What is Forex?

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.

Demo and real accounts. Why a demo account? What’s the difference?

For every experienced and successful forex trader, there is a plethora of new and/or inexperienced would-be traders out there. We strongly recommend, especially for the novice trader, that you start by using a demo account.

Why?

Simply because it eases you into the world of real forex trading without financial risk to yourself, because you are, in effect, using an entirely virtual money account.

With a demo account it does not matter to you nor anyone else if you happen to lose a fortune on your first trade. You can always open another demo account or ask your broker to top up the accounnt.

Moreover, it gives you time (over how ever long-a-period you feel you need) time to play with all the brokers facilities and become orientated as to how online forex trading really works and can, in fact, work for you – to your advantage.

A demo also gives you time to realise what type of a trader you are and allows you to develop your own trading strategy. In a nutshell, it gives you the time to develop your wings.

Finally, whether or not one is seasoned trader, when using a new Forex site, for the first time, it is our strong recommendation that one should always become acquainted with how each and every Forex site works, by using the site’s demo trading platform – in order to understand exactly how the site’s software works.

What’s the difference?

Simply put, apart from (as mentioned above) you are using virtual money the difference is virtually unnoticeable – all the features are exactly the same, as in the real account.

The only difference being is that your PC is your dealer, which will always open or close your positions automatically – in accordance with the current market rates. In real trading, it is done manually, by one of our traders.

  1. In demo trading, with the benefit of no risk, should you use up your initial credit, you can easily top this up. Simply go to our user zone with the help of your account and password (Section “Demo Account”).
  2. There are almost no delays, between your inquiry and offer of the exchange to open or close a position. However, in real trading there could be delays of 30-40 seconds.
  3. Rubbish quotes (these are single bounces for more than 30 or more pips from current quotes) are accepted by the PC as real ones on a demo account – participating in the quote system. In a live account they are ignored.
  4. With a real account, it could happen that there is market movement, whilst you are in the middle of closing your position, in line with a certain rate. Should this be the case, your order might not be fulfilled. Hence you will be in receipt of an order to close the position at another (current) market rate.
  5. We believe that there are or can differences, in psychological make up, when a player is using virtual money and real money. It is important not to get carried away, when using a demo account, and not to forget that you are there to study and make good on your real objective – of preparing for the day, when you decide you want to try and spread your wings and fly and become a fully-fledged trader; with the objective of using real (your) money, with the sole objective of making more money, via way of return.
  6. You should be aware of the fact that the market is always moving and sometimes very quickly. An exchange rate are by nature, very changeable and subject to world events and breaking news and it is possible for rates to leap either up or down by several pips on breaking news stories. The speed at which you enter your order into the system may influence the rate according to which you can enter the market. This is one of the many factors that influence the results of your trading.

We strongly advice that you learn, develop and trade the market using a planned forex trading strategy- one that works the best for you.

Remember, there is no one plan which fits all. We are all individuals, and what might work rather well for one person, does not mean that it will work well with you. You should also consider what are the up’s and downs of the loss you can stand.

In essence we cannot stress enough, the importance of having a plan and following that plan. This does, however, call for a rather ruthless approach and it is all too easy, for the human emotion to kick in.

However, the other thing is that with real trading, you are using real money and it could be those very human emotions, which could also stop you from making a good kill. Therefore you need to be able to temper your emotions with the cold realisation of the hard facts of what all the indicators/signals are telling you.

Our demo version will give you all the tools and the time necessary, preparing you for the day when you will be ready to take your first flight, into the real world of Forex.

We wish you good luck. As usual, you should always be aware that there is the potential for loss as well as very attractive gain.

Breakout Identified in EURUSD

Signal ID: 42290
Time Issued: Monday, 08 February 2016 16:12:15 GMT
Status: open
Entry: 1.11577 – 1.12034
Limit: 1.12685
Stop Loss: 1.10856

The Breakout Opportunities system has just bought EURUSD at 1.11817.

The system recommends entering this trade at any price between 1.11577 and 1.12034. The signal was issued because the EURUSD has broken its 24-hour high while our Speculative Sentiment Index was at -1.6938, suggesting that the EURUSD may have further to rise.

A stop loss has been set at the 24-hour low of 1.10856 and a profit target has been set at the 1 Day ATR level at 1.12685. The system will move the stop to the next 24-hour low every time that 24-hour low is higher than the previous 24-hour low.

Breakout Opportunities is a breakout strategy that aims to catch the significant moves that typically happen when currencies break through technical support or resistance. The SSI Breakout strategy tends to work well in volatile market conditions.

Hey, I am a Beginner. How Do I Invest in Online Forex Trading in Kenya?

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.

5 Incredible Tips That You Must Master to Be Successful in Forex Trading in Kenya

There are two type of investors in the forex market. Those who learn all there is to learn about the market, and those who approach forex trading as if it was a gamble. They do not take their time to learn. To them, investing in forex is not so much unlike spinning the roulette. They click blindly on the charts and wait for Lady Luck to bless them with profits.

Wrong approach. Traders who do not learn end up making massive losses.

If you want to separate yourself from this sad group of ‘trader’s, you should take your time to learn how the forex market operates.

Here are 12 most important things that you should take time to learn:

1. Develop Your Trading Plan

By failing to plan, you are planning to fail- Benjamin Franklin

I’ll illustrate the importance of having a trading plan with situations that I encounter almost on a daily basis.

When new traders discover an uptrend in the market, they usually ask something like, “ The EUR/USD is on an uptrend, where should I enter the market?” My reply is usually, “What amount of risk/reward ratio are you willing to place on a trade?”

This reply catches them by surprise. Most forex traders in Kenya concentrate so much on being right and forget that they could be wrong. The market could go against you or it could hit a top and turn right back.

Without a trading plan, it means that you do not know what to do not only if a trade goes against you, but also when a trade goes your way. Big profits on paper could turn into massive loses when you do not have a trading plan.

Here are a few important points that I use when developing a trading plan. Feel free to borrow from the list when you are developing your own trading plan:

  • I always make sure that I know where and how to enter the market.
  • I always know what amount of money I can put to risk on any particular trade
  • I know when to leave if the market does not go my way
  • I know how much profit I am expecting from every trade if I am right
  • I always protect my profits by placing a trailing stop loss on my orders

These are just but a few of the things that go into developing a trading plan.

2. Have an Aggressive Money Management Strategy

Money management is one of the most important aspects of online forex trading. It is the one thing that will make or break your career as a forex trader. Unfortunately, a lot of traders enter into trades without taking money management into consideration.

If you are serious about trading, you have to learn how to manage your money.

Good money management starts way before you open a live trading account. It should start even before you are trading on a demo account. Good money management should start when you decide that you want to invest in online forex trading.

How, you ask?

Suppose that you had $20,000 that you have decided is a good starting capital for your online forex portfolio, would you put all the money on your forex trading account? You’d be putting yourself at an aggravated risk by doing so. What happens next if you lose all the money in the account for whichever reason? What if your forex broker goes broke bankrupt, closes the company and never pays back your money?

Or what happens if you accidentally take a 20 lots position and forget to set a stop loss?

If $20,000 is all you have to start trading, you should consider opening an account with a maximum of $1000. You can always inject more money into the account as you see necessary or when you have gained substantial trading experience.

The second most important factor to consider when managing your money is leverage. While it is possible to get accounts with leverage as high as 1:500, a huge leverage is a double-edge sword and usually a reserve of seasoned and aggressive forex traders in Kenya.

As a general rule of thumb, you should never risk more than 2% of your account in any one single trade.

Learning the art and science of money management will determine how you prosper in forex.

3. Make use of stop loss orders

With so much activity going in the forex market and so many a facets of setting up a trade, it is sometimes possible to forget the small things like setting protective stop loss orders on your trades. Apart from mitigating your losses, a stop loss order also lifts the burden of monitoring your trades from you. With proper stop loss orders, you can set up your trades and move on to other things, leaving your trade to play.

What is a stop loss order?

Trading online forex with your real hard earned cash is a serious business, and it should be taken seriously. As such, you should take time to familiarize yourself with the different trade management tools that you have at your disposal.

A stop loss order is an order that you place on your active trades to prevent further losses. The stop loss closes your position in case the market moves against you and reaches your specified level of acceptable loss.

As an example, if you decide to go long on the USD/JPY at 109.58, you could set a stop loss at 106.58. If the market goes against you and reaches this level, your trade would automatically be closed, preventing further losses.

Most importantly, a stop loss order eliminates one of the hugest barriers to trading: emotions. Many traders tend to fall in love with their trades, believing that the trades will turn around. They hold on losing positions for far too long, and pay dearly for it.

To become a successful forex trader, you have to learn not only how to place stop loss orders on your open positions, but also where to place the stop loss orders. To tight of a stop loss means that your stop loss will be hit by the slightest drawdowns or noise in the market, while spaced out stop loss orders could lead to insufferable losses on your account. The art of the stop loss is one of the main lessons we teach traders during our paid training sessions.

4. Close your profit-making trades at the right time

Closely related to the art of putting stop losses on your trades is the art of taking your profits at the right time. One of the biggest blunders among new forex traders is that they take tiny profits too soon but allow their losing trades run.

When is the right time to take your profits?

The right time to take your profits will be dictated by your trading plan. Before you enter your trade, you should have a predetermined entry and exit points. This reduces the impact of emotions on your trades.

Your trading style also determines when you should take your profits. For scalpers, taking profits as soon as possible is an excellent strategy, but if you are a swing trader, you might want to let your trades run for longer.

5. Exercise Proper Trading Discipline

A lot of forex traders in Kenya end up burning their accounts not because they were not trained properly in the forex course, but because they lack the proper trading discipline. It is hard to become a successful forex trader unless you learn how to be disciplined, how to stick you your trading plan and how to substract emotions from trading.

One of the best exercises to help you develop stellar discipline is to watch the markets the whole day without taking a trade, even when you have an excellent entry set up. Repeat this several times every month and you should be on your way to becoming the next successful forex trader in Kenya.