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Choosing A Forex Trading System – Part 2

In the first part of our series – Choosing A Forex Trading System – Part1 we covered a few quick tips to get you a few steps closer to choosing the Forex trading system that’s right for you.

In Part2 we will take a look at a few other do’s and don’ts for choosing a Forex trading system. With that in mind here is “don’t” number 1.

1) Don’t be overly impressed by a high percentage of winning trades

Often times you will see Forex trading systems advertising a high winning trade percentage. The ad might contain information a line like the following: “Over 90% Winning Trades”

You might look at that and say, “Wow, with numbers like that I’ll be rich in no time!” Before you stop reading the ad to call your local real estate broker about buying that private island just realize that this one figure does not tell the whole story.

The fact is that most successful traders the world over have made their money with far smaller percentages of winners than many of the trading systems you will see advertised.

I would suspect that the reason the high winning percentages are advertised is to attract as many customers as possible. Many buyers believe that the closer the winning percentage is to 100% the closer the trading system is to being a “sure thing”. In the trading world there is no such thing and you would be well advised to run as fast as you can away from anyone who tells you otherwise.

Often times you will see Forex trading systems advertising a high winning trade percentage. The ad might contain information a line like the following: “Over 90% Winning Trades”

Here’s a quick illustration of a losing trading system with a high percentage of winning trades:

Trading System A Performance

Number of trades = 1000

% of Winning trades = 92%

% of Losing trades = 8%

Average Winning trade = $180

Average Losing Trade = -$2100

That’s just a quick illustration of how a Forex trading system can have a high percentage of winners and still lose money. We’ll go into even more depth in the next part of our series as we continue to explore choosing a Forex trading system.

To Your Forex Trading Success!

Whether you're a beginner or a seasoned pro you'll discover the best Forex Broker tips, tricks, and techniques as well as valuable tools, resources, and information at http://www.forex-strategies.com

How to Read Forex Quotes

There are many technical terms associated with foreign exchange trading. These terms are very important to the Forex trading and the information is also crucial for every trader. Two such import terms are quotation and spread. Quotation deals with the ask price of any cash commodity at a certain period of time. The word quote is sued in almost all kinds of businesses and stands for an approximate market price. The quotation is always used only for information purposes. Most foreign currencies are given a quotation in pairs. The Forex trading works only with currency pairs like the USD/EUR. Now the USD is the base pair while the EUR is the quote currency. The world’s financial wholesale markets quote a currency using 5 different yet important numbers. The last number is known as the pip.

Forex quotes come with two kinds of prices the bid price and the ask price. The quotations for both the prices are sent in real time and as a result the Forex market is able to ensure that all traders will receive a fair price while doing a transaction. Like all trading markets, the Forex market also has an immediate cost attached to establishing a position. Let’s take an example. If the USD/AUS bid is at 131.40 and the ask price is at 131.45 then there is a five-pip spread. This spread will define the traders’ cost. To a layman, a Forex quote might sound Spanish but in reality it is very simple. There are two very important things to remember and they are: The base currency, which is the first currency and the value is always 1. The most important currency or the heart of the Forex market is the US Dollar. In a quotation-involving USD as one of the currency, it will always be referred to as the base currency. If there is a quote for a currency pair of USD/JPY and if the value is 160.25, then it means that $1 is equal to 160.25 Yen.

If there is a currency pair, which has the USD as the base and if there is a rise in the currency quote then it would translate into appreciation for Dollar and depreciation for the secondary currency. Like the last example if the quote for the USD/JPY pair increased to 169.35 then that means that the Dollar is stronger. It also means that $1 can now buy 169.35 Yen. There are only three exceptions to this rule and they are the Australian Dollar, the Euro and the British Pound. If the dollar is paired with the Pound, and the quote for GBP/USD shows 2.3647 then it means that 1 pound is equal to $2.3647. In such pairs the US Dollars is not the base currency and a rising quote would mean that the US Dollar is depreciating. The third type of currency pair is the cross currency. This combination doesn’t use the US Dollar like AUD/JPY. In such a scenario, Australian Dollar would be the base currency. Probably now this might sound simpler to everyone.

Scott is the founder of currency trader, a community site for the active forex trader

 

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A mutual fund is perhaps one of the most popular means of long term investing and is the vehicle of choice in IRAs and 401k accounts. A mutual fund is basically a way of investing in a pool of different companies in order to minimize risk.

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