leverage' – loans extended for trading. Typically, lots can be controlled with a
leverage of 100:1 meaning that US$1,000 will allow you to control a $100,000 currency
exchange.

There are many advantages to trading in FOREX

· Liquidity - Because of the size of the Foreign Exchange Market, investments are extremely
liquid. International banks are continuously providing bid and ask offers and the high number
of transactions each day means there is always a buyer or a seller for any currency.
· Accessibility – The market is open 24 hours a day, 5 days a week. The market opens
Monday morning Australian time and closes Friday afternoon New York time. Trades can be
done on the Internet from your home or office.
· Open Market – Currency fluctuations are usually caused by changes in national economies.
News about these changes is accessible to everyone at the same time – there can be no 'insider
trading' in FOREX.
· No commission – Brokers earn money by setting a 'spread' – the difference between what a
currency can be bought at and what it can be sold at.
How does it work?

Currencies are always traded in pairs – the US dollar against the Japanese yen, or the English
pound against the euro. Every transaction involves selling one currency and buying another, so
if an investor believes the euro will gain against the dollar, he will sell dollars and buy euros.

The potential for profit exists because there is always movement between currencies. Even
small changes can result in substantial profits because of the large amount of money involved
in each transaction. At the same time, it can be a relatively safe market for the individual
investor. There are safeguards built in to protect both the broker and the investor and a
number of software tools exist to minimize loss.

FOREX versus Stocks

Stocks have been a popular investment for hundreds of years. Companies issue stocks to raise
capital for expansion and new projects, and each share of the stock represents a partial
ownership in the company.

When the company does well and makes a profit, the value of the stocks rise. Stock owners can
sell their shares for a profit or hold on to the stock for even more gain in the future. Sometimes
companies will issue dividends – part of the profits that are distributed to share holders.

Stocks are traded on stock exchanges. Most stocks are bought and sold through brokers who
charge a commission or fee for this service. American stock exchanges include the New York
Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation
System (NASDAQ). Most stocks are only listed on one exchange, although large companies may
have listings on several exchanges.

Stocks were traditionally seen as long term investments. So called 'blue chip' stocks - those
having proven value over many years - may form the backbone of an investment portfolio.
Short term trading is a relatively new phenomenon made possible with the advent of Internet
trading. Day traders attempt to take advantage of large daily fluctuations in the market by
buying and selling many times in one trading period. It is relatively risky and any profits realized
are reduced by broker commissions charged on each transaction.

Stocks may sometimes be bought on margin, meaning that the investor borrows money to buy
the stocks. Margin rates are usually around 50% - the investor can borrow as much as half the
value of the stock.

FOREX

The Foreign Exchange Market (FOREX) is quite different from the stock exchange. In contrast
to the stock exchange, the FOREX is primarily a short term market. Most traders enter and exit
deals within a 24 hour period – sometimes within a few minutes. Many FOREX trades can be 3
made in one day without building up a large brokerage fee because FOREX trades are
commission free. Brokers earn money by setting a spread – the difference between asking and
selling prices.
The FOREX is the largest financial market in the world. It is handles transactions worth $1.5
trillion every day. By comparison, all the American stock exchanges combined handle daily
transactions worth about $100 billion. The huge volume of FOREX means that it is one of the
most liquid markets in the world. There is always a buyer and seller for any type of currency
because the world economy relies on the movement of goods from country to country. The
stock market is less liquid because participants may choose to hold their investments or move
on to other markets.

The FOREX is not located in any one location. Trading markets are located world-wide and
because of difference in time-zones trades can be made 24 hours a day, 5 days a week.
Trading begins in Sydney, Australia on Monday morning (Sunday afternoon New York time) and
continues non-stop until Friday afternoon New York time.
Stock exchanges have more limited trading hours. While it is possible to trade on exchanges
world-wide, each exchange is independent and operates for just 7 hours a day. There is no way
to buy or sell a certain stock that is only traded on one stock exchange when that exchange is
closed.

Other advantages of FOREX? It is more predictable than stocks. It follows well established
trends; it allows high leverage – typically 100:1 instead of 2:1 on the stock market; and it
doesn't require a large investment – mini accounts as small as $250 can get you started in
FOREX.

FOREX versus Futures

The origins of today's futures market lies in the agriculture markets of the 19th century. At that
time, farmers began selling contracts to deliver agricultural products at a later date. This was
done to anticipate market needs and stabilize supply and demand during off seasons.

The current futures market includes much more than agricultural products. It is a worldwide
market for all sorts of commodities including manufactured goods, agricultural products, and
financial instruments such as currencies and treasury bonds. A futures contract states what
price will be paid for a product at a specified delivery date.

When the futures market is played by speculators, the actual goods are not important and there
is no expectation of delivery. Rather, it is the futures contract itself that is traded as the value
of that contract changes daily according the market value of the commodity.

In every futures contract there is a buyer and a seller. The seller takes the short position and
the buyer takes the long position. The futures contract specifies a buying price, a quantity and a
delivery date. For example: A farmer agrees to deliver 1000 bushels of wheat to a baker at a
price of $5.00 a bushel. If the daily price of wheat futures falls to $4.00 a bushel, the farmer's
account is credited with $1000 ($5.00 - $4.00 X 1000 bushels) and the baker's account is
debited by the same amount. Futures accounts are settled every day.

At the end of the contract period, the contract is settled. If the price of wheat futures is still at
$4.00 the farmer will have made $1000 on the futures contract and the baker will have lost the
same amount. However, the baker now buys wheat on the open market at $4.00 a bushel -
$1000 less than the original contract, so the amount he lost on the futures contract is made up
by the cheaper cost of wheat. Similarly, the farmer must sell his wheat on the open market for
$4.00 a bushel, less than what he anticipated when entering the futures contract, but the profit
generated by the futures contract makes up the difference.

The baker, however, is still in effect buying the wheat at $5.00 a bushel, and if he hadn't
entered into a futures contract he would have been able to buy wheat at $4.00 a bushel. He
protected himself against rising prices but he loses if the market price drops.

Speculators hope to profit by the daily fluctuations in the futures market by buying long (from
the buyer) if they expect prices to rise or by buying short (from the seller) if they expect prices
to fall.

FOREX

The foreign exchange market (FOREX) has several advantages over the futures market. FOREX
is a more liquid market – as the largest financial market in the world it dwarfs the futures
market in daily exchanges. This means that stop orders can be executed more easily and with
less slippage in the FOREX.

The FOREX is open 24 hours a day, 5 days a week. Most futures exchanges are open 7 hours a
day. This makes FOREX more liquid and allows FOREX traders to take advantage of trading
opportunities as they arise rather than waiting for the market to open.

FOREX transactions are commission-free. Brokers earn money by setting a spread – the
difference between what a currency can be bought at and what it can be sold at. In contrast,
traders must pay a commission or brokerage fee for each futures transaction they enter into.
Because of the high volume of trading FOREX transactions are almost instantly executed. This
minimizes slippage and increases price certainty. Brokers in the futures market often quote
prices reflecting the last trade – not necessarily the price of your transaction.

The FOREX is less risky than the futures market because of built-in safeguards in the trading
system. Debits in futures are always a possiblility because of market gap and slippage.

How to Get Started In FOREX Trading

You may have been hearing about the foreign exchange market (FOREX) and the investment
advantages it offers. You would like to try it out, but don't know where to start. This short
guide will give you the basics in FOREX and tell you what you need to participate in this fast
growing field.
Foreign exchange used to be limited to large players such as national banks and multi-national
corporations. In the 1980's the rules were revised to allow smaller investors to participate using
margin accounts. Margin accounts are the reason why FOREX trading has become so popular.
With a 100:1 margin account, you can control $100,000 with a $1,000 investment.
FOREX is not simple, however, and education is needed to make wise investment decisions.
Although it is relatively easy to start trading on the FOREX, there are risks involved, so finding
out as much as possible about the market is a good move for any beginner.

FOREX traders usually require a broker to handle transactions. Most brokers are reputable and
are associated with large financial institutions such as banks. A reputable broker will be
registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading
Commission (CFTC) as protection against fraud and abusive trade practices.

Opening a FOREX account is as simple as filling out a form and providing the necessary ID. The
form will include a margin agreement that states that the broker can interfere with any trade it
deems to be too risky. This is to protect the interests of the broker – most trades, after all, are
done using the broker's money. Once your account has been established, you can fund it and
begin trading.

Many brokers have different types of accounts to suit the needs of individual investors. Mini
accounts allow you to get involved in FOREX trading for as little as $250, while standard
accounts may have a minimum deposit of $1000 to $2500 depending on the broker. The
amount of leverage – using borrowed money – varies with accounts. High leverage gives you
more money to trade for a given investment.

HOWEVER – beginner traders are advised get accustomed to FOREX by doing paper trades for
a period of time. Paper trades are practice transactions that don't involve real capital. They
allow you to see how the system works while learning how to use the various software tools
that are at provided by most FOREX brokers.

Most online brokers have demo accounts that allow you to make free paper trades for up to 30
days. Every new FOREX investor is strongly advised to use these demo accounts at least until
they are showing consistently steady profits.

Each broker has their own set of software tools to aid in making transactions, but there are a
few tools that are common to all FOREX brokers. Real time quotes, news feeds, technical
analyses and charts, and profit and loss analyses are some of the features you should expect to
see on most online brokers' web sites.

Almost every broker operates on the Internet. To access their online services you should have a
reasonably modern computer, a fast Internet connection, and an up-to-date operating system
such as Windows XP. Once your account is set up, you can access it from any computer – just
enter your account name and password. If for some reason you are not able get access to a
computer, most brokers will allow you to make trades over the phone.

Trades are commission free, meaning that you can make many trades in one day without
worrying about incurring high brokerage fees. Brokers make their money on the 'spread' – the
difference between bid and ask prices.
How to Win Forex Game?

Well, How to win any game ?  First you need to understand how the game works, get ready
with the tools and skills you need..and finally practice!

You can learn and understand how Forex works from tons of general trading courses – free or
paid – online and offline. And once you put your hands on what you need, you can practice for
as long as it takes. So in my opinion, the problem for most traders – especially beginners – is
with finding the necessary tools and skills.

Manual trading systems are great trading tools. But – in general – they require experience and
time. A lot of both!

And no matter how powerful the manual systems you are using, you will notice that the
creator/s of the manual system would almost always suggest that you keep an eye on “other”
confirmation signals. Like, Price patterns and candles sticks formations!

In other words : most of the manual systems will work perfectly if you are an experienced
Forex trader. What if you are not?!!!

IF you are not that super experienced Forex trader – who is anyway! – then you need a more
advanced trading systems, designed mainly for people with minimum trading knowledge and
limited or no experience at all.. a system like Revolutionary FX.

With Auto Trading robots, things could be little different. Most – if not all – trading robots are
advertised as the copy/paste solution. Or the money printing machine! the idea here is that,
once you install the robot .. you forget about it and only check your account at the end of each
month or few months to collect your profits.

For people who never used a robot before, this may sound logical. But for the ones who tried
ANY trading robot.. They know that this is FAR from the truth. Robots still need baby setting!

The danger here is that even when you are watching your robot working, playing with settings,
adjusting few numbers here and there..you still have no clue about how this robot works. Here
is a question for all readers who are currently using, or once used a trading robot: how many
times did you say to yourself “why this robot is selling while the trend is going UP?!”

Revolutionary FX – unlike Robots – provides clear understanding of the trading method you are
using, this understanding is not only important for better results, it’s also important to improve
your trading skills by adding to your trading knowledge and experience.

William Hopkins

www.revolutionaryfx.com