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Forex trading is a fascinating and cutting edge activity that can be extremely profitable. We've got all the data you need.
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So you want to trade forex. Give the currency trading thing a try.
Congratulations! You are embarking upon an exciting adventure. Forex trading is cutting edge and cool. By doing it, you are going to learn a lot about financial markets--life, too.
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But before the specifics of online currency trading are discussed, it is of paramount importance that the fundamental truth of FX trading be heard, loud and clear. Before this fundamental truth is understood, nothing else about forex trading really can be.
Realizing this fundamental truth gives you a great shot at making a successful forex trade. Not realizing this fundamental truth will cause you to lose loads of money.
The Fundamental Truth of Forex Trading
It is simply this: the only way to consistently make money through forex currency trading is to act in a professional manner while you are engaged in this challenging, complex, exhilarating activity. Without a professional manner, you have no hope of survival in the currency markets.
The urgency of a professional approach to forex trading is primarily a result of the sheer size and force of the forex markets. Online foreign currency trading is a global phenomenon. As of this writing, the online forex trading market sees $1.4 trillion of currency trading action--per day.
Total volume traded in the foreign exchange markets, not just online forex trading but total trading, including banks and governments, comes to over $3 trillion--per day.
This is a big world. Even big fish are small in it. Big worlds, such as the ocean, are by nature dangerous. The forex markets are the oceans of the financial markets and some forex brokers are the giant fish.
Acting in a professional manner while trading forex will be your main survival tool in this giant environment. If you conduct yourself like a chump, you will get dealt with quickly.
What It Takes to Be a Forex Pro
But what, exactly, is meant by this vague phrase "professional manner"?
Does this mean that unless you are going to quit your job, divorce your spouse, and become a full-time forex trader, it's useless to begin trading currencies in the first place, it takes too much time and expertise and should only be done by "the chosen few" while the rest of us sit on the sidelines hoping for a trickle-down effect? Do you have to work 80 hours per week at Goldman Sachs, a.k.a. "Golden Sacks," to prosper as a forex currency pro?
On the contrary, many successful forex traders engage in FX trading on a distinctly limited basis. Two hours per day. A couple months and then take a couple months off. That's common. It's not about how much time you put in actually trading. This can be a very lucrative part-time job.
Rather, the phrase professional manner simply refers to the attitude, the mentality that you must adopt if you are to have any kind of real success in the foreign currency trading arena.
If you do not adopt this professional manner, forex traders who are pros will continuously raid your trading account, feasting upon your missteps until, bowed and broke, you depart the forex game in sadness, with only a dim memory of momentary enjoyment to show for your troubles.
If, on the other hand, you can and, more importantly, you do develop a pro-style currency trading mentality, you can and well might, throughout your natural life, watch with subdued glee as significant sums of cash flow from the forex market into your personal bank account(s).
Subdued glee only, though, please. Feverish, telling-everyone glee is unprofessional, a sure sign that your account balance is in imminent danger of sudden, brutal decline.
The ocean does not like, in fact severely punishes arrogance.
What Makes a Forex Pro
All successful online currency traders possess three key traits, the first of which is technically not a trait but something more akin to a repeated action, a habit:
Practice. Before you start trading currencies online with real money, please practice with a demo account. Please. Every online currency trading platform worth its salt will be more than happy to let you practice for however long it takes you to become ready to speculate with real money.
Notice we use the word "speculate," at all costs avoiding the word "gamble." A vital distinction to assert, because forex trading is not gambling; it is speculating. There is a difference.
Part of that difference is that practice pays off quite consistently, often quite stunningly, in the world of online forex trading. People do get really good at this, and stay really good at this, reaping real income day after day, year after year. Forex pros exist by the thousands.
When it comes to gambling, by contrast, you can practice all you want, but The House always eventually wins, provided you play long enough. Looking for a professional gambler--someone who actually makes a halfway decent, consistent living from gambling--is like trying to find a needle in a haystack that just got a nuclear bomb dropped on it. In other words, not easy.
Forex practice may not make forex perfect--professional forex traders lose trades all the time--but forex practice does, after a while, make forex professional. The proper placing of stop-loss orders, for example, is a forex trading skill that must, must, must be practiced religiously.
And then once that practice is put in, good results come out the other side.
Patience. Another thing that you'll be practicing, hopefully, when you open your first few forex practice accounts, is patience. Patience is your best friend in the forex trading game.
Impatient forex traders place market orders, clicking and hoping and dreaming and watching and living and dying by every tick of the Profit & Loss statement.
Patient forex traders--online currency traders who think like pros--are more than happy to have no trades on at the moment, because there is a ripe set-up a'coming just around the bend.
Impatient forex traders sell too soon, then try to jump back in when the breakout is clear.
Patient forex traders buy from impatient forex traders who sell too soon, and then ride the breakout towards the moon before selling to impatient traders eager to jump back in.
Bottom line here: patience is the cardinal virtue in the forex trading world.
Prudence. What if somebody told you that forex pros, real forex pros like the guys at Golden Sacks, view capital preservation as more important than capital appreciation? Believe it or not, it's true: forex pros value not losing money more highly than making money.
Not losing money is incredibly important for a forex pro because, first and foremost, it is exceedingly easy to lose a lot of money in a short amount of time via currency trading.
The leverage aspect of forex trading--the fact that you can control a $100,000 investment in a currency pair with only $1,000 of your own money--raises the danger level that forex traders who do not act prudently will suffer catastrophic losses sooner rather than later.
Trading positions that are too big for your account, for instance, is imprudent. As such, it is inevitably disastrous--if not this time, then the next time, if not that time, then the next time.
As you learn the fine art of online forex trading, you will learn myriad specific strategies for minimizing risk. But all of these techniques and methodologies will avail you not much if you are not deeply committed to trading as carefully and judiciously as you possibly can.
Go ahead, be a prude. The currency markets will respect and reward you for it.
The Fourth and Final "P" of Pro-Style Forex Trading
Does it seem like another "P" word is missing from our conversation?
Come to think of it, you're right. We are missing a P here.
But the fourth and final P word is not, as might be expected, Profits.
Pips, to define them technically, are the small price changes in currency pairs. For example, if the EUR/USD goes from 1.4639 to 1.4659, the EUR/USD has moved 20 pips.
Pips, sometimes called "points," are the unit of failure or success for a forex broker. Pips are what you want. Pips are what you need. Pips are what you should spend the majority of your time thinking about, in our opinion.
Thinking about profits while you're trading can be a distraction. Profits are the end goal, of course, but pips are what you must concentrate on getting. Think of it like this. Does the great basketball player Kobe Bryant think, during a game, about making money or about scoring points? Scoring points--the money is the byproduct, the result of being really, really good.
Pursue pips first and foremost, and the profits will follow.
That's how the pros do it, anyhow.