This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

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Imagine a trader who expects interest rates to rise in the U.S. compared to Australia while the exchange rate between the two currencies (AUD/USD) is 0.71 (it takes $0.71 USD to buy $1.00 AUD). The trader believes higher interest rates in the U.S. will increase demand for USD, and therefore the AUD/USD exchange rate will fall because it will require fewer, stronger USD to buy an AUD.
In practical terms, this manifests itself in traders holding losing positions open for too long, simply because they fail to consider the options that are outside of their comfort zone. You must not be afraid of trying new things when trading Forex - be willing to try new strategies, and go against what you know. By anchoring yourself to outdated strategies and knowledge, you're only increasing the probability of bigger losses.

Most retail investors should spend time investigating a forex dealer to find out whether it is regulated in the U.S. or the U.K. (dealers in the U.S. and U.K. have more oversight) or in a country with lax rules and oversight. It is also a good idea to find out what kind of account protections are available in case of a market crisis, or if a dealer becomes insolvent.


This is the only way you can really stay on top of your trading. Allow yourself to make mistakes - and don't make the mistake of being scared to prove yourself wrong - you'll be in a much better position for it in the long run. You have to be comfortable with accepting that mistakes are inevitable, especially in the early stages. It's all part of the learning curve.
In the futures market, futures contracts are bought and sold based upon a standard size and settlement date on public commodities markets, such as the Chicago Mercantile Exchange. In the U.S., the National Futures Association regulates the futures market. Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized. The exchange acts as a counterpart to the trader, providing clearance and settlement.
Currency trading was very difficult for individual investors prior to the internet. Most currency traders were large multinational corporations, hedge funds or high-net-worth individuals because forex trading required a lot of capital. With help from the internet, a retail market aimed at individual traders has emerged, providing easy access to the foreign exchange markets, either through the banks themselves or brokers making a secondary market. Most online brokers or dealers offer very high leverage to individual traders who can control a large trade with a small account balance.

Revenge – Traders experience a feeling of wanting “revenge” on the market when they suffer a losing trade that they were “sure” would work out. The key thing here is that there is no “sure” thing in trading…never. Also, if you have risked too much money on a trade (starting to see a theme here?), and you end up losing that money, there’s a good chance you are going to want to try and jump back in the market to make that money back….which usually just leads to another loss (and sometimes an even larger one) since you are just trading emotionally again.


It's easy for traders to feel confident in their ability to remain calm and collected during their trading sessions before the market opens. However, once the clock starts it's a different story. When faced with real financial decisions, it's very easy for emotions to come into play. We can't avoid our emotions, but we can learn to work around them.


This is great, as the markets are open so long, we can enter or close a trade whenever we need to, whereas if you were trading stocks on the NYSE you can only trade during market hours, and once the market is closed you have to wait until the next trading day to trade your position. This forex help tip can really save you when there is a big unexpected political or news release and you need to close your position right away.

The 2nd method is by performing a carry trade, where you can profit by buying a currency with a higher interest rate, and selling a currency with a lower interest rate. An example of this would be the USD/CHF (Swiss franc). If you buy USD/CHF, you are buying the USD, and their interest rates are higher than Swiss interest rates, so if you hold the position overnight, every day you hold the trade you will make money, and the money will be deposited in your brokerage account.
You have probably heard that most people who attempt Forex trading end up losing money. There’s a good reason for this, and the reason is primarily that most people think about trading in the wrong light. Most people come into the markets with unrealistic expectations, such as thinking they are going to quit their jobs after a month of trading or thinking they are going to turn $1,000 into $100,000 in a few months. These unrealistic expectations work to foster an account-destroying trading mindset in most traders because they feel too much pressure or “need” to make money in the markets. When you begin trading with this “need” or pressure to make money, you enviably end up trading emotionally, which is the fastest way to lose your money.
The 2nd method is by performing a carry trade, where you can profit by buying a currency with a higher interest rate, and selling a currency with a lower interest rate. An example of this would be the USD/CHF (Swiss franc). If you buy USD/CHF, you are buying the USD, and their interest rates are higher than Swiss interest rates, so if you hold the position overnight, every day you hold the trade you will make money, and the money will be deposited in your brokerage account.

Many traders enter into a tailspin of emotional trading and losing money after they hit a string of winners. The reason this happens is because they feel confident and euphoric and forget about the real danger of the market and that ANY TRADE CAN LOSE. The key to remember here is that trading is a long-term game of probabilities, if you have a high-probability trading edge, you will eventually make money over the long-term assuming you follow your trading edge with discipline. But, even if your edge is 70% successful over time, you could still hit 30 losing trades in a row out of 100….so keep this fact in mind and always remember you never know WHICH trade will be a loser and WHICH will be a winner.


One unique aspect of this international market is that there is no central marketplace for foreign exchange. Rather, currency trading is conducted electronically over-the-counter (OTC), which means that all transactions occur via computer networks between traders around the world, rather than on one centralized exchange. The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney—across almost every time zone. This means that when the trading day in the U.S. ends, the forex market begins anew in Tokyo and Hong Kong. As such, the forex market can be extremely active any time of the day, with price quotes changing constantly.
An investor can profit from the difference between two interest rates in two different economies by buying the currency with the higher interest rate and shorting the currency with the lower interest rate. Prior to the 2008 financial crisis, it was very common to short the Japanese yen (JPY) and buy British pounds (GBP) because the interest rate differential was very large. This strategy is sometimes referred to as a "carry trade."
Unlike stock markets, which can trace their roots back centuries, the forex market as we understand it today is a truly new market. Of course, in its most basic sense—that of people converting one currency to another for financial advantage—forex has been around since nations began minting currencies. But the modern forex markets are a modern invention. After the accord at Bretton Woods in 1971, more major currencies were allowed to float freely against one another. The values of individual currencies vary, which has given rise to the need for foreign exchange services and trading.

The problem is that this is where traders are most likely to succumb to overconfidence bias. It's not uncommon for traders to complete a winning streak and then believe that they can't get anything wrong in the future. To believe this is of course unwise, and is only going to end in failure. Make sure you always analyse your trading sessions and look at your wins and losses in detail.


You need to not over-trade. Most traders trade way too much. You need to know what your trading edge is with 100% certainty and then ONLY trade when it’s present. Once you start trading just because you “feel like it” or because you “sort of” see your trading edge…you kick off a roller coaster of emotional trading that can be very hard to stop. Don’t start over trading and you will likely not become an emotional Forex trader.

Since the market is made by each of the participating banks providing offers and bids for a particular currency, the market pricing mechanism is based on supply and demand. Because there are such large trade flows within the system, it is difficult for rogue traders to influence the price of a currency. This system helps create transparency in the market for investors with access to interbank dealing.
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