Introduction to Foreign

Exchange Trading
The world’s biggest market at your desk

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 Risk Disclaimer
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Contents
Foreign Exchange (Forex) Basics 4

Why trade foreign currency? 6

How foreign exchange prices work 8

How trading works 10

Your trading plan 14

Before you start 16

Further information 18

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 Foreign Exchange
(Forex) Basics
What is Forex? Who Trades Forex?

Forex or FX is the common abbreviation for Foreign The market is basically comprised of four different
Exchange. If you’ve ever travelled to another country, groups. At the very top of the Forex market ladder
you probably had to find a currency exchange booth is the interbank market. Composed of the largest
at the airport, and then exchange the money you banks of the World, and some smaller banks, the
have in your wallet or purse into the currency of the participants of this market trade directly with
country you are visiting. When you do this, you have each other or electronically through the Electronic
essentially participated in the Forex market – you Brokering Services (EBS) or the Thomson Reuters
have exchanged one currency for another. Or in Spot Matching system. The competition between the
Forex trading terms, assuming you are an Australian two companies - the EBS and the Thomson Reuters
visiting America, you’ve sold Aussie dollars and Spot Matching system - is fierce.
bought United States dollars.
All the banks that are part of the interbank market
Before you fly back home, you stop by the currency can see the rates that each other is offering, but
exchange booth to exchange the United States this doesn’t mean that just anyone can trade Forex
Dollars that you have left over and notice the at those prices. The rates will be largely dependent
exchange rates have changed. It’s these changes in on the established credit relationship between the
the exchange rates that allow you to make money in trading parties. A few of the largest banks that
the foreign exchange market. make up the interbank market include UBS, Barclays
Capital, Deutsche Bank, and Citigroup. Some
Foreign exchange is the World’s largest and governments and their central banks, such as the
most active market. It’s where banks and dealers European Central Bank, the Bank of England, and
exchange large amounts of foreign currency, mostly the Federal Reserve, are regularly involved in the
to facilitate trade and investment between countries. interbank market too.
It’s open all day and night - except at the weekends –
and its volume amounts to about $5 trillion a day. Next on the Forex ladder are the smaller
governments, hedge funds, large corporations,
Compared to the measly $4-5 billion a day volume of retail market makers, and retail ECNs. Since
the Australian Stock Exchange or even the relatively these institutions do not always have close credit
small $22 billion a day volume of the New York Stock relationships with the participants of the interbank
Exchange, the foreign exchange market is absolutely market, they have to do their transactions through
huge. That massive $5 trillion number covers the commercial banks. This means that their rates are
entire global foreign exchange market. slightly higher and more expensive than those who
are participants in the interbank market.

Companies take part in the foreign exchange market

for the purpose of doing business. For instance,
Apple must first exchange its U.S. dollars for the
Japanese yen when purchasing electronic parts
from Japan for their products. Since the volume they
trade is much smaller than those in the interbank

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market, this type of market player typically deals or night. However it is not a 24/7 market because it
with commercial banks for their transactions. Just does shut down on weekends. 24/5 would be more
like companies, smaller national governments accurate. The Forex market can be broken up into
participate in the Forex market for their operations, four major trading sessions: the Sydney session, the
international trade payments, and handling their Tokyo session, the London session, and, the New
foreign exchange reserves. York session.

At the bottom of the Forex ladder are the retail Usually, the best time to trade the Forex market is
traders. It used to be very hard for retail traders to when large volumes of currencies are being traded.
engage in the Forex market but, thanks to the advent At those hours, traders can take full advantage of the
of the Internet, electronic trading platforms, and liquidity in Forex markets. Since the Forex market
retail brokers, the difficult barriers to entry in Forex trades 24 hours a day, the greatest liquidity is when
trading have been removed. several countries are trading at the same time. In
each time zone across the world, Forex markets
operate from 8am to 4pm. So, to take advantage of
heavy trading volume, it’s worthwhile to determine
When Can You Trade Forex?
when Forex market hours in different countries
overlap. When currencies are the most active, that’s
The Forex market hours stretch from Monday
when traders have more trading opportunities.
morning in Sydney, Australia to Friday afternoon
in New York. During that time the market is open
somewhere around the globe at all hours of the day

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 Why trade foreign currency?
Liquidity Trade at home, from a café,
or on holiday
Because the foreign exchange market is global
and includes all of the World’s largest banks, you One of the things that makes foreign exchange
can be sure that there’s always someone to trade trading so popular is that markets are open
with – unlike the share market where you might 24 hours a day. This means you can trade after
want to buy a particular share, but no one wants work, early in the morning, during lunch or even
to sell (or vice versa). This ability to trade at any overnight – whenever it suits you. Further, you can
time is called liquidity. High liquidity means there is trade directly from your desk, or even while sitting in
always someone to trade with, and there is little risk your favouring café with your laptop and a wireless
of a single trader or entity being able to move the internet connection. Some traders take it a step
price, as can happen in other markets, like the stock further by trading on their mobile phones. Foreign
market. exchange providers give you more or less direct
access to the markets. This means you can do your
analysis, make your trading decisions, set a stop-
Comprehensible loss order to help protect yourself against big losses,
and execute the trade without ever needing more
The learning curve in the share market is steep and than your computer and a broadband connection
the amount of analysis required can be daunting.
You need to understand dividends, price-earnings
ratios, and how to assess the quality of corporate
Transaction costs
management before deciding which shares are likely
to move in which direction. By comparison, foreign In the forex market, trading directly or through
exchange is relatively straightforward. You take a derivatives, the cost of trading currencies is
currency you’re familiar with (say, the Australian determined by “the spread”, which is the difference
dollar) and look at its value against another currency. between the price at which traders can buy a
There are only a few major currencies that lend particular currency pair and the price at which they
themselves to Forex trading. You need to learn what can sell. This spread can vary from time to time,
influences movements in a currency pair and, just depending on the market conditions, and is different
as importantly, how to use technical analysis to depending on the currency pair and which provider
improve your chances of success. you use.

For most trading purposes, the cost of each trade

is not vitally important to its success. An exception
applies to some intraday strategies the aim to
capture small profits. On a trade size of $10,000,
for which you need an initial margin of $500, the

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spread will usually average around three pips or To show you the kind of returns this level of leverage
approximately $3. The spread can vary from as low can offer, suppose you buy Australian dollars and
as 0.5 pips for high volume major currencies to the Australian dollar’s value rises from $US 1.00 to
five or more pips for minor currencies. If you hold $US 1.02. A currency can move by this amount, or
a position for longer than 24 hours, there may be a more, in a matter of a few hours when markets are
small interest charge depending on the interest rate moving swiftly. It represents a change of 2.2 percent,
differentials between the two currencies. At other but since you have leverage of 20:1, your profit on
times, you may be paid a small amount of interest the upward move will be 20 times 2.2, or 44 percent
on your position. The interest amount is credited or based on the initial amount you pay. However, if the
debited as your position is rolled over to the next day, market moves against you, you can occur increased
and is made so that you can keep the position open losses. I.E If the 2.2 percent changed mentioned
without actually taking delivery of the currency. above was in the opposite direction of your trade,
your losses on the downward movement would be
20 times 2.2 or -44%. With this amount of leverage,
even very small moves in the value of a currency can
Leverage
result in quite large gains and losses. You will need
to learn the basic rules of risk management to trade
The foreign exchange market offers the availability
safety in the market and how to place stop-loss as
to open a large position in the market for a small
well as stop-limit orders (that is, orders to close a
upfront cost, known as the initial margin. This is
position when the price reaches a set level). You will
called leverage. To demonstrate an example of
need to take some time to lean about trading plans,
leverage, a trader would be able to open a trade
risk to reward ratios, money management, position
worth $1000 using only $50 of their own funds
sizing, fundamental analysis and technical analysis
and levering the remaining $950 from the broker, in
before you begin.
essence using a 20:1 leverage.

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 How foreign exchange
prices work
Currency pairs Most currencies (Japanese yen, Swiss francs, and
Canadian dollars to name a few) are quoted with the
Each currency has a universal three-letter code (the US dollar as the base currency, that is, pricing the US
ISO code) that all foreign exchange participants use currency in terms of its value in the other currency,
to identify it. The code for Australian dollar is AUD but there are four notable exceptions: British Pounds
and the US dollar is USD. Currencies are always (GBP), Euros(EUR), Australian dollars (AUD) and
quoted in pairs, such as AUD/USD, GBP/USD or New Zealand dollars (NZD). These are quoted the
USD/ JPY. The reason they are quoted in pairs is other way around. Although buying British pounds
because in every foreign exchange transaction, you is the same as selling US dollars, if you always
are simultaneously buying one currency and selling think in terms of how the base currency will move
another. The first listed currency to the left of the when placing your trade, you are less likely to get
slash (“/”) is known as the base currency, while the confused.
second one on the right is called the counter or
quote currency.

Major, Minor
When buying, the exchange rate tells you how much
you have to pay in units of the quote currency to and Commodity Currencies
buy one unit of the base currency. When selling, the
The term “major currencies” is used to refer to the
exchange rate tells you how many units of the quote
seven most liquid (most actively traded) currencies
currency you get for selling one unit of the base
in the market. These are the US dollar (USD), British
currency. The base currency is the “basis” for the buy
pound (GBP), Eurozone euro (EUR), Japanese yen
or the sell. If you buy EUR/USD this simply means
(JPY), Swiss franc (CHF), Canadian dollar (CAD),
that you are buying the base currency, or Euros,
and Australian dollar (AUD). Minor currencies are all
and that you are simultaneously selling the quote
currencies other than the majors.
currency, or U.S Dollars.

Commodity currencies are those whose home

You would buy the pair if you believe the base
countries rely heavily on the commodity exports
currency will appreciate (gain value) relative to the
for a major share of their expert income. According
quote currency. You would sell the pair if you think
to IMF studies, there are 58 countries which could
the base currency will depreciate (lose value) relative
be included here, but the most active ones are the
to the quote currency. When you see a quote that
Australian dollar, Canadian dollar and the New
looks like this: AUD/USD 0.9836 you know that what
Zealand dollar.
is being valued (the base currency) is one Australian
dollar ($A1) and that its value is being given in terms
The term major currency pairs often specifically
of US dollars (the counter currency).
refers to any pairs that include the USD, while a pair
that doesn’t include the USD is a cross currency.
Major currency pairs are the seven most liquid pairs:
EUR/USD, USD/JPY, USD/CHF, GBP/USD, AUD/USD,
NZD/USD and USD/CAD.

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Long/Short, Bid/Ask Suppose the Australian dollar is going up in value
and rises from US 101.05 cents to US 101.06c. In the
First, you should determine whether you want to buy Forex market, this is expressed as a move from $US
or sell. If you want to buy (which actually means buy 1.0105 to $US 1.0106. This is the smallest move that
the base currency and sell the quote currency) you a currency can make against another and is known
want the base currency to rise in value and then you as one pip.
would sell it back at a higher price. In trader’s talk, There are pro accounts available that quote
this is called “going long” or taking a “long position.” currency pairs beyond the standard “4 and 2”
Just remember: long = buy. decimalplacesto”5 and 3” decimal places. The yare
quoting fractional PIPS, also called “pipettes.” For
If you want to sell (which actually means sell the instance, if GBP/USDmovesfrom1.51542to1.51543,
base currency and buy the quote currency), you want that .00001 USD move higher is one PIPETTE.
the base currency to fall in value and then you would
buy it back at a lower price. This is called” going
short” or taking a “short position”. Just remember: Standard, Mini and Micro contract
short = sell.
In the spot forex market, the typical size of a trade
is the equivalent of $US100,000, where the base
The bid is the price at which your broker is willing
currency is US dollars. This typical trade unit size
to buy the base currency in exchange for the quote
is known as a standard lot or standard contract.
currency. This means the bid is the best available
For Australian dollars, the base currency is the
price at which you (the trader) will sell to the market.
Australian dollar itself and the size of a deal is
The ask is the price at which your broker will sell the
$100,000 worth of the counter currency. At this
base currency in exchange for the quote currency.
contract size, an initial margin of $1000 is required
This means the ask price is the best available price
and the value of a one-pip move is $US10 against
at which you will buy from the market. Another word
that currency.
for ask is the offer price. In foreign exchange terms,
the difference between the bid and the ask price is
Many forex trading providers offer smaller contract
known as the spread. Other names for the same
sizes. Admirals offers mini contracts where you can
thing are the bid-ask spread or buy-sell spread.
open a trade of 0.01 lots on the Trade.MT5 account
which is the equivalent of just $1000 and having
Pips & Pipettes price increments of 0.00001. This allows traders
with small accounts to enter into trades without
The unit of measurement to express the change in exceeding their maximum loss limits, which are
value between two currencies is called a “Pip.” If related to position size. A one-pip move at this lot is
EUR/USD moves from 1.2241 to 1.2242, that .0001 equal to US10 against that currency.
USD rise in value is one PIP. A pip is usually the last
decimal place of a quotation. Most pairs go out to
4 decimal places, but there are some exceptions,
like Japanese Yen pairs (they go out to two decimal
places).

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 How FX trading works
Spot Foreign exchange and CFDs Example Forex trade

Most foreign exchange trading in Australia occurs Here’s an example of a profitable trade in the forex
in the spot market via instruments called currency market. Suppose you think the Australian dollar is
contracts for difference (CFDs), but there are other likely to rise against the US dollar because Australian
ways to trade. Among them are instruments listed interest rates are starting to increase again. In the
on official exchanges, such as currency futures. market at the time, the Australian dollar is quoted
the AUD/USD 1.2078-1.2080 and you open a trade
Spot trades require an initial margin to start with, to buy $A100,000 at 1.2078. A few days later, the
and further margin payments on a daily basis if the Australian dollar has moved up and the new quote
market moves against you (down when you have is AUD/USD 1.3050-1.3052. You close the trade by
bought, for example). This means you need more selling Australian dollars at $US1.3052. Your profit
than the initial margin in order to trade if the market is the difference between the two $US values, or
moves rapidly against you. a profit of $US972, as illustrated below. However,
if you had a short order on AUD at 1.2078 and the
price went up to 1.3050. You would be in a loss of
-$US972.

1 December

Buy AUD$100,000 at USD$1.2080 USD $120,800 (value) -

Pay initial margin AUS $1000.00

Commission nil

5 December

Sell AUD$100,000 at $US1.3052 USD $130,052 (value) +

Initial margin returned AUD $1000.00

Commission nil

Profit USD $972.00

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Three Types of Market Analysis Some of the economic indicators that show how
healthy the economy is include:
What makes a currency move? In order to find • Interest rates - the dollar tends to move up when
out when a currency like the Australian dollar will interest rates are rising.
appreciate against another currency, traders look • Global growth and demand for resources
towards three types of analysis that work hand- -Australia produces commodities including
in-hand to help them come up with good trade metals, coal and agricultural products such as
ideas. Technical analysis is the study of price wheat and wool. When demand for these goods
movement on the charts. Fundamental analysis is increasing, this supports the currency.
takes a look at how the country’s economy is doing.
• The economic cycle-Indicators include housing
Market sentiment analysis determines whether the
statistics, retail sales, automotive sales figures
market is bullish or bearish on the current or future
and employment levels.
fundamental outlook. Let’s look at these in more
• Budget and trade deficits and surpluses
detail.
-surpluses indicate strong growth and a rising
Australian dollar, deficits the opposite.
Fundamental Analysis • Inflation–inflation reduces investment returns,
and rising inflation tends to reduce the long
Fundamental analysis is a way of looking at the term value of the currency. Indicators of inflation
market by analysing economic, social, and political include the consumer price index and the money
forces that affects the supply and demand of an supply statistics.
asset. The idea behind this type of analysis is that
if a country’s current or future economic outlook is
good, their currency should strengthen. If demand
for a country’s goods or services is increasing, or the
number of people wanting to invest there is growing,
they need to buy that country’s currency before they
can buy its goods or invest and then the currency
tends to rise in value.

Investment in Australia, for example, is attractive

when our economy is strong, when share prices
on the stock market are expected to move higher,
when companies are paying good dividends, and
when interest rates are rising. When these things
are happening, the Australian dollar tends to move
higher against other currencies. The Australian dollar
is like a tiny share in the wealth of the nation as a
whole.

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 Technical Analysis

Technical analysis is the framework in which • Trend lines - lines joining higher and higher low
traders study price movement. The theory is that points (uptrend) or lower and lower high points
a person can look at historical price movements (downtrend). Prices breaking through these lines
and determine the current trading conditions can indicate the beginning of a possible change
and potential price movement. The market is like in price direction.
a balance that’s set as new information about • Moving averages- smooth out past movements
fundamentals comes to hand, swinging in one and indicate a possible new trend if the price
direction and then another, and from time to time moves through the average.
finding a point where it might rest briefly until more
• Reversal patterns-such as head-and-shoulders,
new information is available. As all this happens,
tops and bottoms, triple tops and rounded tops.
prices show patterns that tend to be repeated.
• Support and resistance - price points that a
Identifying these patterns by examining charts of
market has had difficulty moving through in the
past price behaviour is called technical analysis.
past.

The main evidence for using technical analysis is • Relative strength indicators- show whether the
that, theoretically, all current market information is market can be considered overbought.
reflected in price. If price reflects all the information • Fibonacci levels- levels that indicate a continued
that is out there, then price action is all one would move in the current direction is breached.
really need to make a trade. Technical analysis • MACD or Moving Average Convergences/
provides the basis on which most traders make their Divergence used to help spot early trends and
trading decisions. As fundamental factors always trend reversals.
show up in price formation, many traders make their
• Cyclicity indicators - markets go through cycles of
decisions based on technical analysis alone.
bullish and bearish phases with periods in which
they tend to return to their average. Cyclicity
Charts allow you to analyse market pattern and trend
indicators help reveal such cycles.
data and provide a visual representation of price
and volume levels that you can use to determine
the next likely move for a currency. There is no such
thing as absolute certainty when forecasting price
movement. The market can do anything, and often
defies both logic and the forecasts of chart.

Among the patterns and indicators traders use to

forecast the way a market is likely to move are:

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Sentiment analysis

Each trader’s thoughts and opinions, which are Sentiment analysis attempts to understand what is
expressed through whatever position they take, driving trader decisions for now and the immediate
helps form the overall sentiment of the market. future. Volume of trade is one indicator that can
There’s one thing that’s constant about the market’s help determine which direction the weight of trading
behaviour, it’s that traders tend to overreact, pushing money is flowing, and this can help reveal what the
prices to higher levels than their true value, and then market believes is going to happen, which is market
overreach in the opposite direction, pushing them sentiment. It’s the difference between what the
to levels below true value. Sentiment analysis is all charts indicate the market is likely to do based on
about picking these reactions. its past behaviour, and what it actually does as each
unique market situation unfolds.
Although the indicators of market sentiment, such
as moving averages and a currency’s average true
range (ATR) are traditionally thought of as technical
analysis tools, technical analysis focuses on past
price movements.

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 Creating a trading plan
Developing Your Trading Plan

Trading in foreign exchange can be risky, especially • How you will decide when to exit a trade. This
if you haven’t traded before. Most people who is also a result of your understanding of the
lose money trading in leveraged markets (such trading strategies and the proper use of technical
as the Forex market) do so because they haven’t analysis and chart patterns.
undertaken the essential learning, have no trading • •Definition of your risk-management system -risk-
discipline and no set trading plan. management rules are designed to preserve your
risk capital by limiting the amount you put at risk
Don’t follow someone else’s trading advice blindly. on any one trade.
Just because someone may be doing well with their
method, it doesn’t mean it will work for you. We all
have different market views, thought processes, risk
tolerance levels, and market experience. Have your Sound money management
own personalized trading plan and update it as you
Sound money management is essential to the
learn from the market.
success of your foreign exchange dealing. It’s
Finding strategies that work and then preparing a
fundamental. The reason so many potential traders
trading plan takes some research and time to ensure
fail early in their attempt is that they ignore this
it covers every essential aspect of keeping your
simple discipline that, if followed, will keep any
risk capital safe and maximising your chances of
trader from the disastrous losses that often spell the
success. Your trading plan should have the following
end of their trading endeavours. Here are some of
as essential elements:
the guidelines successful traders follow:

• Your objective in trading - this might be a target

1. Don’t risk more than 1 percent of your capital
return or an expected percentage gain on winning
on any one trade. This rule, along with correct
trades. Many traders in forex target a number of
position sizing will keep you from risking too
pips per week as their trading objective.
much of your capital at once, and from showing a
• Use of trading strategies that have been proved to
disproportionately large loss on any trade.
work in the past.
2. Learn about stop losses and how to use them.
• How you will decide when to enter (buy or sell) -
A stop-loss order (known as a stop) is an order
this will come from your understanding of proven
to exit your position at a particular price as a
• trading strategies and proper use of technical means of limiting losses or helping to protect
analysis. profits already made on positions that are still
• Use of stop losses - stop losses are essential for open. Determine the price level of your stop-loss
risk management, and require close study so that by reference to the specific currency pair you are
you use them appropriately for your position size trading and its past behaviour, as indicated by
and amount at risk. charting signals, rather than by simply placing
it to keep losses to a known dollar amount. Pay
particular attention to support and resistance,
trend lines, and recent volatility when placing
stops.

14
3. Know how to calculate your risk-reward ratio, Trading psychology
or the ratio of how much you are likely to gain
to how much you have at risk. The reward, or The psychology of trading relates to how well a
possible gain is based on the target price for trader manages his trading capital and the risks
the currency, which is the level you expect the involved in leveraged trading. The only successful
exchange rate to reach based on your technical traders are those who keep strictly to the money
analysis. The risk is the total amount at risk management rules that have been found to work.
based on where you place your stop, also The psychology of trading examines why there
calculated by reference to chart signals and is a conflict, if any, between what we think and
patterns. Unlike shares, where a minimum risk understand about the markets and what we go on
reward ratio would be 3:1 – a possible gain of $3 to do. The reason traders – especially beginners
for every $1 risked – the minimum acceptable – don’t follow the rules is that they have not
ration in the Forex market is 1:1. understood their own relationship to money and to
4. Determine your position size based on how greed. Leveraged trading in forex will challenge you
much you will lose if the stop is triggered at to know yourself better and to learn what you really
the indicated level, and the 1 per cent rule. You think about money and greed. It will also challenge
should know in advance how much the likely you to accept responsibility for your results in the
maximum loss will be on the trade. knowledge that there is no one else to blame.

5. Realise that no matter how well you know

There is no substitute for experience in learning
the rules, emotion can step in and overrule
about your own ability to keep from overtrading,
that rational knowledge. Hesitation through
hesitating, and risking too much, from adjusting
uncertainty before entering a trade, and the
stop-loss levels without sound reasons or from
tendency to hold on to a losing position in the
holding a losing position past the maximum loss
hope that it will turn around and prove you right,
level. But awareness of these possibilities and
are among the most common trading errors.
the reason for them in your own mind – everyone
being different in this regard – can make the
experience more valuable. A good place to start is
Mark Douglas’s book, ‘Trading in the zone’, which
Data and software is written for traders generally, and is directly
applicable to forex trading.
To know whether the entry and exit rules in your
trading plan will work, you will need to test them
on actual trading data. A way to do this is through
software designed for the purpose, using past data
from actual foreign exchange markets. Brokers
often provide a demo account that includes many
of the tools you’ll need. Only when you are confident
your system will work – providing bigger profits on
winning trader over time than the losses on losing
trades – should you begin trading with real money.

15
 Getting Started
Chose a Forex broker Learn the trading platform

Choosing a suitable foreign exchange broker is not Trading platforms come in two main varieties.
as easy as it sounds. One of the best ways is on a You either download the software or run it on your
recommendation from other traders, but as a guide own computer, or you trade via the internet using
you should look for a broker that: remotely operated software. Internet (web-based)
• Is reputable and offers secure handling of clients’ platforms give you’re the flexibility of trading from
funds, in particular segregation from their own any computer. Software you download has to be
and ideally offering protection for those funds – available on the computer you wish you use, which
including unrealised profits, and cash on deposit– could mean downloading and installing it again if
against their own financial failure. you change computers.
• Admirals is a broker with a global presence,
authorized and regulated by multiple regulators Web-based platforms are not necessarily better,
such as the Financial Conduct Authority (FCA), however. What’s more important is the features they
the Cyprus Securities and Exchange Commision provide in terms of charting tools, trading features,
(CySEC), Australian Securities and Investment ease of use, screen legibility and speed of execution.
Commision (ASIC) and Jordan Securities Before beginning to trade, take some time to learn
Commision (JSC). how the software works by trading the smallest
possible trade sizes or, if possible trading on a
• Offers not only the best spreads between bid and
practice account where no real money is involved.
ask prices, but also consistent spreads that aren’t
This will help prevent the occurrence of trading
widened significantly during times of market
errors because of unfamiliarity with the way the
volatility – remember this is the cost of trading;
software works.
• Does not requote prices, unless there are
exceptional conditions, but allows you to trade at
or very close to the price quoted on the screen;
• Allows you to deposit funds and withdraw
earnings smoothly and speedily;
• Has a responsive, fully featured and easy-to-use
trading platform;
• Offers competent, easily available account and
technical support, especially after the account is
opened.

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Demo and Live Accounts

Using a practice (or demo) account is one of the

best ways to prepare for trading with real money.
However, there are differences that you should keep
in mind when making the transition from a practice
account to a live account:

• Delayed vs live data feeds: Some practice

accounts use delayed pricing information in their
demo trading system, which could affect the
timing of trades and any impact of fundamental
news announcements.
• The way orders are executed: Demo platforms
can execute some orders differently than the way
they are executed in a live account–particularly
stops and limits. It’s important to understand how
the executions might differ.
• Features available: Demo systems often only
include basic features, and you will receive full
access to all features only after opening a live
account. Examples include available charting
tools and indicators, and you should make sure
you understand what will be included with a live
account.
• Emotions: Because you are not trading with real
money in a practice account, your emotion will
not be a factor. Be sure to develop a disciplined
trading plan so you not let your emotions get the
better of you.
• Without the essential information on trading
plans and strategies, Forex trading is more of
a gamble than a source of income. Use these
resources to help you learn more.

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 Further information
Foreign Exchange Books

• Currency Trading for Dummies By Mark Galant

and Brian Dolan
• Market Wizards By Jack D. Schwager
• Essentials of Foreign Exchange Trading By James
Chen
• Technical Analysis of the Currency Market:
Classic Techniques for Profiting from Market
Swings and Trader Sentiment, By Boris
Schlossberg

Trading Psychology

• Trading in the Zone By Mark Douglas (USA)

Technical Analysis Resources

• www.incrediblecharts.com
• www.esignal.com
• www.investopedia.com
• Analytics
• Premium Analytics
• Fundamental Analysis

Trading Plans

• Art of Trading By Christopher Tate

• Better trading By Daryl Guppy (Australia)

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