How to buy/sell in Forex???

How to buy/sell in Forex?
How to set stop loss and set take profit when buying selling in Forex?

From the technical point of view, it depends on the trading platform you use.
Every Forex broker will gladly give you the Forex trading Platform manual or will be able to guide you through the steps of setting buy/sell orders, profit targets and exits per you request.

As an example, let's review the basic order setting steps at the one the most popular trading platforms - METATRADER4.

On the price chart - mouse Right Click. Go to 'Trading', 'New order'.
You will have a new window with order specifications.
Symbol - the currency you'll be trading
Volume - how many lots you'll be buying
Stop loss - you need to put the price you want to be stopped at in case a trade goes against you.
Take profit - your profit goal.
Comment - leave it blank.
Type - leave it as Instant execution.
Then you have two buttons: Buy and Sell.
Press one of them. Ok. You have a new trade open.

You will be able to see it on your chart and also you can check menu 'Trade', located below your chart. If you now try to Right click on this trade, you will have an option to 'Modify or Delete order', where you'll be able to change your trading preferences.

http://www.youtube.com/watch?v=TmeQqJd3PYw&feature=player_embedded

How much can one earn in Forex?? What does it depend on???

Does capital invested determine the profit one make or depends on the no of lots executed??

The capital invested plays one of the key roles in the size of profits a trader can look to make in Forex.

One cannot come with $200 in a hope to make $20 000 quick and easy.
The major obstacle for this would be the inability to cover the cost of the trading, in other words, a trader won't be able to trade large lot sizes, because he/she will quickly run out of available margin.
Running out of the available margin results in a margin call.

When trading Forex, the very first thing a trader wants to do is to protect his/her investment capital. It can only be possible when risks on each trade are managed and do not exceed the reasonable percentage of account put at risk. Reasonable risk vary from 2% to 4-5% of the account size.

To expect large profits a trader should trade standard lot sizes of 100 000 units. Trading such lots requires good starting capital of at least $20 000, because when each pip costs on average $10 you don't want to risk losing $200 in just a small 20 pip move. You can't put tight stops here to protect yourself, because stops of 20 pips will be hit way too often. But you also don't want a stop of 100 pips being hit causing a $1000 loss. Therefore only investors with large size accounts can trade large lots and earn large profits.

What is left for small size account holders in Forex? They are offered an option to trade mini lots, which is the only good choice according to any conservative or aggressive money management rules.
Smaller lot sizes offer smaller profits, but they also bring smaller losses. The primary rule for every trader is how to survive losses, before he/she begin a hunt for profits.

Conclusion: invested capital determines profits one can earn in Forex.
The lot size traded should be chosen in accordance to account size.
Taking huge risks by trading large lots with small account size leads to a quick loss of the entire investment sooner or later.

What is drawdown???

What is drawdown?

A DRAWDOWN is a percentage of an account which could be lost in the case when there is a streak of losing trades. It is a measure of the largest loss that a trader's account can expect to have at any given moment or period of time.

(Streak of losing trades or a LOSING STREAK - a period of consecutive losses with no profitable trades.)

You'll see the term "drawdown" being used when describing a trading system. Before trusting any particular system, a trader wants to know what is the largest loss he can face when he starts taking losses due to changes on the market that would lead to a temporary worsening of a performance of a trading system.

For example, if a trader put $5000 to trade with and later he has lost $2500. This would be 50% drawdown.

Another example: you may hear that a trading system is 80% profitable, (which would logically mean that the remaining 20% of the time will produce losses). What a trader cannot predict is in what sequence the profits and losses will come... Will it be 8 consecutive profitable and 2 losing trades every time? Will it be 10 consecutive losing trades and then 3 profitable, and then 5 losing and then 15 profitable? It is impossible to tell in advance. However, by testing a system, a trader can look back ad find the largest period of losing trades - the largest losing streak - this is what would be called a MAXIMUM DRAWDOWN for a particular system, and this is what a trader should be prepared to.

What is a pip??? With Example!!!

Pip in Forex is the smallest price change in currency exchange rate.
Fore example, a current rate for EUR/USD = 1.4000.

If we add 1 pip to the rate, it'll look next way:
EUR/USD = 1.4001
The last decimal place in the rate is the smallest change of the value of the EUR/USD pair.

When currency pair rate increases, for example, by 5 pips, it means the value of that pair (EUR/USD in our example) will look next way:
EUR/USD = 1.4000 + 0.0005 = 1.4005

On the sreenshot we can see a chart of US dollar versus Canadian dollar (USD/CAD).
The very last price bar shows that the exchange rate raised from 1.1865 to 1.1866.
In other words, USD/CAD pair has moved up by 1 pip.

What is lot size and what's the risk???

Currencies in Forex are traded in Lots.
A standard lot size is 100 000 units.
Units refer to the base currency being traded. For example, with USD/CHF the base currency is US dollar, therefore if to trade 1 standard lot of USD/CHF it would be worth $100 000.
Another example: GBP/USD, here the base currency is British Pound(GBP), a standard lot for GBP/USD pair will be worth £100 000.

There are three types of lots (by size):

Standard lots = 100 000 units
Mini lots = 10 000 units
and micro lots = 1000 units.

Mini and micro lots are offered to traders who open mini accounts (on average from $200 to $1000). Standard lot sizes can be traded with larger accounts only (the requirements for a size of standard account vary from broker to broker).

The smaller the lots size traded, the lower will be profits, but also the lower will be losses.

When traders talk about losses, they also use term "risks". Because trading in Forex is as much about losing money as about making money.
Risks in Forex refer to the possibility of losing entire investment while trading. Trading Forex is known as one of the riskiest capital investments.

Returning back to lots:

With every Standard lot traded (100 000 units) a trader risks to lose (or looks to win) $10 per pip. Where Pip is the smallest price increment in the last digit in the rate (e.g. the smallest price change/move).

With every Mini lot traded (10 000 units) a trader risks to lose (or looks to win) $1 per pip.

With each micro lot (1000 units) - $0.10 per pip.

In Forex traders always search for the most efficient ways to limit risks or at least lessen risk effects. For this purpose various risk management and money management strategies are created.

It is impossible to avoid risks in Forex trading. In order to limit risks traders use methods of setting protective stops, trailing stops; use hedging techniques, study scalping strategies, look for the best deals on spreads among brokers etc.

Traders with the best risk management strategy earn the largest profits in Forex.

Would you like to add your own comment or ask another question?
Discussions speed up learning. Let's talk.

Why trade multiple time frames in Forex???

Why simply not trade Forex using one favorite time frame?
Why do we need screening several time frames?

Many beginners start trading Forex looking at one chosen time frame. They bring along or develop an approach and start testing their knowledge and skills.

Sooner or later traders discover that despite all efforts results seems to be random: at one time their trading system would work well, while the other time, seems like under the same conditions, it would fail…
What’s going on?

One of the potential answers may lie in the narrowness of the research done by looking at one time frame and never knowing what is going on at the more superior level.

The higher the time frame the more importance it carries.
E.g. 5 minute time frame (TF) is more important than 1 minute frame.
1 hour TF is more important than 5 min.
Daily TF is more important than 1 hour.
Weekly TF is more important than daily etc etc.

The key to successful Forex charts analysis lies in the habit to screen time frames higher than the one you normally trade with.
Two superior time frames is just the right number. Screening more than that could overload traders with information, less than that might be not enough, but still better than nothing.

Let’s avoid philosophy again and go straight to common time frame pairs.

Fist is the one you trade, second and third are suggested time frames to check market major trends, important price levels and forming patterns on:

1 min => 5 min => 30 min
5 min => 1 hour => 4 hour
1 hour => 4 hour => daily
4 hour => daily => weekly

The main approach here is to start with a superior time frame, conduct the analysis, identify the main trend and market turning points. Then go 1 step lower, continue the analysis while referring now to the major frame. Then descend to original chosen time frame and identify trading opportunities that fit the analysis done on the global scale.

Seeing things from larger prospective help traders increase the rate of winning trades in Forex.

What time frame to trade in Forex???

What is the best time frame in Forex? What is the most profitable time frame in Forex?
Those and similar questions are rising day after day in minds of novice Forex traders.

Let’s drop out the philosophy and focus on facts.

We know that each time frame displays same data, but in different intervals.
The choice of time frames is wide.

Let’s take the most preferred Forex time frames: 1 day, 1 hour and 5 minute.
These time frames are also perfect for beginners to test their feel about the Forex market.

On daily charts each price bar represents one day, thus a change on the chart will be observed once a day.
On hourly time frame new price bars will appear every hour, putting more data on the chart for analysis.
5 minute chart will produce a new price bar every 5 minutes, showing market changes fast and in greater details.

Each time frame can be traded successfully and yield opportunities for profitable trading.
What time frame to trade? It will depend on your next expectations:

A. Timing
B. Profit goals
C. Money management and tolerance for losses

Timing
Are you willing to monitor charts every 5 minutes for several hours a day?
Are you comfortable taking decisions fast and like quickly changing prices?
If yes, try trading 5 minutes charts.

Or may be you prefer a slower pace at 1 bar per hour. You also believe that hourly charts are more reliable in the way they depict the market since much of the noise produced on smaller time frames can be eliminated.
Then 1 hour time frame might be your winner.

Or it might be the case that you don’t have time watching the charts during the day because you have a full time job and/or you believe that intraday changes do not have much effect on the market and summary results can be best observed by the end of the day. You may also find out that you want to hold your trading positions open overnight, means that your money will work even when you sleep; and at the same time you want to be confident that your Forex analysis wasn’t based on short term momentum.`
Then daily charts would be just right for you.

Profit goals
The smaller the time frame the smaller the profit goals set by traders for each trade. E.g. while on 5 minute charts Forex traders would see reasonable targets at the next support/resistance level 15-30 pips away from the entry point, on the daily time frame profit goals will be extended several days into the future with expectations of banking 200-400 or more pips in one trade.
A trader can make same 200-400 pips trading 5 min time frame, but it would require a lot of trades to be taken, hours of price monitoring, which is not an easy task.

Money management and tolerance for losses
Forex trading is not always about wins, losses are part of the trading process.
Managing losses on 5 min time frame would be the easiest thing to do. Firstly, because a trader is able to monitor charts all the time, secondly, because losses are usually small due to the nature of 5 minute trading: price ranges are smaller and it is easy to tell when the market starts turning against your position.

Hourly charts have wider price ranges and therefore require wider stops to be placed, and in case of being wrong on a trade, larger losses to be taken.

If to speak about daily charts, losses there if occur are even larger as the market requires wider space to swing the price.

So here you have: smaller profit targets and smaller losses or larger profit targets and larger risks. Making profits with more price action and more trading opportunities, but also a lot of time spent in front of the monitor every day, or making profits with less price action and opportunities and less time spend trading Forex.