Category: Forex Education

So you want to learn to trade forex. Hmmmmm…

This site will teach you how to trade.

It will provide you information and links to information that will explain the trading process. The process of trading is not to be taken lightly.

Should you decide to venture upon this journey, you must know that you run the risk of losing every friend you have, your sanity, your dignity, all your worldly possessions, and most of all every penny you own.

On the other hand, if you learn to trade properly and stick to your strategy, you can make a lot of money.

Paying for Training

Keep in mind that there is a price to pay. This price is often called, for newbies, tuition. That price includes those trades where you have a loss, the hours you spend reading books and information sites on the web, the time away from your friends and family, and a change in your life style.

You’ll stay up nights doing research and you’ll pass up those get-togethers with friends at the local Kenchic.

“No” you say. Well friend, lets get something straight from the beginning. Trading is not for the weekend warrior or the midnight cowboy. Unless you are willing to put in the time to study and learn, YOU WILL FAIL!

The amount of studying and preparation that you invest will ultimately determine the level of success and the strategy that you design for yourself.

That’s right, you will design and determine your own strategy. While others will try to convince you that their methods are right or if you decide to follow someone else’s method you must always remember:

“You and you alone are responsible for your actions.
You and you alone are responsible for any trades that you make.
You and you alone are responsible for doing your own Due Diligence (research).

Don’t be so foolish as to try to blame others if a trade goes sour and you lose money. You should have gotten out of the trade before it dumped you beyond your economic capabilities.

[easy-tweet tweet=”The amount of studying and preparation that you invest will determine your success” user=”KenyaForexFirm”]

Are you a born forex trader?

Online Forex Trading in KenyaOne more note of caution: don’t let your ego get in the way of saying to yourself, “This is not for me.”

All too often, people see dollar signs in their eyes and just won’t admit that trading forex online is not for them.

If you still want to trade in online forex, you might try working with a full service broker for a few years. Some people find that a full service broker satisfies the craving. Remember, learn your limitations. Don’t be afraid to admit to yourself that this is not suited to you.

Perhaps you would be more comfortable joining an investment club in your community. If so, visit Investment Club Central.

Ok, I know, enough already.

Well, the reason we started this site was because we would see, and still do see, people everyday losing everything. We want to make sure that prospective forex traders in Kenya are aware of the risks involved with trading.

Also, for those of you that are really sure that you want to go on, then, at least you are armed with a wealth of resources where you can study, research, practice and chat in your pursuit of learning to trade.

Don’t be foolhardy. Trade with only those funds that you can afford to lose. Don’t use your savings, retirement plans, school tuition, etc. Be cautious, learn to trade on paper first.

Perhaps before going much further, you should read some comments from some of the chat rooms on starting to day trade for a living. As in any job, there are pros and cons. Read between the lines and learn to separate the hype from reality.

Perhaps self study is not for you. Are you one of those people that learn better in a classroom? If so, we can definitely say the Online Trading Academy is one of the best. Their 1 week boot camp is a real good way to jump start your entry into trading in the markets.

The Foreign Exchange (FOREX) market is by far the largest market in the world. The $4 trillion average daily turnover dwarfs the daily turnover of the American stock and bond markets combined.

There are many reasons for the popularity of foreign exchange trading, but among the most important are:

  1. The available margin trading
  2. The 24-hour a day 5 days a week liquidity
  3. And low if any commissions.

Of course many commercial organizations are participating purely due to the currency exposures created by their financial institutions accounts on their import and export activities.

Investing in foreign exchange remains predominantly a domain of the big professional players in the market such as hedge funds, banks and brokers.

Nevertheless, any investor with the necessary knowledge is and complete understanding of this market can benefit from this exciting arena.

What is Currency Trading

Currency trading is done, when a trade off is made against the strength and weakness of two or more opposing currencies. For example the currency trading of the Euro against the US dollar or that of the Japanese Yen.

In order for a Forex trader to be successful in currency trading, he needs to look at the market trends and try to analyse where and in what direction he might think that the market is going to go.

There are many factors which can (and do) contribute to the daily currency trades being made, and these can have almost immediate effects to the currency trader. In the world of online forex  trading such factors could be:

  • The outbreak of war
  • Natural (sometimes called Acts of God, in insurance terminology) disasters such as hurricanes, earthquakes, typhoons
  • Secessions and the breaking of trade blocs as recently witnessed with Britain’s exit from the Euro bloc (Brexit)

All these factors impact directly on the supply and demand of currencies and commodities. For example, war could interfere with the supply and delivery of crude oil. Terror acts also play a role in currency trading. Although, traders today, and after 9/11 tend to take such things more in their stride now, and the currency trading markets usually correct themselves pretty quickly today.

In internet forex trading, an exchange rate represents the value of one currency against that of another. An exchange rate fluctuates over time.

The US dollar is the most traded currency in the world and we can look at the value relative to a third currency, which may be obtained by dividing the US dollar rate for that of another.

For example, if there a 120 Japanese yen to the dollar and 1.2 euros to the dollar, then the number of yen per Euro is 120/1.2 = 100.

The magnitude of numbers is not, by themselves, indicative of the strengths or weaknesses of any particular currency. Meaning that the US dollar could be rebased tomorrow, so that one new dollar was worth one hundred old dollars.

All the numbers, in the table, would be multiplied by one hundred – this does not suggest, however, that all the world’s currencies just got weaker. One way or another, currency trading is almost as old as mankind itself.

What is Margin Trading?

Foreign exchange trading is normally undertaken on the basis of margin trading or gearing.

A relatively small deposit is required in order to control much larger positions in the market. This is possible because when you buy one currency you sell another.

Margin requirements are set by your broker and vary from as little as 1% to 10% margin.

This means that in order to trade 1,000,000 USD on 1 % margin, you need to place just 10,000 USD by way of security.

That same security of 10,000 USD, traded on a 10% margin could control up to 100,000 USD worth of one currency against another currency.

For convenience sake, let’s say that you’re studying the EURO and your trading strategies are telling you that the prices will rise or rally, during a given time frame. You buy the EUR/USD pair or, technically speaking; you will simultaneously buy euros as the base currency and sell dollars.

So, you open up your trading platform, which is usually provided for you free by your online forex broker, and you then see that that the EUR/USD pair’s are trading at EUR/USD: 1.3242/45, for example. It is important to remember that the quote (1.3242) on the left, is the bit or “sell” price, which you obtain, when in USD’s when you sell EUR’s. the quote, on he right (1.3245), is used to obtain the ask or the “buy” price, which is what you have to pay in USD if you buy EUR.

Based on the belief that the market price for the EUR/USD pair will climb, you then enter a “buy position” in the market. Simply put, let’s assume that you’ve bought one lot at 1.3245 and as long as you sell the pair at a higher price; then you’ve made some money.

This seemingly complicated process is handled and calculated for you, via your broker’s software and trading platform. The charts and quotes board software should be in agreement with all currency sides.

Let’s have a look at this type of scenario, involving the USD/JPY currency pair. Remember, selling (“going short”) the currency pair implies selling the first base currency and then buying the second, quote currency. If you believe that the base currency (USD) will go down, relative to the quote (JPY) currency or, equivalently , you believe that the quote (JPY) currency will go up, relative to the (USD) base currency, then you sell or “go short”.

NOTE: while the Profit Calculations, on the Short-sell trade scenario below, may seem somewhat complicated if you’ve never been in the FOREX market before, trust us when we say, “this process is nearly seamless through your broker trade station (software). We’re just showing you this thought-process below so you can SEE how a PROFIT occurs even when. also view Forex Education.

Selling a Currency Pair. The current bid/ask price for USD/JPY is 105.26/105.30, meaning you can buy $1 US for 105.30 Japanese YEN or sell $1 US for 105.26 YEN. Suppose you decide that the US Dollar (USD) is overvalued against the YEN (JPY). To execute this strategy, you would sell Dollars (simultaneously buying YEN), and then wait for the exchange rate to rise.

So you make the trade: selling US $100,000 and purchasing 10,526,000 YEN. (Remember, at 1% margin, your initial margin deposit would be $1,000.). as you expected, USD/JPY falls to 104.26/104.30, meaning you can now buy $1 US for $104.30 Japanese YEN or sell $1 US for 104.26.

Since you’re short dollars (and are long YEN), you must now buy dollars and sell back the YEN to realize any profit. You buy US $100,000 at the current USD/JPY rate of 104.30, and receive 10,430,000 YEN. Since you originally bought(paid for) 10,526,000 YEN, your profit is 96,000 YEN.

To calculate your P&L in terms of US dollars, simply divide 96,000 by the current USD/JPY rate of 104.30. Total profit = US $920.42.

In a nutshell forex trading is really just that – foreign exchange currency trading, which today we know as Forex.

The forex market found popularity in the mid nineties and has gained in sophistication and momentum since then. It has become something of an immeasurable entity, with millions going online to trade on the forex market on an almost daily basis.

As a result, the forex market now trades billions of dollars, pounds, or whatever currency you care to name twenty-four hours a day, and the only time it’s closed is at the weekend.

However, worldwide time differences, mean that the shop, which is forex, is hardly ever closed. Therefore, the forex market is not a fixed, physical, entity.

And here is the difference between online currency trading and a physical trading market place like say, the New York Stock Exchange, The City of London, or the Tokyo Stock Exchange, where the traders are limited to the trading hours of these places.

In contrast, the world of the internet forex trading has no such limitations. The internet market permits one to trade from anywhere there happens to be an Internet connection; be it from home, an Internet cafe, or even from one’s work place, in the office.

There are numerous online currency trading platforms, from which to choose from, and it could be said that each online currency trader, has his/her favourite. For those new to forex trading, however, the choice should be made with care, and it is always advisable to try the various “demo” versions as fully as possible.

It must be said, thought that as well as having the possibility to make and take profit(s) from on-line currency trading, it is also possible to incur losses as well, so be careful and never spend more than you can easily afford to lose.

In Summary

Internet forex trading is purchasing one currency, for another, with the view of making a profit against the weakness of the currency one’s purchasing.

However, because the market can change within the wink of an eye – one has to have an agile mind, confidence, and to possess awareness of world and up to the minute financial affairs.

The online forex market can and will have sharp reactions to terrorist acts, for example and/or acts of God, for example hurricanes, which could upset crude oil supply and delivery.

And, although the markets now readily adjust to such affairs these days; the sudden drops and spikes, as a result, very often could and do, take one by surprise, nevertheless – even the most experienced of traders.

An average of $1.9 trillion is traded on Forex market daily, thus making it the world’s biggest market, and although anyone can now join in on online currency trading, the biggest players – day in day out, are the banks, which range from commercial to investment institutions as well as, registered, futures commission merchants.

Forex trading in Kenya has in the last ten years taken off as a result of penetration pf internet. Unlike the years gone by, almost every Kenyan has access to the internet.

Additionally, the options and trading applications and platforms, now on offer from the abundance of web sites promoting their services – quite literally spoils one for choice.

But what is Forex trading?

Forex trading in its simplest form is trading one currency against another currency. Traders profit from the fluctuations in the value of the different currencies.

The internet forex trading of today can be traced back to the time when man first started trading one or several items in exchange for others. This was and is known as bartering and that’s how things continued until the introduction of money.

The origins of the word money stem from the Latin word, “moneta,” which in turn comes from the Greek temple of “Hera the Moneta.” And this is where money first came from, in the early days of Rome.

Money, in itself, must be a scarce good and many items have been used as money, from naturally scarce metals and minerals, to conch shells and cigarettes, to artificial banknotes; i.e. paper money.

Money is, in its crudest form, a token – an abstraction and perhaps the most popular of that is the form of paper money, in the design of banknotes, which is the most common sign of physical money. Gold and silver retain, however, many of the essential properties of money. An example of cigarettes, being used as “money,” may be found in many prisons, where the usual forms of coins and notes are prohibited, from being held by their inmates.

Bartering, however, has several problems, most notably timing constraints. If you wish to trade fruit for wheat, you can only do this when the fruit and wheat are both available at the same time and place. That may be a very brief time, or it may be never. With an intermediate commodity (whether it be shells, rum, gold, etc.) you can sell your fruit when it is ripe and take the intermediate commodity. You can then use the intermediate commodity to buy wheat when the wheat harvest comes in. Thus the use of money makes all commodities become more liquid.

Forex trading is where (as already mentioned), one currency is bought and sold against the fluctuation rate of that of another, on the international currency exchange market, with the idea of selling one currency against the other for profit. Money has always been traded, through the centuries. However, this was, until the advent of the Internet; usually the exclusive domain of the rich and that of their brokers. Before the Internet, anyone wishing to make a currency exchange, went through an agent, known as a broker, who bought and sold, at what he thought were the best rates of exchange. For this, they extracted a fee, unusually via of a percentage of the total sum of the deal.

The forex trading market I always in a continuous state of flux due to the continuous rates of variability on the foreign markets and this as a direct result of supply and demand and, amongst other things, domestic stocks, and international trade patterns, tendencies, and movements.

Today, with the richness and abundance of the Internet, anyone can become their own forex trader, from the comfort of their own home, start trading and stand a good possibility of making money, after a little trail and experience.

Forex trading, on the Internet really started to take off, in the mid-nineties and at that time there were only a handful of web sites, with (in comparison to today’s usage) a handful of people. These people started trading from home, during the day, and rapidly became known as Day Traders and all of this really got started in the US. For many forex trading even became a way of life, with many giving up their regular jobs, and making money for themselves, in real time and at home.

With the advent of broadband, with good and secure high speed connections becoming a forex trader is not difficult and simply requires a degree of understanding of how the markets work, spotting what the tendencies are and making a trade on what you think is going on in the forex market. Forex trading is no longer the exclusive domain of the rich and their brokers – rather it there to be used by one and all, with a degree of intellect, and an aptitude for spotting market trends, and making a trade on what he or she thinks will happen to that currency next.

For the past few months, I have been running an in-depth experiment on social trading. I have made a few pips here and there, and some losses too. But the greatest thing is that I have learned a lot that I didn’t know.

forex social trading

Social trading is what happens when you combine elements of social media with forex trading. It allows new traders to observe, learn, and copy trades of the most successful traders on a platform.

A few forex companies (such as etoro and Zulutrade) have integrated social trading in their platforms. In return, they have reported a spike in the number new client acquisition and retention. This is because Social trading features keep clients engaged. Imagine trading on a platform that allows you to see what other traders are buying or selling? Would you ever want to leave?

A look at data obtained from Leverate, another popular social trading platform, reveals that social trading significantly reduces the learning curve for beginners and increases their profitability.

In fact, Ronald Mwiti, who was one of our forex training students, advanced to the list of top forex traders on etoro by copying what other traders were doing.

Personally, I first heard of social trading a few years ago, but I never paid that much attention to it.

Why?

Because I have always wanted to do all the hard research and market analysis for myself. That way, if something went wrong with any of my trades, I would only have myself to hold responsible.

Then, I was doing so well using a foolproof trading system that I developed. I was doing so well that I thought I could give myself some time off to indulge in an expensive hobby.

And what other better hobby beats being in social media. Etoro has been referred as the Facebook of Forex Trading, and whoever gave the platform that name was right on point.

So, What is Social Trading?

Social trading is an approach to forex trading that allows you to see and copy what other traders are doing.

Traditionally, successful traders guarded their positions and trading strategies fiercely. In fact, way before the advent of the internet, only a few individuals knew about online forex.

When online trading was popularised a few years ago, the only way you could trade forex was through fundamental or technical analysis. Although there is nothing wrong with technical and fundamental analysis, they are both complicated strategies that confuse most new traders.

But things have gradually changed over the past few years.

forex social trading

The world has slowly but surely become a small village. Social networks have made communicating with friends, relatives, and strangers just a click or a tap away.

You can think of social trading and social forex as the biggest leap in social media for traders.

Such trading combines aspect of social media such as updates, following, and friending, with the core aspects of forex. Unlike with technical or fundamental analysis, trading decisions are crowdsourced within the community.

In social trading, information is generated by other users on the platform, therefore removing the need for newbies to learn complicated analyses strategies. And just like in social media, information is shared in real time, allowing new investors to watch and replicate the trading decisions of experts.

How Does it Work?

To help you understand social trading better, let us take a hypothetical example of what would happen on social media, say Facebook.

If you learn from a Facebook friend of yours that a company is about to release or acquire a new startup, this is certainly bound to skyrocket the shares of that company, which means that the best time to get in on the stock is now.

social trading forex kenya

Still on Facebook, another friend mentions a managerial conflict is brewing in another company. This will certainly dip the shares of the company. If you had bought their shares, you’ll most probably want to dump them now.

I hope you get the picture.

But what you get on Facebook might not be reliable. And Facebook is not specialised for such information.

Now, imagine being on a platform that only shares information on forex trading, in real time?

But the beauty of social trading sites lies not only in the information provided, but also in the fact that you can see the historical trading data of the person providing the information. You can therefore tell how reliable they are.

You can get information on different other places such as Google+, Twitter, forex forums or from a premium forex signal service, but there is no way to prove the legitimacy of such information.

I’d therefore recommend you to use social trading sites, if you intend to trade using third-party generated information.

Getting Started With Social Trading

Sign up on a social trading platform

You’ll need to sign up on a social trading platform. There are quite a number of them that have sprout up in the past few years. However, the most popular and reliable ones included

  1. Etoro
  2. ZuluTrade
  3. Ayondo
  4. Tradeo,
  5. and Copyop.

Following a trader

Once you have signed up in a social trading platform, take time to explore through the different expert profiles on the platform.

If you find a trader that pleases you, and is constantly profitable, you can choose to follow him or her.

This way, you’ll see his trades, comments, and more of his activity at all times. Following an expert helps you learn from him, and if you do not understand what he is saying, you can always ask him to clarify for you.

There is a lot that goes into choosing a trader to follow. However, I’d recommend that you follow a trader who communicates with the community on the platform. By doing this, you’ll be able to learn a lot faster than you’d otherwise do.

Of course, if the community is a large one like the one in etoro, the trader might not be able to answer all the questions and comments. Don’t act like an entitled aristocrat.

Private Messaging

A truly social trading platform puts social interaction features upfront. Many of the social trading platforms that I mentioned above allow users to exchange messages via a private inboxes.

The social features mirror those of Facebook, Twitter, and LinkedIn.

Make use of these social features. There is a reason why they are there. Ask questions where you don’t understand. Like with any other social media platform, the more you are active in there, the more you’ll gain. In short, don’t be an introvert.

Can you make money with social trading?

It is good to be sceptical, especially where money is involved. So, how plausible is it for a beginner trader with zero experience in trading to register on a social trading platform, and make money from just copying other traders?

Yes. Social trading increases your chances of profitability. You’ll be more positioned to make money with social trading than with conventional trading.

However, while social trading is fairly easy to implement, it is not without its drawbacks.

  1. Many of the social trading platforms will allow anyone to become a ‘leader’ and have their trades available for others to copy. So, how do you choose the leader to follow? This is a topic for another day, but in essence, you want to copy traders who have a history of successful trading.
  2. Social trading fosters a culture of laziness and lack of responsibility. To become a successful investor in any market, you have to

Would you like to try a trading on a social trading platform? Open a demo account on etoro.

Is investing in online forex trading worth it? This is one of the most common questions we get asked by fellow Kenyans who want to invest in the forex market, but they are not sure whether it is worth it or not.

There are a few other common questions that we get asked now and then. So, in addition to answering whether investing in forex is worth it, we will also be looking at the other 6 commonly asked questions.

But first things first:

Is Investing in Forex Trading Worth It?

When new traders are asking this question, they actually have a number of questions vested in one:

  1. Should I spend time learning how to trade the forex market?
  2. Is online forex trading a promising venture, or is it a waste of time and money?
  3. Can one become wealthy (read millionaire) by trading forex?

These are all worthy questions. You really need to know what you are getting into before you start trading. You need to know whether it is worth to spend your time and money learning how to trade forex or whether you should look for another means of investment.

[easy-tweet tweet=”Is investing in online forex trading really worth it?” user=”kenyaforexfirm” hashtags=”#KenyaForexFirm”]

If you are asking this question, you probably fall into one of two categories of Kenyans:

  • You know that you can make money trading forex. You have seen your friends or family become rich by simply investing in forex. But you have doubts as to whether you can personally do it.

The short answer here is simple. If others can do it, you also can. You don’t have to be a genius or have high academic qualifications. You only need to be dedicated, disciplined, and serious.

  • The second category consists of those who have a slight clue that they can make money trading forex, but they don’t know just how much they can rake in. They probably don’t have anyone they can look up to who’s been trading forex successfully.

If you fall under this category, you probably have a few comparisons to make, and you are looking for an investment that will give you the highest return on investment in the shortest time possible.

I like to use the example of a doctor while explaining this. If you are to become a doctor, which is one of the highest paying jobs in Kenya, you’ll need to spend at least 7 years learning. After you’ve graduated, your starting salary would be around 500,000/=, and that is if you are highly specialized. To earn this much, you’ll also be required to put in at least 8 hours of work per day.

Average high school teachers in Kenya make about 60K per month. Bank tellers make about 30K per month, and a janitor will take in at most 20K at the end of the month.

Now, let us look at how much you can make as a forex trader.

The earnings of forex traders in Kenya vary greatly. Each trader’s earning will depend on factors such as their trading style and their account size. However, once one learns how to trade forex and starts trading profitably, there will be no limit to the amount of money they can make per month.

Say for instance, you open a forex trading account with a deposit of $2000 (200,000 KSh), and you consistently make a profit of 20% per month. After three years, this account will have grown to $1,417,603.75 (that’s more than 141 Million Kenya Shillings!)

If you start withdrawing your monthly profits after your account has grown this much, you’ll have yourself a month income of $283,520.75 (Ksh 28,352,075- yes, that is 28 million Kenya Shillings.)  A lot of forex traders in Kenya have been able to achieve this, and so can you.

But Can You Really Make 20% Per Month?

I am going to tell you something that I always avoid saying. The way most forex traders trade, making 20% per month is a piece of cake. I don’t usually say this, lest I be accused of misleading people. But the truth is, you can make more than 20% per month trading online forex.

[easy-tweet tweet=”You can make 20% per month trading forex” user=”demagnify” hashtags=”#KenyaForexFirm”]

So, Is Forex Trading Worth It?

Compared to other jobs, an investment in forex trading is a worthy investment. It has less hassles, stress, and risk. Once you become a profitable forex trader, all you have to do is check a few charts per day. You’ll literally be spending less than 60 minutes on your computer per day, and making more than you’d have made on an 8-5 job.

Risk Disclaimer

It’d be imprudent for us to end this article without a risk disclaimer. Forex Trading is profitable, yes, but if you do not follow the right track, it is also the easiest and fastest way to burn your money. You can lose a lot of money in this business. You can even lose all that you have- I’ve seen this happen to a few fellow Kenya traders.

Don’t rush after wealth and riches. Aim to understand the ins and outs of the market first, and everything else shall follow. If you liked this article, kindly share and comment.

 

 

The past few months have seen a spike in the number of international forexpreneurs who are holding workshops in Kenya. First there was Gregg, and then there is Edward, who is set to hold a free one-day forex training workshop on January 30, in Nairobi.

While some of these forex mentors have a genuine need to help emerging traders get off their feet, most are only looking to generate sales for their expensive forex trading software and robots, which brings me to the question, Can robots make money in the forex market?

What are Forex Robots?

We don’t want to run ahead of ourselves. If you are new to the forex market, you must wonder what forex robots are? Are they a set of cybernetic humanoids that you buy and place at your desk to monitor, analyze, and place trades for you?

No. They are not even close to that. A forex robot is a software. A software that has been programmed with instructions on what to do if certain conditions are met or are not met.

These software are designed to monitor, analyze, and actually open and close trades on your behalf.

Do they work?

Hundreds of forex robots aka Expert Advisors are released into the market every month, and as if that was not enough developers are at work creating more. Some are free. Others will cost you the price of opening a Standard Forex Trading account with one of the prime time forex brokers. Each one of the forex robots claim to be better than the others. It is a wild, wild world, if you ask me.

It is utterly confusing for a new forex trader to choose one over the other. Usually, newbies will end up buying more than one software, and hope to sit back, relax, and watch their trading accounts grow astronomically.

But they are usually disappointed.

The forex software does not perform as well as the vendor said it would perform. It is actually losing more trades than you’d lose trading manually!

It does not take long for the newbie to realize that they’ve been taken for a ride! If s/he is critical enough, they will realize that more money is made selling the forex robot than the robots are making. After a while, the trader starts wondering whether there are any forex robots that can actually make money, and if there is one, where do they find it?

What’s Our Stand?

We believe that some robots can make money in the forex market, some of the time. There are few critical factors to consider if you want to go the robots way.

Some robots will be released into the market with a lot of fanfare. However, their performance starts to dwindle as the market changes. Look for a software that is periodically updated. Don’t get shy to ask the vendor how often their fancy forex robots are updated.

However, regardless of how good a forex robot is, you cannot leave your trading station unmanned.

Have you had experience trading forex with EA’s? What’s your opinion about automated trading? Kindly leave a comment.

Forex traders in Kenya, and elsewhere in the world, approach the forex market from two broad perspectives: either through technical analysis or through fundamental analysis. As a beginner, you may spend a lot of time trying to figure out which is the best approach to trading. The truth of the matter is that none is better than the other.

History is full of traders who have made bank by employing any of the above approaches.

In his book, Market Wizards, Jack Schwarger interviews two prominent traders, Ed Seykota and Jim Rogers. Rogers is a diehard fundamental trader who believes that no one can make a living trading forex using technical analysis. He goes ahead to say that he has, in fact, never met a rich technical trader.

Seykota shares the opposite view. According to Seykota, he had always been a poor trader when he relied in fundamental analysis. He insists that his fortune changed when he switched to technical trading.

As stated earlier, none is better than the other. You only need an approach that suits you, stick to it and make bank.

In this article, I am going to disect the basics of fundamental trading, just in case you decide that you decide you want to be a fundamental trader.

What is Fundamental Analysis?

Fundamental analysis is a way of studying a security in order to deternine its intrinsic value by analyzing a host of financial data.

In the forex exchange market, a security would be a currency. Fundamental analysts are always analyzing emerging financial data from a country in order to determine the value of the country’s currency.

There are several important economic indicators that every fundamental forex trader should understand. Fluctuations and variatons in these data will make the currecy value of a country to fall or rise.

Interest Rates

Interest rates are the most important driving force of the value of a country’s currency. Most central banks announce the interests rates every single month. Fundamental traders keenly watch these announcements to decide how a currency will be affected.

In general, Central Banks will manipulate the interest rates in order to control the amount of money in circulation. If the Central Bank wants to increase the amount of money in circulation, it lowers the interests, and conversely increases the interest rates when it wants to decrease the supply of its currency in the economy.

Gross Domestic Product (GDP)

GDP is the indicator of how fast a country’s economy is growing. Every country’s Central Bank has expectations of how much the economy is expected to grow every year. When the Gross Domestic Product falls below this expectation, currency values tend to sink while a growth that hits the expected growth rates or goes above raises the value of the currency.

Inflation

Inflation destroys the purchasing power of a country’s currency, and therefore tends to devalue the currency. It is generally expected that a currency will suffer inflation of 2-3% annually. However, if the inflation rises beyond the Central Bank’s expectations, the Central Bank will increase the interest rates on the currency.

Unemployment

Without people, we wouldn’t have any economic growth. Employment and unemployment are the backbone of every country’s economic growth. When the level of unemployment in a country rises, it tends to have a devastating effects on the economy. To minimize the effects of unemployment on the economy, the Central Banks will reduce the interest rates in an attempt to increase the supply of money in the economy and stimulate economic growth.

Consumer Demand

As we have already stated, people are the ones that drive economic growth. Healthy consumer demand lies at the center of economic growth. When consumers are able to demand goods and services, the economy tends to grow. When the consumers’ demanding power is decreased, the economy tends to stagnate.

Have you ever come across a person who asks this question? Maybe you haven’t because you are also new to online forex trading. You are probably also looking for a person to guide you.

But if you were in my position, this type of questions has everything skewed up. I normally do not answer such questions, but if I could, I would have only one answer for such people: “What…? You mean you are a newbie? Well, go and invest your money elsewhere. You will never become a profitable forex trader!”

Asking questions like this one is utter nonsense.

You may call me rude, pessimistic or arrogant, but such a trader will lose. Yes, you will lose, if you are the kind of person who asks such questions.

It is obvious that such a person has not bothered him/herself to even push a single keyboard key to find out about online forex trading.

Such a person does not want to tire their brain doing research for themselves and gathering information about online forex trading.

Such a person does not consider other people’s time to be valuable. How can s/he expects other people to be the ones to answer these basic questions about forex trading?

And this is the sole reason why they will lose. A person with such an attitude and ‘exceptional’ research knowledge may never become a profitable forex trader.

An investor is a die-hard researcher at heart. An investor keeps an open mind and has the ability to find all the answers by him/herself.

Before you ask such dumb questions, remember that Google is your best friend. Type your question on the search engines, and 10/10 times, the answer will be right there in the search engine results.

Every successful forex trader needs a set of skills and characteristics. Some of these skills we can acquire through training while others we can only develop from constant practice, which is why a demo account comes handy.

The ability to understand the fundamentals of a currency and the ability to point the direction of the trend, for instance, are some of the key skills that online forex trading demands, but none of them is as important as developing the proper trading psychology and discipline.

What’s it About Trading Discipline That is so Important?

If you ask me, or any other sober forex trader in Kenya, they will tell you that the psychological aspect of trading is the most important and defining part of trading. Forget about a fancy trading system or a million-dollar forex trading course, if your psychological game is not intact, you are headed for doom.

A s a forex trader you will always be entering and exiting trades, sometimes on very short notice. The market will constantly force you to make snap decisions. To operate profitably in such circumstances, you will need an incredible mental game, and by extension, discipline, so that you are able to stick to your plan.

This is what we call self-discipline.

According to Mark Douglas, the author of Trading in the Zone, self-discipline is “a mental technique to redirect our focus of attention to the object of our goal or desire, when that goal or desire conflicts with some other component of our mental environment.”

In short, self-discipline is the ability to develop a mental framework that lets you stay focused and motivated in spite of challenges, losses, mistakes, and conflicts of interest. Particularly, you will need to teach yourself how to get rid of the negative feeling that is associated with losses and setbacks.

Unfortunately, this is easier said than done. When faced by the real market risk, many traders abandon their trading plans and succumb to emotional trading. Greed, fear and euphoria can get the best of you and ruin your plans.

Things would have been different if self-discipline was a trait that you were born with. Unfortunately, it is not.

Many traders find it difficult to develop steady forex trading discipline, which is why automated forex trading software has become so common. But trust me, it is possible to develop the right trading discipline. Being disciplined will help you become a more profitable trader in the long run, even if you decide to use automated trading software in the future.

Here is how you can build your trading discipline:

Developing Clear Trading Goals

Setting clear trading goals and understanding the motivation behind your trading is a good place to begin. Ask yourself, “Why do I want to trade forex? What do I want to gain and achieve from investing in the forex market?”

Sitting in front of your computer, taking trades and hoping for the best is not enough. You must have a target in mind. What are you aiming to achieve by taking that particular trade? How many pips do you hope to gain?

Many beginner forex traders get into trading because they feel it is a get-rich channel. They set unrealistic goals and pay a hefty price for that. Don’t just set a bunch of crappy goals because I told you to do so. Your goals need to be realistic. It is important that you set challenging but achievable goals to avoid frustrations that may result from not hitting your target.

Without a goal in mind, it is possible to let the discouragement of being new to trading defeat your desire to learn.

Here is something that you must keep in mind as you venture into forex trading; every endeavor that you set to undertake will always be difficult in the beginning. This hold true more in online forex trading. Chances are that you will suffer many losses. This part will be disheartening, and if you are not disciplined, chances are that you will give up trading.

Maintaining Focus on What Needs to Be Done

Setting clear and realistic goals puts you one step closer to becoming a successful and disciplined forex trader. It is easier to stay focused on your goals, but that assumes that you actually get off your ass and do what needs to be done i.e. trading. For instance, if your goal is to let profits run and cutting your losses short, you must start putting trailing stops to your trades.

On the contrary, if you did not set clear trading goals, you’ll probably waste a lot of time trying to figure out what needs to be done. In return, this makes you more susceptible to your emotions.

Keeping a Trading Journal

Keeping a trading journal is an easy way to track your past trades. It can also help you identify areas that you need to work on. I also find that a trading journal helps me avoid making impromptu trades since I hold myself accountable for every trade that I take.

After a streak of losses, many traders, I included, start to take trades that are not in their plan. By recording your trades in a journal, you will identify this behavior and work to correct it.

A trading journal is also a great way to keep yourself motivated. It is unavoidable that you will face a lot of obstacles along the way. There will be a lot of times when you will feel discouraged and ready to give up. This is where your self-discipline will be put to the test. In order to succeed, your resolve to push on must be greater than the temptation to give up.

When you have reached your trading goals, take some time to refer back to your trading journal. What were the trades that you took that led to your target. What kind of analysis led you to hit your target? Can you replicate it on your future trades?