If you can master this single element, taking the next, the next and the next trade, you will be ahead of 99% of all traders. Having the discipline to repeat your proven strategy, day after day, is the single most important facet of successful trading.

"When it comes to trading, your fears will act against you in such a way as to cause the very thing you are afraid of to actually happen."
Mark Douglas, Trading in the Zone

The main reason why people lose money in day trading is because they fear loss.
Courage is moving ahead even though you're afraid.
Discipline and emotional balance is critical to success.
Above all, you need to be able to trust your system completely. You have to feel completely comfortable.

If you have a simple method that will produce a steady, though small, profit regularly - and follow it religiously - you will be the trader who walks away consistently winning. By simply changing the amount of capital you risk in your day trading, you can turn a system from returning 10% to returning a 100% per annum.

Once you have tested and refined your system, it is then possible to enter the market with realistic expectations. It is when we begin modifying our systems without first testing the changes that we risk unknown dangers.

Don’t try to predict outcomes. Just take every clear trade setup. Do not seek ‘certainty’ on trade outcomes, because certainty does not exist in markets.

By taking all of your clear trade setups, the odds are rigged in your favor.

Concentrate on just one or two good setups at the most to make trading more manageable, which will help you to trade better.

When the strategy has too many indicators and conditions, the day trader can be easily confused, and a confused trader has almost no chance of executing successful trades. Use strategies that are powerful, but easy to apply.

Constantly feed yourself with information which helps improve your trading.

Many traders experience stress and frustration because they are trading poorly and lack a true edge in the marketplace. Working on your emotions will be of limited help if you are putting your money at risk and don’t truly have an edge.

Stop loss pricing is the key to becoming a successful day trader. Always focus on limiting your losses, not maximizing your profits. Never add to a losing position. It is a prescription for disaster.

Traders are just as susceptible to overconfidence during profitable runs as lack of confidence during strings of losers.

The surest path toward emotional damage is to trade size that is too large for one’s account. Understand what your personal edges might be. Having an edge in the market isn’t just a slight advantage; it could be the pivotal difference in your success. So it’s very important to list your edges in your business plan.

Have a positive attitude towards the market. Look at the market as a wonderful source of financial freedom, rather than “the market is out to get me”.

There are many things you can do on a regular basis to really improve yourself. And if you have the commitment to really doing them, you will be unstoppable.

The practice of trading commodities is known as futures trading. Experience combined with patience can make such a transaction very lucrative. It involves the trading of tangible items, like silver, gold, oil or even crops. This practice is based on your ability to predict the future price of a commodity. Companies and individuals alike make investments in futures trading. The wisest way to begin futures trading is to set your financial goals and conduct a well-planned research, before you get into it. Consider hiring a professional broker because even though it may be initially expensive, the expertise of the broker will help you to avoid the common novice mistakes.

Future trading endeavors can either be very beneficial or utter failures. Everything depends on how smart your moves and decisions are. You can be on your way to success, once you get an idea of the operations involved in this trade.

These are a few points to keep in mind:

- Remember that the prices at which the commodity futures are sold is not determined by the commodity exchanges. Prices are established on the demand and supply conditions. If the sellers are more than the buyers, the prices will decrease and vice versa. They are also determined by the buy and sell orders.

- Futures markets are considered clearing houses for the current demand and supply information. Buyers and sellers of financial instruments, agricultural commodities, petroleum products and metal meet in these markets.

- The primary purpose of a futures market is to provide an efficient method to manage the price risks.

- Hedgers and Speculators are the two groups of futures traders.

- Hedgers: They place their interest in underlying commodities and try to avoid the risk included in the change of the commodity prices. You can be protected against the fluctuations that take place in market prices by hedging. Transferring the risk to a professional risk taker is involved. For instance, if you are a manufacturer, you can protect yourself from the fluctuations in the price of raw materials by hedging in the futures market. Hedging includes hedge sale and hedge purchase. You can buy and sell futures of the same quantity, as a protection against the risk in price change, while you still hold the stocks.

- Speculators: They predict market moves and buy commodities of no practical use to them. They purchase these commodities ‘on paper’ and make a profit out of it.

- If you do not have the required experience or resources, it is advisable for you not to attempt speculating or predicting the market. Future performance results cannot be based on the results of your past performance.

- Futures contracts are traded on a futures exchange. They are standardized contracts that help in the buying and selling of a certain commodity, at a certain pre-set price and date. This contract gives the right to buy and sell, unlike the options contract that does not.

The advancement in technology and electronic communication has introduced new and better tools for futures trading. However, you could end up losing thousands of dollars if you do not execute the procedures involved correctly.

The foreign exchange market, or Forex market, is an around-the-clock cash market where the currencies of nations are bought and sold. Forex trading is always done in currency pairs. For example, you buy Euros, paying with U.S. Dollars, or you sell Canadian Dollars for Japanese Yen. The value of your Forex investment increases or decreases because of changes in the currency exchange rate or Forex rate. These changes can occur at any time, and often result from economic and political events. Using a hypothetical Forex investment, this article shows you how to calculate profit and loss in Forex trading.

To understand how the exchange rate can affect the value of your Forex investment, you need to learn how to read a Forex quote. Forex quotes are expressed in pairs and usually in five-digit numbers. In the following example, your pair of currencies are the U.S. Dollar (USD) and the Canadian Dollar (CAD). The Forex quote, USD/CAD = 170.50, means that one U.S. Dollar is equal to 170.50 Canadian Dollars. The currency to the left of the "/" (USD in this example) is referred to as base currency and its value is always 1. The currency to the right of the "/" (CAD in this example) is referred to as the counter currency. In this example, one USD can buy 170.50 CAD, because it is the stronger of the two currencies. The U.S. Dollar is regarded as the central currency of the Forex market, and it is always treated as the base currency in any Forex quote where it is one of the pairs.

Let's go now to our hypothetical Forex investment to show how you can profit or come up short in Forex trading. In this example, your pair of currencies are the U.S. Dollar and the Euro. The Forex rate of EUR/USD on August 26, 2003 was 1.0857, which means that one U.S. Dollar was equal to 1.0857 Euros, and was the weaker of the two currencies. If you had bought 1,000 Euros on that date, you would have paid $1,085.70.

One year later, the Forex rate of EUR/USD was 1.2083, which means that the value of the Euro increased in relation to the USD. If you had sold the 1,000 Euros one year later, you would have received $1,208.30, which is $122.60 more than what you had started with one year earlier.

Conversely, if the Forex rate one year later had been EUR/USD = 1.0576, the value of the Euro would have weakened in relation to the U.S. Dollar. If you had sold the 1,000 Euros at this Forex rate, you would have received $1,057.60, which is $28.10 less than what you had started out with one year earlier.

As with stocks and mutual funds, there is risk in Forex trading. The risk results from fluctuations in the currency exchange market. Investments with a low level of risk (for example, long-term government bonds) often have a low return. Investments with a higher level of risk (for example, Forex trading) can have a higher return. To achieve your short-term and long-term financial goals, you need to balance security and risk to the comfort level that works best for you.

There are plenty of people trading in the forex, and why not, there are so many reasons to do it. By trading in the forex demo you are able to start by using a free demo on real time, you have a leverage of 400:1, or another simple reason is just getting into the action and trading with international currency. However, even when you practice in real time testing services and other strategies you can still fail. Using the trading demo may not be enough; the trader must know what he is doing.

There are three things that all forex traders must remember if they are to succeed: practice, reinforcement and repetition. For this you will need to refine your strategies and you will also need skills. Therefore, I recommend that traders include forex simulators in their strategies in order to save money and help themselves start as winners and not as losers.

Compared to a demo that provides functions in real time, forex simulators allow traders to upload, review, and view historical data any time. This way, traders can fast forward and rewind and recognise valuable trading signals. This means that traders can better test their knowledge of the forex and therefore improve their trade and change, so they can stay in the pace of the ever changing conditions found in the forex market.

Forex simulators are an essential tool for traders. Simulators allow a high level of training within a few days of work as traders can pause, rewind, fast forward and play around with whatever knowledge they have acquired. A five-minute timeframe can be set-up to whatever chosen area. Simulators allow you to get snapshots, use any indicators you wish, and even keep journal trades in order to refine strategies.

First, the Figures

If you cast your minds back to last month (or take a look at our account of the October 2006 report) you will remember that the headline figure was much worse than expected. However, monthly revisions to the data from August, a better than expected unemployment rate and annual Non-Farm Payroll revisions (very few were aware of these annual revisions) overshadowed the headline data. To be honest this is fairly rare because the headline figures generally take centre stage but it was a good example of why traders should pay attention to all data releases and be aware of any potential conflicts that may arise. For example, strong revisions to previous data conflicted with September’s poor headline figure.

After hearing that it is fairly rare for the headline figure to be ‘out-influenced’ you may be surprised to read that the same occurred with the November report. We had further revisions to the August data from 188K to 230K. There was also a revision to September’s data; the extremely low figure of 51K was revised up to 148K. The unemployment rate was a further surprise coming in at 4.4%, a five year low! This positive data was enough to offset the disappointing headline figure of 92K versus expectations of 125K.

Price Action

By all accounts the price action caused by the November report was very similar to what we saw last month. As you would expect the headline figure is released a fraction of a second before any of the revisions, this caused a rapid spike higher in the EURUSD rate. This spike reached a high of 1.2792 and reversed immediately. Revisions and better than expected unemployment data became the focus causing the dollar to rally to a low against the Euro of 1.2682. Picture: http://www.passion-trading.com/Articles.TradingTheNews.NonFarmPayrollsNov2006.htm

Some Simple Economics

Why does positive employment data influence the foreign exchange market the way it does? Basically individuals with jobs have a greater amount of disposable income than those who are unemployed. If the unemployment rate falls it means that more people have disposable income to spend on consumer products and services. This creates an increase in demand that causes inflationary pressure on prices. At the same time companies expand their operations to meet the increase in demand but they now have a smaller pool of labour to choose from. This means that it costs more to hire and train the right staff, again causing inflationary pressure. The FOMC attempt to control inflation and keep it at a healthy rate so the US economy does not boom only to burn itself out and head into a crippling recession. To control inflation the fed uses interest rates. If inflationary pressure increases beyond the Fed’s threshold then they will raise interest rates thus making the dollar more attractive. At the time of writing the FOMC isn’t expected to raise interest rates further until mid 2007. However with encouraging employment data and the basic economic understanding that it will cause inflation you can see why there was such a strong demand for dollars post Non-Farm Payrolls.

When discussing market analysis, we generally consider the two contending schools of thought to be Fundamental Analysis and Technical Analysis. However, in the early 1970's, there emerged a third view known as the "Random Walk Theory", which was not so much an approach to market analysis as it was a critique of the other two methods.

The Random Walk Theory is the popular name for a market model known in academic circles as Efficient Market Theory. This model of the market contends that prices are "efficient" in the sense that all known information and market expectations are immediately factored into the market through the movement of prices. But these price movements are caused by so many different factors that they become random in nature, and the only thing that we can be sure of is that the present price is the correct one because it is based on all known information. We cannot, according to EMT, reliably predict the movement of prices which keeps the market at this point.

This model centers around the Efficient Market Hypothesis, of which there are three versions; the weak, the semi-strong, and the strong. In terms of using analysis techniques to outperform the market consistently, the weak version basically says that technical analysis cannot work, the semi-strong says that neither technical analysis nor fundamental analysis can work, and the strong version says that nothing, not even illegal inside information, will work! More recent academic developments such as Behavioral Finance have presented strong arguments against the EMH, and in my view the hypothesis is not valid even in its weak form.

My purpose in this article is not to argue against the merits of the Random Walk Theory however, but to voice some concerns about the tone of the debate. In my own view, one of the historical effects of the Efficient Market Hypothesis has been an unfortunate level of animosity between trading professionals (especially technical analysts) and the academic community. The condescending attitudes of some academics such as Burton Malkiel, the author of "A Random Walk Down Wall Street" toward the field of TA has tended to exacerbate this schism.

Allow me a brief rant on "A Random Walk Down Wall Street". While most of Malkiel's book is scholarly and objective in tone, this goes out the window when he discusses technical analysts. The book has a section called "Holes in their shoes and ambiguity in their forecasts" where he makes the claim that he has never met a successful technical analyst. He lumps chart reading in with astrology and market superstitions like the hemline indicator and the Super Bowl indicator. In one well known part of the book, he describes an incident in which he supposedly duped a technical analyst with a chart made from the results of coin tosses. According to Malkiel, when this unidentified analyst saw the chart, he immediately asked what stock it was so that he could hurry out and buy some right away. He then became angry when told it was a chart of random coin tosses. While I'm not aware of any evidence that this story is contrived, this strikes me as more of a wishful fantasy on Malkiel's part than an actual event. If not, then he certainly picked the most neurotic and unobservant technical analyst he could find to validate his stunt (the chart was very odd looking because all the closes were either at the high or low for the day and all the daily ranges were equal).

This sort of thing is not helpful. While I agree that technical analysis in its classical form is not satisfactory, I believe that its practitioners should be supported and educated by the academic community...not ridiculed by them. It has become clear that the EMH is not widely applicable to markets in the real world. There are trading opportunities which arise in markets and persist for long enough periods of time for traders to profit from them, if they have the correct tools to find and validate these opportunities. The academic world and the trading world can and should work more closely together to explore these possibilities and develop these tools.

Proponents of the Efficient Market Hypothesis or "Random Walk Theory" generally have two lines of defense when it comes to supporting the idea that technical analysis of the markets cannot improve returns:

The first is that they have tested many TA indicators and have not found any that are able to lift returns significantly enough to overcome transaction and slippage costs. The counter-argument to this is that since they cannot test every possible indicator, and since there are certainly market inefficiencies which have been documented such as the January Effect, there could be many untested indicators which can in fact lift returns significantly.

The random-walkers then move to their second line of defense which says that even if there existed some indicators which could predict the market and give higher returns, they wouldn't work for long once they were discovered. This is because once everyone started using such an indicator, their collective behavior would cancel out the indicator's value. This is commonly stated as, "If everyone knows that the market is going to go up tomorrow, then it will surely go up today instead." A rebuttal to this is that the discoverer of such an indicator may not make it public, so there could be many undisclosed indicators out there that work very well. The response to this is that if an indicator is good enough, it will eventually be discovered by more and more people, and this will lead to the same "self-defeating" phenomenon.

Let's play a brief game of "What if."

What if we just decide to re-examine this whole paradigm of "indicators that work" and "indicators that don't work" and "indicators that work until everybody knows about them and then they don't work" and so on? What if at any given time there are actually thousands of indicator combinations that work really well and millions that don't? What if the set of "good indicators" changes over short periods of time for any given market? And finally, what if we had technology for finding and testing the combinations of indicators that are working well currently?

This would make the whole argument moot. Consider this alternative vision:

Oh, you found a great indicator? But you're worried that everyone else will start using it and it won't be effective for long? Don't be. It wasn't going to be effective for long anyway. They never are. Besides, everyone else just found some great indicators too, and they're all completely different from the one you found. So have a good time with your indicator. Make lots of money. Just remember that it will wear out in a week or two and you'll have to find a new one. Just like the rest of us will...

This view is based on one of the preliminary models I have of the way the market might work. In a nutshell, I don't think that the main reason indicators become less effective over time is because everyone uses them. I think the effectiveness of any given indicator rises and falls over time because the behavior of individual markets changes over time. I think the behavior of the market in a given instrument changes over time because the market participants change over time.

Market participants are the different traders, whether they're individuals or institutions, who are actively engaged in moving into and out of positions in a given financial instrument. The only reason the price of the instrument moves around is because of these market participants. Note that my definition of "market participant" does not include people who are just passively holding a position in the financial instrument. This is because if they're just holding a position then they're not moving the price around, and therefore do not participate in the creation of "price behavior."

Each market participant has his or her own particular quirks and unique approach to trading. Some are trend followers and others are contrarians. Some are quick on the trigger and others have nerves of steel. Some are scalping for small gains while others are swing trading. Some use tight stops, some use wide stops and some don't even know what stops are.

At any given time, there is a specific set of these market participants involved in trading the instrument, and all their individual trading styles combine to make the price behave in certain ways. Different sets of participants will cause different behaviors. For example one FOREX currency pair may have a tendency to always turn on a dime, while another may often consolidate for long periods before changing direction. One may have a very orderly movement and form well defined chart patterns while another is very choppy and undefined, especially around major tops. And as the group of market participants changes over time as some drop out and others begin trading the pair, the price behavior will change with the gradual evolution of the group. This will cause some indicators to work well at some times and poorly in others.

So the way to get superior returns out of the market is not to just find a set of terrific indicators and keep them to yourself. It's not to develop a single well thought out trading strategy. It's to constantly scan the market's price behavior, trying out many combinations of indicators and strategies to see which ones are currently working well. This kind of constant dynamic statistical analysis of historical price movements can only be done with the aid of computers.

This is one of the ideas that I have managed to flesh out the most in my research into FOREX price behavior. I developed a tool called a Price Behavior Map which tracks how various TA indicators have been performing recently across a group of seven currency pairs. By using this tool, I hope to get a better idea of how price behavior evolves over time. And I may just make some nice FOREX trading profits along the way!

Statistical Trading consists of using statistical tools on historical price data in order to improve trading returns. The idea behind statistical trading is that if a trader can find even a slight statistical edge, then the expected return over a large number of trades will be positive. We'll talk about exactly how to calculate expected return below, but for now let's just concentrate on what it means to get a statistical "edge."

I'm talking about the same kind of edge that a casino owner or an insurance company has. This is a statistical edge based on the law of large numbers. The casino doesn't know if a particular spin of the roulette wheel will be a win or a loss, but they know that after 1000 spins they will very likely be richer. Their edge is simple to describe using the game of roulette as an example. The player has a 1/38 chance of winning on any given spin, but will only receive 36 times their money if they win. So for 3,800 spins, the player will win 100 of them on average, yielding $3,600. But the player will lose the other 3,700 spins at a dollar each for a loss of $3,700. So what's the average take for the house? It's $100 for every 3800 spins, or a little under 3 cents per spin. It adds up...and all other casino games of pure chance (these don't include poker or blackjack which can involve some skill) are variations on this theme. That's why casinos get rich and gamblers go broke.

Insurance companies get rich in pretty much the same way. The company has no idea if a particular person will die this year, but they do have a pretty accurate idea how many people out of 1,000,000 policyholders with a given profile will die this year. Let's say that statistically the death rate of a given class of people (males over 55, smokers, and in moderate health for instance) is 4% so that we expect 40,000 to die this year. If each policy pays $10,000 for a death, then the company expects to shell out $400 million dollars in benefits...wow! So how much should the company charge in premiums for those one million policies each year then? Well how about $500 each? That gives the company $500 million in revenues for an expected $400 million benefit payout, leaving $100 million for salaries, expenses, profits and whatever. That's their statistical edge.

Now let's look at some ways that we can use this idea of a "statistical edge" in trading.

A very common way that traders try to apply the ideas of statistics is by planning trades in such a way that the potential gain exceeds the potential loss. This is the classic "cut losses short and let profits run" argument. For instance if you set up a trade so that you lose only $100 if you're wrong but gain $300 if you're right, then you only have to be right 1/4 of the time to break even. That's because for every four trades (on average) you would lose $100 three times and gain $300 one time, which is a wash (not counting commissions). And any numbskull can be right more than a quarter of the time right?

Right. Sure. So why aren't we all rich? After trading currencies for a while in 2004, I figured out what the problem was. A tight stop and a wide target will tend to make you wrong a lot simply because it's easier for the stop to get hit. On the other extreme, suppose you decide that you like to have a lot of winning trades, so you place very wide stops and very close price targets. Fine, now you'll win a lot of the time but the amounts will be small. And one loss, although uncommon, will tend to wipe out many little wins. So no matter where you are on the "trading setup" spectrum, wide stops and tight targets, tight stops and wide targets, or any combination in between, statistically it ends up being a wash. There is no intrinsic "edge" in any given trading setup scheme, including "cutting losses short and letting profits run." Heresy, I know.

Getting a real statistical edge requires that you can identify situations in which the price tends to move in such a way that you can set up trades which have a positive expected return. Expected return is just the percentage of wins multiplied by the win amount, minus the percentage of losses multiplied by the loss amount. An example will make this clearer.

Suppose you know that every time the USD/JPY rate crosses above its 20 day moving average, the price tends to move up more often than it moves down. Investigating this in more detail using historical data, you determine that there is a 40% probability that the price rises by 25 pips before it ever drops by 10 pips. Now even though this only happens less than half the time, it still allows you to set up trades with a positive expected return. This is because if you set your target at 25 pips and your stop at 10 pips, you will win 25 pips 40% of the time and lose only 10 pips during the other 60% of the time. Note that I am greatly simplifying this trading example for clarity. Stops and targets need to be set at locations that make sense on the chart, but I discuss such details in other articles. For our purposes here, we're just concerned with calculating the expected return, which is:

(40% x 25 pips) - (60% x 10 pips) = 10 pips - 6 pips = 4 pips

So on the average, you can expect to get 4 pips per trade using this strategy, even though you lose most of the time! But remember that this whole example is predicated on the knowledge that a positive crossover of the 20 day moving average tends to skew the expected return in your favor. That's your edge in this example.

This type of article is one of the most fun for me to write because it's really just a romp through the imagination. Since the 1990's, I have made a hobby out of exploring new and varied ideas for analyzing the markets, and this is a great opportunity to dust off some of my old notes, publish some of those ideas and perhaps get some feedback on them. I'm also looking forward to using some of the following concepts in my ongoing research work on FOREX price behavior. So put on your "what if..." hats and let's get started!

Market Models - Old & New

Most traders are familiar with the two basic schools of market analysis that we call Fundamental Analysis and Technical Analysis. In the 1970's, members of the academic community proposed a new model of the market known as the "Efficient Market Hypothesis". This is more commonly known as the "Random Walk Theory" and basically said that the first two schools of thought were both wasting their time. In response to the Random Walk Model, other academics put forth an even newer theory of how markets work called "Behavioral Finance". These are all examples of comprehensive explanations of what factors drive market prices. Here's a brief summary of market models, some of which are only in their infancy:

Fundamental: Market prices are driven by tangible events and conditions in the real world, such as earnings, sales, management, natural disasters, weather, economic conditions, geopolitical tensions and so forth.

Technical: Market prices are driven by what prices have done in the past. As traders observe these past and present price movements, their expectations about future prices lead to feelings of greed and fear which in turn create buying and selling pressures.

Random Walk: Current market prices are efficient reflections of all known fundamental and technical information, so we can discern nothing about future price movements. The factors that cause future price movement will be so varied that such movements can only be random in nature.

Behavioral Finance: Prices are driven by human psychology which is not always rational. Traders may base expectations about price movements, risk and reward on erroneous reasoning, thus causing prices to behave in non-random ways. Bubbles and crashes are classic examples of this.

Chaos Theory: Market prices are part of a non-linear dynamic system in which outputs are re-introduced back into the system as inputs, causing complex behavioral loops and very sensitive dependence on slight variations in conditions.

Fractal Geometry: Price patterns are recursively nested, meaning that a large pattern may be composed of several smaller similar or even identical patterns and so on through all time scales. Elliot Wave Theory is a classic example of this idea.

Scott's Emergent Property Model: I've discussed this one in more detail in other articles, but the idea is basically that identifiable properties of price behavior emerge from the combination of unique individual trading styles of the current market participants. An analogy would be how a person's personality emerges from the combination of individual neurons in their brain. This price behavior changes gradually over time in an evolutionary way in the same way that the behavior of an organism changes over time due to both internal changes in its makeup and external pressures from its environment.

My apologies if I have neglected or grossly mis-represented any of the various ways of explaining what makes the market tick.

Mechanical Trading Systems

Another subject that often grabs my interest is the design of mechanical trading systems based on money management rules. Some examples of such systems are "buy and hold", "dollar cost averaging", Robert Lichello's "Automatic Investment Management" (AIM) and any other systems that try to take the emotion out of trading through the application of a rule-based system for buying and selling. Systems like this differ from other mechanical systems in that the rules are based entirely on money management variables such as cash on hand, average cost per unit, total portfolio value and current position value.

These kinds of mechanical systems were generally designed for the securities markets however, not for the futures or FOREX markets where the cash management situation is much different. In FOREX, unlike the securities markets, we are not taking some currency out of an account that we own and exchanging that currency for some security (i.e. dollars for stocks). FOREX involves simply putting down a margin deposit and then using that as the basis for borrowing some larger amount of a currency and exchanging it for another currency, making us long one currency and short another at all times. This entirely different structure of the FOREX market presents a new challenge to the design, use and understanding of the classic money-management based mechanical systems.

Artificial Intelligence & Artificial Life

What if we could design a neural net which could learn over time how to make consistent profitable buy and sell decisions based on FOREX chart data? Or if you prefer cellular automata (CA) we could create one of those in a multi-dimensional format in which symbols "swirl around", colliding and combining in new ways creating emergent behaviors. If we rewarded profitable behaviors and punished unprofitable behaviors would this CA eventually learn to behave like a super FOREX trader? What's that you say? Why not harness the power of evolution by using Genetic Programming? Ok, let's create an environment full of trading programs that have to compete with each other to survive and reproduce offspring programs. After many generations of "nature - red in tooth and claw" we may end up with a group of very robust FOREX trading programs. They will have earned their place in this virtual world where the prime law is "survival of the fittest."

These are all examples of how the ideas popularly known as AI and A-Life might be applied to FOREX trading. Using programming languages such as LISP, I think it would be interesting to use neural nets, cellular automata, genetic programming environments and other techniques to create rudimentary trading programs. These programs would be exposed to many sets of market data (probably intraday charts) and over time would "learn" or "evolve" into expert trading systems. This isn't science fiction, but it's at the frontiers of cognitive science.

Computer Modeling of Dynamic Systems

What if the markets are deterministic in some ways? In other words, I'm wondering if there is a kind of "physics" behind price movements that is ultimately subject to complex cause and effect relationships. After all, we know that cause and effect relationships certainly exist. I decide to buy some FOREX currency pair, which causes me to place an order, which causes several offers to be hit in order to fill my order, which causes the bid and ask of the FOREX pair to rise, which causes some stop orders to be triggered, which causes more buying, which causes another price rise, which causes several news services to take notice, which causes several other people to buy, which causes the price to become so high that people start to take profits, which causes me to sell. Whew!

Keeping track of all these relationships where each event may be caused by and in turn causes several other events is a job for computer modeling. In fact, computer modeling or simulation is what we use to try to understand the behavior of any complex system that we can describe through a few simple rules.

We can use this technique to try to understand the dynamics of what goes on in the FOREX markets as described above. We can also use it to describe what's going on in the economy. We don't necessarily have to use cause and effect relationships either. We can model such things as the supply and demand levels of money, goods and labor in the economy as well as the price levels of these items. In a market, we could try to discover what factors lead to the buildup of buying or selling "pressures" and what factors might act as a catalyst in releasing those pressures, causing catastrophic crashes or sudden bubbles in the market.

I do a lot of modeling on paper by simply drawing diagrams of how I think certain systems might work. This is different from computer modeling in that I am not trying to simulate the behavior of the system. Instead, I am often trying to reduce the complexities of a system down to some very simple concepts in order to understand what the main driving forces are.

Here's an example of this. One of my favorite ways to reduce the complexities of any economy is to look at it as a simple set of elements and behaviors such as: People apply labor to natural resources, thus producing goods which they can either consume or save, allowing them to raise their quality of life and continue the process. Believe it or not, it actually took a lot of diagramming before I figured out that an economy really can be boiled down to:

1. People who want to live well, and 2. Natural resources which allow them to do so.

Every other economic concept like labor, money, wages and prices, etc. are just extensions of this basic model.

Another way that I like to try to model the market is in terms of the different types of participants and their behaviors. For example I will divide the market up into "contrarians" who sell when the price goes up and buy when it goes down and "trend followers" who buy when the price rises and sell when it falls. How will different mixes of trend followers and contrarians affect the behavior of the overall market? Conversely, is there a way just by observing market behavior that we can tell if the market is dominated by trend followers or contrarians?

Of course none of these models may actually describe reality accurately. We have to remember that models are really tools to help us suggest various hypotheses about the way things work. We can then test those hypotheses scientifically.

Inventing New Indicators

One of the most interesting coincidences (to me anyway) between the market and the physical sciences is the use of the variables "P", "V" and "T". In chemistry and thermodynamics these usually stand for the Pressure, Volume and Temperature of a gas, and they are related to each other in a way described by Boyle's law. On a price chart they stand for Price, Volume and Time. Are they all related? What if we had an indicator that kept track of how much time it takes on average for the price to move by a certain amount. Is it taking longer to move up than to move down? Is there more volume associated with down moves than up moves? What about an indicator for that? Or an indicator that combines all three variables?

I was reading another trader's blog a few weeks ago and they mentioned that they would like to set up a moving median indicator of the price instead of the standard moving average which uses the mean of the prices. The discussion went on to speculate about how a regular moving average and a moving median plotted together would interact. Would a crossover of the median by the mean be significant? I thought it was a pretty interesting idea.

Coming up with new indicators is a common pastime for many traders, and I just wanted to give you an example of the thought process that I might go through when inventing a new one. Of course there are more indicators out there than any one person could ever use, but who knows...maybe the next one will give us new insight into the movement of prices that we've never had before. So let's keep inventing!

What is Forex Trading?

Forex Trading, also technically referred to as Foreign Exchange Trading, is the financial market of the world. Forex consist of selling and buying currencies on the market. Forex generally used by businesses and entrepreneurs looking to conduct international business and transactions.

To give you an example of Forex Trading, let us say that the United States is selling products to Canada. Canada would have to convert their money, the Canadian Dollar (CAD) into the United States Dollar (USD) to perform the transaction. So, essentially, what is happening is that Canada is buying USD currency with CAD currency for the conversion.

How can I trade in the Forex Market?

The Forex Trading market, works very similar to our stock market, with the exception that it deals with currencies. In order to trade on the Forex market, you must have a broker. Just like with the stock market, not just anyone can enter the market for trade. The Forex Market does differ from the stock market in that there is not a centralized exchange or clearinghouse to trade from. You must have a Forex Broker in order to take part in the trading.

How can I make a Profit?

To make a profit you will need to obtain a Forex broker specialized in the area. In some cases, in less serious trading cases, some people will use their local bank to handle the trade. However, if you are looking to hedge risks, convert receipts or profit at all in the Forex market, the first thing you need is a broker.

It takes a large amount of experience to begin earning large profits in Forex trading. Some people enjoy a thirty-percent return on their investments each month. To do this you must learn everything you can about Forex trading and speak with your broker about investment strategies. The internet can be a valuable tool in this area as well, there are many online Forex trading courses where you can learn just what it takes to become a competitive, profitable investor.

If you've just begun trading Forex, you probably want all the help you can get. Though Forex trading can be very lucrative, you'll want a Forex winning system that will work for you. There are several Forex killer systems available just as there are in marketing, sales, and other forms of business. You must find the Forex strategy that works for you, and develop good trading habits for long-term success. Here's a brief Forex winning guide for getting started.

Develop a Forex Trading System that You Can Stick With

Not only do you need a Forex strategy - you also need a system. You can have the best strategy in the world, but if you don't do it systematically, you could lose. Create a schedule of when you will do your Forex trading. Then, create a budget to manage your money coming in and going out. Just like operating any business, you'll have good and bad times. Stay with your Forex trading strategy through up-times and slumps for the best results.

Develop a Forex Trading Plan in Advance

Before the Forex market opens, you should already have a plan as to how you will trade. Don't get caught up in the moment. Carefully plan your investment as if you were making a big decision such as buying a home or a car. Even if the Forex trading amount seems small, treat it as if it were a million dollars. It could turn into that amount one day.

Expect Small Losses

If you plan to do Forex trading for the long haul, expect and accept small losses. They will occur no matter how well you know the market. A Forex winning system is one where you are prepared to accept the small losses in hopes of acquiring something greater in the future.

Be Patient

Remember, steady and slow is the key to any long-term Forex success. Don't sit staring at the quotes all day long! Take a break, enjoy life, and don't see a loss as the end of the world.

Avoid Forex Trading Strategies You Don't Understand

When developing a Forex winning strategy, avoid using methods you don't fully understand. Use helpful Forex guides and tutorials, but beware of Forex scams. There are many out there today - especially email scams. Be leery of companies who want to do your Forex trading for you. Develop a plan with the help of Forex experts, but please do your own trading or choose a reputable broker.

Develop an Exit Plan

Know when it's time to take your money and run! Don't hope for the best when all evidence points toward the worse. It's better to exit your trading with some of your money than to lose it all in a risky trade. Before you begin trading, set limits on how much you will invest - and stick with your limits.

Use this quick Forex guide to develop a strategy that works well for you. Forex trading doesn't have to be stressful. You can realize Forex trading success sooner than you think!

If you look at some websites around the net you’d think that day trading was some kind of disease or something. So much bad press surrounds it that you would thing that anyone who tries it must be nuts! So what exactly is day trading anyway?

That’s easy. Day trading is simply entering a trade on or after the opening of the day’s trading session and exiting a trade on or before the close of the day’s trading session. So logically the length of a day trade is no more than a single day.

Does day trading have risks? Of course it does. In fact all trading and investing has risks. Day trading became popular when the availability of real-time market data expanded to the masses. It appears that many trader became more fascinated with some of the fast-paced action rather than with the actual bottom line. It is true that some traders need more action than others and day trading may provide a way for those traders to satisfy their need for trading action.

Day trading is a method of trading and as such it is a tool. Now this may or may not be the right tool for you to use to build your fortune, but that depends on far too many factors for us to go into in this brief introduction.

A Few Day Trading Advantages

No over night positions - With the volatility of the markets constantly changing there are people who definitely prefer to be flat (holding no open positions) at the end of the trading day.

Rapid Feedback – Day trading gives you rapid feedback which allows you to see how well your trading system works in a relatively short period of time. Please keep in mind that making a fortune in the market is not a short-term proposition although the time frame you trade in may be.

A Few Day Trading Disadvantages

Typically increased transaction costs - Transaction costs are typically higher because trading frequency is typically higher.

Typically does not take advantage of a large move – Trend followers live for the big move and day trading is simply not equipped to take advantage of the big move. Some would consider this to be a big disadvantage although day traders would argue that they make enough smaller profits to equal or surpass the profits in a big move.

If you choose to day trade or do any other type of trading, remember that there is absolutely no substitute for preparation. Dot your i’s , cross your t’s and prepare to trade successfully.

To Your Trading Success!

FOREX is an international online currency exchange that was established in 1971. It is now the premier foreign currency exchange market in the world, with an average daily trading volume reaching as high as one and a half trillion. Three types of traders make use of FOREX-banks, individuals, and corporations. When they have need to exchange currency online, FOREX is the number one place to do it.

There are two basic reasons to do your online currency trading with FOREX. First and foremost, FOREX trading is done to make a profit. Depending on the market, a bank, corporation, or individual can make a windfall profit through FOREX trading. Another reason to do currency trading is to get into a secured position by eliminating trading risks arising from foreign exchange rate movement. In other words, FOREX online trading can help a bank, corporation, or individual to weather changes in foreign exchange rates by already having the foreign currency they need on hand.

FOREX is unique in terms of trading exchanges. Rather than the typical exchange like Wall Street or the Tokyo Exchange, FOREX is an entirely digital foreign currency exchange system. The rate of foreign exchange changes so quickly that traders must be able to react to market shifts within seconds. Online FOREX trading makes this possible by eliminating the classic stock broker. Rather than trading telephone calls and trying to catch a great deal by shouting and waving papers, FOREX trading is accomplished with a touch of a button on the computer.

The ease of online FOREX trading appeals to many, both businesses and individuals alike. All the information one needs to get started with FOREX trading is available online. FOREX exchange rates are continually updated on many websites. It is simple to buy one currency when it is low and sell it when it is high. However, what goes up can also come down, and new traders on the FOREX online markets must be prepared for losses. Still, despite the risks, more and more people are participating in online FOREX trading every day.

Keeping updated with the world market is the best way to prevent losses with currency trading. Learning which countries are experiencing economic growth or recession is essential to make the best currency trading decisions. It is always good to invest in currency from nations who are experiencing growth. Likewise, avoiding countries that are historically unstable or are experiencing war or international economic sanctions is only wise. FOREX online trading is not for everyone, but with some knowledge and skill, it can be very lucrative.

Foreign Exchange or FOREX Trading has existed for as long as merchants ventured to new lands hundreds of years ago and traded with their counterparts.

It is only since the latter part of the 20th and the beginning of the 21st century that faster and more efficient ways of trading via the Internet have evolved.

Forex trading online can now be transacted 24 hours a day 7 days a week Worldwide!

One consideration when forex trading online must be the security measure that the company applies to their site. Things as simple as encryption should be available, when there are possibly millions of dollars involved in each transaction, you need peace of mind that the money you trade will get to the intended recipient.

When looking for forex trading sites online, it is best to test out the capabilities of the site before you register for membership. Fortunately most trading sites provide you with the ability to trade on a trial basis first with "monopoly money" enabling you to get a feel for how the site works before you commit any of your own funds. This forex trading education can be priceless. These sites are not difficult to find, may offer different aspects to their accounts but are well worth testing out first.

Your chosen forex trader should receive the rates for each currency everyday. You need up to date information on the rate, to be able to make an intelligent decision for your trade(s).

Any sort of analysis tool or analytical report on the behavior of the currency you are trading, giving you a forex trading signal will be worth its weight in gold. You really should familiarise yourself with any forex trading software as soon as possible..

Providers now employ the services of experts standing by online, enabling you to chat with these traders and brokers to seek their advice on what move would be best for you to make. They can also help analyze what currency will gain or loose during the next forex trading day.

Email us for forex currency trading, forex trading, forex trading course, forex trading education information.

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In the past one year e-currencies especially egold have become very popular in Nigeria. E-gold is an electronic currency backed by real gold stored up in a bullion somewhere in the United States and accounted for by weight. E-gold was established by Douglas Jackson in 1996.

E-gold is used as a medium of exchange on the net. Many businesses now accept e-gold as a form of payment for their services or products all over the world. Our very own Nigeria caught the bug about a year ago with people using it especially to fund their forex trading accounts, hyip programs and muli-level marketing programs.

The main attraction perhaps for Nigerians is the fact that the process of opening and operating an e-gold account takes just a few minutes and verification is never required unlike payment systems like paypal.

Another controversial feature of the egold system is their non-repudiation policy which regards all spends as being final. There are no charge-backs with egold. To fund an egold account, all a user has to do is find an Independent exchanger whom he pays cash in exchange for his egold account to be funded.

The two features of e-gold stated above has made it a preferred medium of operation by fraudsters. The fact that no verification is needed and that once the egold gets into their account, it can’t be retrieved makes the system a perfect one for fraudsters. These limitations notwithstanding, millions of people all over the world have continued to use the system.

With its growing popularity in Nigeria, the egold system gradually became a target of fraudulent activities by criminally minded Nigerians. Today, egold fraud in Nigeria has become an issue. Perhaps it is the next level of internet fraud in Nigeria.

How Egold Fraud Is Perpetuated

1. The most common method is for the criminal to gain access illegally into your egold account, lock you out and then move out the funds from your account. This is done in a variety of ways.

   The criminal may send out an email to unsuspecting egold users, pretending that the mail was sent from the real e-gold system. He may claim that your account needs to verified and you need to click on a link inside the mail to verify your account. That link then leads you to a page that appears to be on the egold site but which in fact has nothing to do with egold. You will then be asked to fill in your egold account number, passphrase, email address and email address password. The moment you that, you can as well kiss your money goodbye because they will use all the information you supplied to gain access to your account and steal your money.

   The criminal may again have installed a keylogger software on the system you are accessing your egold account with. The software captures you account number and passwords which the criminal retrieves later and uses to access your account. This mostly happens if you use a public computer to access your account.

2. Just recently a more advanced and organized egold fraud scheme was discovered here in Nigeria. Here the criminal put up a website (www.vedanix.com) and claimed to be able to sell egold at N138 ( which in fact is impossible). They he looked for reputable egold exchangers and placed their account numbers on his own website.

   When people called to buy egold from him, he simply gave out the exchanger’s account number. As soon as the unsuspecting victim made a payment into that account he requested and colleted all the payment information. He then visited the website belonging to the reputable exchanger to order for egold using the information earlier supplied by his victim but using his own egold account to receive the egold.

   It was really easy for him since he already had all the payment information including payer name, bank branch where payment was made, and bank teller number. This is all that is required for the reputable egold exchanger to confirm a payment and conclude an egold funding transaction. Once the egold had been sent to the vedanix criminal’s account, he simply disappeared and switched off his phones while waiting for the next victim.

   The criminal according to information on his website, www.vedanix.com has been arrested in Jos. Before he was caught, he had used account numbers belonging to Global Errands Limited (Graphcard Representatives) and Cyberkonsults ( owners of GoldNairaExchange ) to perpetrate his fraud. Both companies have stated strongly that they have never met him and they know nothing about him and his business.

In order to protect yourself from egold fraud, you are advised to observe the following security measures:

1. Always logout from your account after use.
2. When you use a public computer, always clear your passwords, cookies and stored files.
3. Never ever click on a link in any message supposedly sent to you by egold. Egold will never send you such.
4. Never disable the ascent pin security settings in your egold account.
5. In order to avoid the vedanix model fraud, always use services of reputable and trusted egold exchangers. If the offer is too good to be true, it can’t be true. Don’t lose your hard earned money to greed by patronizing exchangers who offer ridiculously low rates.
6. If you want to try a new exchanger, it is advisable to test with a very little amount the first few times, $5 maybe.

Observing these measures should protect you from egold fraud.

Forex brokers are companies or institutions that offer a range of forex services like management of forex accounts and execution of orders. A trader needs to be very careful while choosing a broker.

There are many websites that help new traders compare and choose a broker that can provide the services they need. There are many factors depending on how one compares the broker's criteria for points like what is the minimum deposit required, maximum leverage, spread of major currencies, commissions charged, number of pairs offered, and are mini accounts available?

Minimum deposits required varies from company to company, and can range anywhere from $100 to $10,000. Leverage is the ratio of the money present in the account of the trader to the amount that opened the account. The allowed leverage makes a big difference while trading in the real market. The difference between sell quote and buy quote is known as spread. Sell quote is the price at which the base currency can be sold, and the buy quote is the price at which it can be bought.

Some brokers choose not to charge commissions. This must be determined before signing up with a broker. The past performance of the broker and the word of mouth from other traders must also be considered. A trader must compare the services offered by the broker. Constant updates and newsletters on market trends are services that must be provided to you by the broker. The reliability of the broker is of utmost importance. Many brokers insure their customer's funds against any mishap. Also, the margin requirement or the deposit required for opening or maintaining a position must be checked. For small time investors, many brokers offer mini forex accounts. This is another area of comparison.

The word Forex is derived from combining two words - Foreign Exchange. It deals with buying of one currency and selling of the other at the same time. Over $2 trillion in foreign exchange is transacted everyday.

Currency exchange is a new option that has emerged for small investors. Earlier, the market was not easily accessible to small investors. Only banks, multinational companies and large conglomerates engaged in trading. Now, with the help of technology, everyone can derive benefits from this low risk, high return market. A proper understanding of the system is necessary to avoid losses. Brokers help individuals, as well as institutional investors to establish their accounts for currency exchange.

Option trading is a kind of trading wherein a contract allows a person to buy a certain security (whether stocks or currencies) at a particular price at a certain point in time.

There are basic two categories of option brokers. Some brokers offer their services online, while others offer their services over the phone. Some forex brokers offer both options.

The minimum amount required for trading accounts varies amongst forex option brokers. They may also have specific rules about trading contracts of a minimum value. Contract liquidity is also an important factor. Some brokers allow the investor to enter and exit at any time, whereas others may have fixed time periods.

Standard option contracts that are traded over-the-counter (OTC) are generally referred to as Plain Vanilla Forex Option products. They have very good liquidity for major currencies. The brokers who offer this product are known as Plain Vanilla Forex Option Brokers. However, not many option brokers offer plain vanilla forex option online, but do so only over the phone.

Another type of broker is the Exotic Forex Option Broker. By definition, they deal with currencies that are not traded too often. Also, these products are called non-vanilla, as their structure may be quite different from the standard option. They are also not very liquid, and are generally designed to suit individual needs.

There are many different forex option-trading products available. It is very important to understand all the risk factors associated with all of them before choosing a suitable one. The forex option broker helps the investor make the right choice.

When a trader wants to open a forex account with any forex broker, there are options to choose from full service, discount and introducing brokers.

A full service broker offers all the standard services, such as investment advice and price quotes. They also keep traders updated with all current trends. With a discount broker, the trader has to take care of all buying and selling decisions. An introductory broker is a person that introduces new customers to the full service brokers. The full broker then provides full support in managing their accounts. They earn brokerage on every customer they introduce.

An introductory forex broker deals with futures contracts and commodities. The ranges of services provided are the same as that of a full broker. Futures trading deals with trading of treasury bonds, stock indexes and foreign currencies. Speculation in futures trading is on the rise with the availability of technology and services. Today, traders prefer to opt for a fully managed account with the brokers.

Introductory forex brokers are generally, existing traders who have solid experience and sound knowledge of the forex market. They can enhance their knowledge by managing other people?s accounts. They form a significant fraction of the workforce of many brokerage companies.

These brokerage companies offer traders the option of joining them as introductory brokers, and provide full support to set up their offices. Introductory forex brokers are generally provided with full back office support. They are also given access to training and workshops that the company conducts for its prospective customers.

Introductory forex brokers are presented with extensive tips and current trend updates and analysis to help their traders do well in the market. Total support is provided to these introductory brokers in order to establish a successful business.

Traders that understand the forex market well and have an inclination for business can choose to become an introductory forex broker.

With the advent of technology, it has become possible for new and small investors to start currency trading. These investors do not have the huge capital that a conglomerate or an MNC (Multi-National Company) has. Therefore, such small investors are given an option of opening a mini forex account.

Mini-Forex Brokers allow investors to open their forex accounts by putting down a comparatively smaller down payment. The minimum requirement for actual forex trading is $100,000. Mini forex brokers may accept contracts as small as $10,000. Also, the margin in real forex trading is 1%, where as mini accounts may operate at around 0.5%. Many mini forex accounts can be opened with a deposit as low as $100.

A mini-forex broker offers the investor a quick and inexpensive way to trade from the comfort of home day and night. All the specifications remain the same, except that these trades are operated from a mini forex account.

For beginners, many online websites of these brokers offer demo or trial accounts that help the investor practice trading skills. These accounts also help increase the understanding of the functioning of the real time forex market.

Mini-forex brokers often guide their customers regarding the best trading options that could yield the most profit. The major factors to consider while choosing a mini forex broker are feedback from other traders about the broker, if the broker has insured his client's funds and the amount of commissions charged.

A trader's success in forex trading depends on the information they possess. Brokers keep traders informed of market fluctuations, which help them to take maximum advantage of the forex market.

I would like to talk about 10 common mistakes in trading. New traders are often unaware of what is required in trading and the bad habits that can lead to financial suicide.

1. Under capitalization - One of the first mistake I made when beginning to trade was being under capitalized. I started with a $10K account without any idea on how to trade. You need enough capital to learn and gain the experience. Some like to call the initial stake "market tuition." If you can avoid paying your dues, great for you. But most new traders will lose their money. Just make sure you learn from every loss.

2. Having the approach to trading as a "learn as you trade" - Big mistake. "Learn as you trade" = losing money. Losing money can lead to emotional and financial stress and may even create enough fear in you making it hard to trade. Make sure you come prepared to the battlefield. Be a strategist. Sun Tzu said, "The battle is won before it is fought." Think about it.

3. Trading as a hobby - Take a look at your hobbies. Do they make money? Hobbies in general are entertainment that cost money. Do not approach trading as a hobby. Treat it like a business. Develop a business plan, have goals, and understand what you want out of trading.

4. Thinking that you know it all - The moment one thinks he knows it all is the moment he has become a fool. Its impossible to know everything about the markets. This is a lifetime learning process. Find your niche.... find your speciality and be an expert in it. In other words, find your edge. One thing I learned in trading is that niche = money.

5. Trading without a plan - One of the worst things you can do as a trader is to trade without a plan. Trading without a plan is like driving in a new area without a map or a navigation system. You are lost.

6. Not following your trading plan - Okay so now you have a trading plan. Why don't you just follow it? A common mistake among traders is not following a developed trading plan. This leads to impulse trading or emotional trading.

7. Wanting to be right - Are you trying to be right? Or are you trying to make money? This is a hard one... I personally have to battle myself to avoid this bad habit. Our egos interupt with our trading and we tend to want to prove something to ourself or someone else. The markets do not care what you think. You are in it to make money.

8. Money Management - Strict money management is a necessity. Set your risk parameters for all your trading setups. A common rule is to risk no more than 2% on one trade. I prefer 1%. Being long 10 different stocks at 2% risk per trade is not a good idea. In fact you are risking 20%. Know your size and do not double up your position after a series of losses. Be a grinder and not a cowboy.

9. Have realistic goals - Too many traders come into this arena without unrealistic goals. Questions like "Can I make a million my first year with a $10k account?" Sure you can..... but is that really realistic? Focus on crafting your trading. When you know how to trade the money will flow naturally.

10. Not analyzing yourself and your trades - This a poker habit I have. I tend to analyze every losing and winning hand to learn from it. Traders need to do the same and analyze every trade. Think about it after the trading hours and focus on what you can do to improve. Trading is a constant journey of soul searching as well. Understand yourself and you will significantly improve your trading.

Money can be made or lost on the Forex (foreign exchange) market, just like the stock exchange. With the proper trading education, the investor learns how to buy and sell at the right times, using various methods to achieve one's goals.

The investor is, in most instances, looking for higher interest rates to receive a greater rate of return on their investment, and adjusting the interest rate is a method used by a central bank to ensure continued interest to trade by investors.

The following are brief explanations of different types of currency trading:

* * * * * *

Forward transaction: To decrease risk, forward transactions are often sought on the Forext trading market. In this type of transaction, money changes hands at a predetermined future date. Transactions are set up by the buyer and seller in terms of days, months, or even years. Regardless of the circumstances on that future date, the transaction closes.

Futures: Similar to forward transactions, foreign currency futures also involve standard contract sizes and maturity dates. Standardized and traded on an exchange for this purpose, the average contract is roughly three months. Interest amounts are usually included in these types of transactions.

Swap: The swap is probably the most common type of forward transaction. Two parties exchange currencies for a predetermined length of time. They also reach an agreement on when that swap will reverse - at a later date. Swaps are not contracts and the transaction does not take place through an exchange.

The most common type of forward transaction is the currency swap. In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date. These are not contracts and are not traded through an exchange.

Spot: As indicated by its name, a spot transaction is for a much shorter duration - two days. A "direct exchange" between two currencies, spot transactions involve cash rather than contracts. Interest is not included.

* * * * * *

Though easy to understand in theory, it is most advisable that the potential investor learn everything there is to know about trading prior to making their first successful trade.

The world currency market is a highly fluid market. Conditions, positive and negative, within countries has impact on the rate of exchange for that given currency at any given time. Learning to properly trade in any exchange market helps increase the odds of the investor's success. Forex trading education should be of the highest quality, with ongoing support and mentoring. Practicing one's trading skills in a safe environment provides an excellent training education ground before one decides to jump into any trading arena.

As evidenced around the world, trading in the world currency market can be very lucrative, but as this article demonstrates the different choices and methods must be learned to offset financial risk.

If you are an aspiring Forex trader then you should be aware that there is a lot to learn about this huge market. Fortunately, there are many places where you can find out the information you need to help you become a successful foreign currency investor. Check online or in local bookstores and you will see there is a wealth of information on the topic.

One of the main benefits of trading Forex is that the market is open 24 hours a day. This means that investors are able to respond to any change in political and economic situations all over the world. This means that those interested in analyzing Forex based on fundamentals rather than technical analysis are helped greatly here.

The Forex market is very dependent on the smallest changes in world economies and political situations so if you are going to be profitable you need to be able to understand these nuances and how they should affect your trading. Additionally, an understanding of the overall market dynamic is important. Be careful also to only listen to sources of information that you are confident you can trust. As with the stock market you may find there are people trying to influence your trading with little information to back up their claims.

Probably the first thing you should do if you are still a novice is to read a good book on the subject. Examples of books you might be interested in are Trading in the Global Currency Markets by Cornelius Luca and The Disciplined Trader: Developing Winning Attitudes by Mark Douglas.

Once you have built up a good foundation of knowledge I would advise to delve into the Internet for some more information. The only problem with using the Internet here, though, is that the Internet is flooded with phony courses and systems promising to make you rich quickly. So, I would avoid paying a lot of money for any information as it is usually available for free.