The FOREX market is the largest financial market in the world. Nearly $3.2 trillion worth of foreign currencies trade back and forth across the FOREX market every day. FOREX stands for the foreign exchange—the financial exchange on which governments, banks, international corporations, hedge funds, and individual investors exchange foreign currencies.
Those of you who travel abroad frequently have probably also noticed that the exchange rates at the currency counter at the airport never seem to be the same. They are constantly changing. Sometimes you get a lot more bang for your buck when you exchange your money, and sometimes you have to exchange a few more euros, British pounds or U.S. dollars just to get by. That is because exchange rates are constantly changing, and it is these changes in exchange rates that enable you to make a lot of money in the FOREX market.

Everything is relative in the FOREX market. The euro, by itself, is neither strong nor weak. The same holds true for the U.S. dollar. By itself, it is neither strong nor weak. Only when you compare two currencies together can you determine how strong or weak each currency is in relation to the other currency. Currencies always trade in pairs. You never simply buy the euro or sell the U.S. dollar. You trade them as a pair. Some of the most well-known currency pairs are:
 

EUR/USD	(Euro / U.S. dollar)
GBP/USD	(British pound / U.S. dollar)
USD/JPY	(U.S. dollar / Japanese yen)

Investors, just like you, make money every day by trading currency pairs. By determining what is going to happen to a currency pair in the future, investors can act today to take advantage of coming price movements.

The key to make money in the FOREX is understanding what makes currency pairs move. Ultimately, it is investors who make currency pairs move as they buy and sell different currencies, but these investors buy and sell for a reason. Either they see something happening fundamentally in the global economy that makes them believe a currency is going to get stronger or they see something happening fundamentally that makes them believe a currency is going to get weaker. In other words, they watch the fundamentals and make their decisions according to what they see.

Fundamentals make currency pairs move. If the economic fundamentals in the United States are improving, the U.S. dollar (USD) will most likely be getting stronger because FOREX investors will be buying dollars. Conversely, if the economic fundamentals in the United States are declining, the U.S. dollar (USD) will most likely be getting weaker because FOREX investors will be selling dollars.

Fundamentals move currency pairs, and news moves fundamentals. News of an interest-rate hike or news of a sub-prime meltdown can cause a currency pair to change directions in an instant. The fundamentals that were true just 10 seconds earlier can become completely meaningless in the face of new fundamental information. You, as a FOREX trader, need to be able to react to big news when it is released.
You may be worried that you won’t be able to be in front of your computer to react to all of the market news that may come out during a day. After all, the FOREX market is a 24-hour marketplace. Luckily, as a retail FOREX trader, you don’t need to monitor the news wires quite this actively. If you use appropriate risk-management techniques, you have the ability to react more nimbly than large, institutional investors while protecting yourself from extreme downside risk
 

Most economic news is scheduled

The expected is already priced in

Most Economic News Is Scheduled

Most of the economic news that is going to be important to you as a FOREX trader is scheduled months in advance. For instance, you know a year in advance when the U.S. Federal Open Market Committee (FOMC) is going to be meeting to discuss interest rate changes. This gives you plenty of time to research the announcement and position your portfolio accordingly.
Brooge Forex Broker provides an up-to-the-minute economic calendar so you can know exactly what news is scheduled to be released today, tomorrow and into the future.
A quick glance at the economic calendar lets you know about important upcoming events that have the potential to change or accelerate the movement of the currency pairs you are watching,

The Expected Is Already Priced In

Investment analysts, economists and other market participants are constantly analyzing upcoming economic announcements, trying to determine ahead of time what the news is going to be. While no two analysts will arrive at exactly the same conclusion, if you look across the various estimates, you can determine what the average estimate is. This average estimate is also known as the “consensus estimate.”
Knowing what this consensus estimate is will help you take advantage of price movements once the economic announcement is released because the consensus estimate will already be “priced in” to the value of the currency pair. Here’s how it works.
Once investors complete their analysis, they start placing their trades to take advantage of where they believe currencies are going to move in the future. They don’t wait until the announcement comes out. They want to be ahead of the market. So by the time an economic announcement is released, most of the major market participants have already placed their trades.
If an economic announcement is released, and the number matches the consensus estimate, the currency pair will most likely not move very much. Since most of the big traders have already placed their trades, there are no new traders to jump in and move the currency pair. If, however, the actual number from the economic announcement is higher or lower than the consensus estimate, the price of the currency pair will have to adjust either up or down to factor in the new economic information.
During this period of time when market participants are scrambling to factor in the new information, you have an excellent opportunity to take advantage of the price movement. You can do so in one of the following three ways

1	You can enter your trade immediately following the economic news announcement
2	You can wait for the market to process the new information and enter your trade once a new trend has been established
3	You can set two entry orders, one above the current price of the currency pair and one below the current price of the currency pair, just before the economic announcement is released

Entering Immediately Following an Economic Announcement

Entering immediately following an economic announcement is typically the most difficult way to trade the news. Currency prices tend to adjust sharply when the result of an economic announcement is not what investors had anticipated. Depending on how quickly you get the economic news and how quickly you can enter your trade order, you may not be able to get into your trade before the price has already taken off.
Traders who try to jump into trades after the announcement has been released have to be prepared to have their trades filled at a higher price if they are buying the currency pair or at a lower price if they are selling the currency pair. The price movement between the time when you enter your trade and when you are trading is actually filled is called “slippage.” If you are comfortable with experiencing slippage in your trading account, you can explore this method of treating the news. If you’re not comfortable with the experiencing slippage in your trading account, you should choose one of the other two methods for trading the news.

Entering Once a New Trend is established

Most FOREX traders who trade the news choose to enter their trades once a new trend has been established. This is typically the easiest way to trade the news. Oftentimes when an economic announcement is released, the price of the currency pair will fluctuate back and forth as investors try to determine which way the currency pair will move in the future. Once these investors have determined which direction they believe the currency pair is going to go, the currency pair generally develops a strong trend moving in that direction.
FOREX traders who wait for this new trend to appear avoid the noise that is generated as the currency pair fluctuates back and forth immediately after an economic announcement is released. Doing so gives them an advantage over traders who enter their trades too quickly only to be knocked out as the price reverses direction and hits their stop losses.

Using Entry Orders before the Economic Announcement

Placing entry orders before an economic announcement is released is the most profitable way to trade if the news when you are right and the currency pair moves the direction you want it to. By placing your entry orders before the currency pair moves in one direction or the other, you assure yourself of entering the trade at the price which you specify. In other words, you don’t have to worry about slippage when you’re using entry orders. As soon as the price of the currency pair reaches your entry price, your trade will be placed. This method is also one of the riskiest ways to trade the news when the market whips back and forth immediately following the economic announcement. For instance, if the price of the currency pair moves higher immediately following the economic announcement and then turns around and moves lower once the majority of market participants realize the economic announcement was bearish for the currency pair, you will be knocked into the trade once your entry order is hit and then knocked right back out of it if the currency pair turns around and hits your second entry order
One way you can prevent this from happening is by deleting your second entry order once the first entry order is hit. However, you will want to place a stop-loss on your trading after you hit your first entry order

Strong economies generally have strong currencies. The two seem to go hand in hand. When an economy is performing well, it means that corporations are making profits, most of the workforce is employed and, in most cases, interest rates are going up. Each one of these characteristics of a strong economy benefits you as a FOREX trader.
In the fundamental analysis section we explained that rising interest rates are the most predictive indicator for rising currency values and central banks around the world determine interest rates in their respective economies. These central banks typically raise interest rates when inflation—as measured by the consumer price index (CPI) and the producers’ price index (PPI)—starts growing too quickly.
Economic growth spurs inflation on. Here’s how it works. The stronger the economy is, the higher the demand for workers becomes. As demand for workers goes up, wages for those workers also goes up. The more money workers take home in their paychecks, the more money they have to spend at retail stores, on cars and on houses. As demand for goods and services increases, the price for those goods and services also increases—in other words, inflation.
Naturally, if central banks watch inflation indicators (like the CPI and PPI) in their decision-making process, you would assume they would also be interested in watching economic strength indicators to see how strong an economy is—and they most certainly are.
Central banks watch the following fundamental economic indicators to gauge the strength of an economy, and so should you:
 

• Gross Domestic Production (GDP)
• Payroll Employment
• Durable goods orders
• Retail sales

Gross Domestic Product(GDP)

The Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity available. Reported quarterly, GDP growth is widely followed as the primary indicator of economic strength.
GDP represents the total value of a country's production during the period and consists of the purchases of domestically produced goods and services by individuals, businesses, foreigners and the government.
As GDP reports are often subject to substantial quarter-to-quarter volatility and revisions, it is preferable to follow the indicator on a year-to-year basis. It can be valuable to follow the trend rate of growth in each of the major categories of GDP to determine the strengths and weaknesses in the economy.
A high GDP figure is often associated with the expectations of higher interest rates, which is frequently positive, at least in the short term, for the currency involved, unless expectations of increased inflation pressure is concurrently undermining confidence in the currency

Payroll Emploment

Payroll employment is a measure of the number of people being paid as employees by non-farm business establishments and units of government. Monthly changes in payroll employment reflect the net number of new jobs created or lost during the month and changes are widely followed as an important indicator of economic activity. Payroll employment is one of the primary monthly indicators of aggregate economic activity because it encompasses every major sector of the economy. It is also useful to examine trends in job creation in several industry categories because the aggregate data can mask significant deviations in underlying industry trends.
Large increases in payroll employment are seen as signs of strong economic activity that could eventually lead to higher interest rates that are supportive of the currency at least in the short term. If, however, inflationary pressures are seen as building, this may undermine the longer term confidence in the currency.

Durable Goods Orders

Durable Goods Orders are a measure of the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. Monthly percent changes reflect the rate of change of such orders. Levels of, and changes in, durable goods order are widely followed as an indicator of factory sector momentum.
Durable Goods Orders are a major indicator of manufacturing sector trends because most industrial production is done to order. Often, the indicator is followed but excludes Defense and Transportation orders because these are generally much more volatile than the rest of the orders and can obscure the more important underlying trend.
Durable Goods Orders are measured in nominal terms and therefore include the effects of inflation. Therefore the Durable Goods Orders should be compared to the trend growth rate in PPI to arrive at the real, inflation-adjusted Durable Goods Orders.
Rising Durable Goods Orders are normally associated with stronger economic activity and can therefore lead to higher short-term interest rates that are often supportive to a currency at least in the short term.

Retails Sales

Retail Sales are a measure of the total receipts of retail stores. Monthly percentage changes reflect the rate of change of such sales and are widely followed as an indicator of consumer spending.
Retails Sales are a major indicator of consumer spending because they account for nearly one-half of total consumer spending and approximately one-third of aggregate economic activity.
Often, Retail Sales are followed less auto sales because these are generally much more volatile than the rest of the Retail Sales and can therefore obscure the more important underlying trend.
Retail Sales are measured in nominal terms and therefore include the effects of inflation. Rising Retail Sales are often associated with a strong economy and therefore an expectation of higher short-term interest rates that are often supportive to a currency at least in the short term

Technical analysis, or chart reading, is the next natural step available after you have conducted your fundamental analysis. Fundamental analysis helps you determine whether you should trade a particular currency pair. Technical analysis helps you determine when you should buy or sell that currency pair.
Many traders consider technical analysis to be somewhat of an art form that anyone can master with a little time and practice. To get started, you should focus on becoming comfortable with the following foundational concepts of technical analysis:
 

• Trends—where prices may be going
• Support and Resistance - Where prices may stop and turn around

Trading With The Trend

The key to making money in FOREX is identifying trend and trading with it. Trends tell you where prices will most likely be going in the future. If the trend of a currency pair is pointing up, you need to buy the currency pair to make money. If the trend of a currency pair is pointing down, you need to sell the currency pair to make money. If the trend of a currency pair is pointing sideways, you either need to alternate between buying and selling or wait until the trend points up or down to make money. Whatever you do, never fight the trend. It will be an expensive battle if you do.
Trends do not move straight up or straight down. They usually move in one direction for a while and then retrace part of the previous movement before turning back around and continuing on the previous direction. Every time a currency pair turns around and begins moving in the opposite direction, it forms a new high or a new low. New highs form when a currency pair moves higher and then turns around and moves lower. New lows form when a currency pair moves lower and then turns around and moves higher. Identifying these highs and lows allows you to identify whether a currency pair is in an uptrend, a down trend or a sideways trend.
Up trends—currency pairs that are trending upward form a series of higher highs and higher lows.

Down trends—currency pairs that are trending downward form a series of lower highs and lower lows.

Sideways trends—currency pairs that are trending sideways form a series of highs that are at approximately the same price level and a series of lows that are at approximately the same price level.

Trends—whether they are up trends, down trends or sideways trends—can form over various time periods. Identifying the following trends
Over each time frame and being able to align them in your analysis is crucial to your success as a FOREX investor:

1. Long-term trends
2. Intermediate trends
3. Short-term trends

Long-Term Trend
Fundamental factors are the major drivers of a currency pair’s long-term trend. Now that you understand the impact interest rates have on an economy’s currency, you are already one step ahead of the competition. You’ll learn even more about the fundamental factors that drive long-term trends in later sections. For now, all you need to focus on is how to appropriately identify long-term trends.
Long-term trends, sometimes called major trends, are those trends that have dominated a currency pair for the longest period.

Next, you need to look at the intermediate trend to see if it is trending in the same direction as the long-term trend.

Intermediate Trend
Intermediate trends, sometimes called minor trends, are more responsive than long-term trends because they cover a shorter period of time. These trends are also affected by fundamental factors. However, interest rates do not dominate intermediate trends like they do long-term trends. Other fundamental factors carry equal weight in their affect on intermediate trends. Looking at this chart ( ), you can see that the currency pair was in a sideways intermediate trend during the highlighted time frame—notice the series of level highs and level lows as time progressed.

Notice that while the intermediate trend was moving sideways, the long-term trend was still moving upward. Trends tend to move in a stair-step fashion. Rarely do they move straight up or straight down.
Seeing this price action should confirm your bias toward buying the ( ). However, it should also tell you that while your bias is bullish (you think the currency pair is going to move higher), you may want to wait to buy the currency pair until you see the intermediate trend move upward—in line with the long-term trend.
Next, you need to look at the short-term trend to see if it is trending in the same direction as the long-term trend and the intermediate trend.

Short-Term Trend
Short-term trends, sometimes called micro trends, are more responsive than both long-term trends and intermediate trends because they cover the shortest period of time. These trends are the most volatile trends and are predominantly affected by the news of the day. It is not uncommon to see these short-term trends change direction extremely rapidly. Looking at this chart of the ( ), you can see that the currency pair was in a down-trending short-term trend during the highlighted time frame—notice the series of lower highs and lower lows as time progressed

The most important part of investing is money management. Money management involves determining how much of your overall portfolio you are willing to put at risk in any one trade and how many contracts your risk tolerance warrants. Proper money management can be the difference between a successful account that you are able to manage far into the future and an unsuccessful account that you decimate in six months.
The investors who enjoy the greatest amount of success in their trading are those investors who have established clearly defined rules that govern their trading. These rules help them avoid the money management pitfalls you just learned about and keep their emotions under control. Following are three money management rules you will want to incorporate in your own trading:
 

• Live to trade another day
• Know what you are willing to risk
• Know how to determine trade size

Live To Trade Another Day

Live to trade another day is perhaps the greatest piece of advice you could receive in your investing. Regardless of whether you are right or wrong in your trade analysis, if you live to trade another day, you know that you will always have another chance to make more money. The subsequent two rules will show you exactly what you must do to survive every day in the FOREX market, but as long as you understand and believe this first rule, you will already have an advantage over most investors
The single factor that causes most investors to overextend themselves and blow up their accounts is greed. When investors get greedy, they take unnecessary risks. They also spend countless hours trying to find the one technical indicator or the one economic announcement that is the “Holy Grail” of investing. They believe that if they only follow what that one indicator says or what that one economic announcement points to, they will never have to worry about being unprofitable in their trading again—they will always be right. You will also hear this referred to as the “secret” of investing.
Unfortunately, all this searching and hoping is unproductive simply because there is no secret. Sure, they may be able to identify a technical indicator that provides outstanding returns during a given period in market history, but the market changes, and soon another technical indicator will come into vogue. Or they might find an economic announcement that the market has been paying particularly close attention to for the past few months and believe they have found the key to their investing success. But once again, the market will change, and they will be left looking for a new key to success. To help you avoid the frustration that always comes from chasing your tail, we are going to show you how to live to trade another day so that no matter what changes take place in the market, you can be successful

Know What You Are Willing To Risk

Know what you are willing to risk before you ever enter a trade. This rule is the basic tenet of living to trade another day. If you don’t risk too much of your account in any trade today, you know you will have enough in your account tomorrow—even if you lose money on your trades today—to place another trade. In other words, it is not sound investing practice to put all your money into any one or two trades. Because you never know what is going to happen in the market, you never want to risk everything you have on one position.
The first thing you have to do is determine what percentage of your account you are willing to lose in any one trade. Once you have decided that, the rest is a simple math formula. Most investors feel comfortable risking approximately 2 percent of their total account balance in any one trade. While this is a general rule of thumb, you will need to determine how aggressive or conservative you want to be in your individual account. If you want to be more aggressive, you would risk a larger percentage of your account in any one trade. If you want to be more conservative, you would risk a smaller percentage of your account in any one trade. It is up to you to determine how much you are willing to risk, but we will say one thing—avoid going to either extreme. If you want to be more aggressive, consider risking 2 to 5 percent in any one trade. If you want to be more conservative, consider risking 1 to 2 percent in any one trade. If you risk too much, you probably won’t be around to trade another day much longer. If you risk too little, you probably won’t make very much money in your investing.

Account balance / risk percentage = amount at risk

Here is an example of how this would work. Imagine that you have an account balance of $50,000 and that you would like to risk 2 percent of your account in any one trade. If you plug these numbers into the equation, you will see you should not risk more than $1,000 in any one trade.

$50,000 / 0.02 = $1,000

One point to remember is that this is the maximum amount you want to risk in any one trade. You may have more than this at risk in your overall account if you are in more than one trade. If you were in three trades at once, for example, you would want to risk only $1,000 per trade, but this may add up to a total amount at risk of $3,000. Once you have determined how much you are willing to risk, you are ready to determine your trade size.

Know How To Determine Trade Size

Know how to determine trade size to prevent unnecessary exposure to risk. Trade size is the amount of currency you purchase in any one trade. Once you know how much you are willing to risk, you need to know how to set up your trades so that you don’t end up risking more than you are comfortable with. It doesn’t do you any good to know what your risk tolerance is and then enter a trade that exposes too much of your account to risk.
To determine your trade size, you must first decide where you are going to set your stop loss (which you will learn about next). Once you have determined where to place your stop loss, you have to figure out how many pips lie between the point where you are going to enter the trade and the point you have determined to use as your stop loss. Now all you have to do is plug that amount into another simple equation that builds on the equation you just used to determine the amount you want to have at risk in any one trade.
To determine your trade size, you must first decide where you are going to set your stop loss (which you will learn about next). Once you have determined where to place your stop loss, you have to figure out how many pips lie between the point where you are going to enter the trade and the point you have determined to use as your stop loss. Now all you have to do is plug that amount into another simple equation that builds on the equation you just used to determine the amount you want to have at risk in any one trade.

Amount at risk ÷ (pips at risk – value per pip) = size of your trade

Stop-Loss Orders
A stop-loss order is an order you place that exits your trade if the currency pair reaches a specified price point. Stop-loss orders allow you to protect your trading account even when you are not in front of your computer—which is essential since it is physically impossible for you to watch your trades 24 hours per day.
If you buy a currency pair, you will place a stop-loss order somewhere below the current price to protect you in the event the currency pair turns around and starts moving lower. If you sell a currency pair, you will place a stop-loss order somewhere above the current price to protect you in the event the currency pair turns around and starts moving higher.
Here’s how it works. Imagine you buy the EUR/USD at 1.4000. You notice that there is strong support approximately 50 pips below this price level at 1.3950, and you conclude that if the EUR/USD breaks below this level it will most likely continue to move lower. Since you bought the currency pair, and you will be losing money if it moves lower, you decide you do not want to hold onto the trade if the EUR/USD breaks below 1.3950. To protect your account, you set a stop-loss order at 1.3940 that exits the trade if the EUR/USD touches the 1.3940 price level. Whether it is in the middle of the night or it is the middle of the day, if the price of the EUR/USD drops to 1.3940, the trade will automatically be exited for you.
Stop-loss orders provide safety and security when you are trading, and they place a critical role in all of your money-management decisions. You should never place a trade without one.

FOREX traders have to not only compete with other traders in the FOREX market but also with themselves. Oftentimes as a FOREX trader, you will be your own worst enemy. We, as humans, are naturally emotional. Our egos want to be validated—we want to prove to ourselves that we know what we are doing and we are capable of taking care of ourselves. We also have a natural instinct to survive
All of these emotions and instincts can combine to provide us with trading successes every now and then. Most of the time, however, our emotions get the best of us and lead us to trading losses unless we learn to control them.
Many FOREX traders believe it would be ideal if you could completely divorce yourself from your emotions. Unfortunately, that is next to impossible, and some of your emotions may actually help improve your trading success. The best thing you can do for yourself is learn to understand yourself as a trader. Identify your strengths and your weakness and pick a trading style that is right for you.
In this section, you will learn about the following four psychological biases that may be affecting your trading results and what you can do to overcome them:
 

• Overconfidence bias
• Anchoring bias
• Confirmation bias
• Loss aversion bias

Overconfidence Bias
Overconfidence bias is an over-inflated belief in your skills as a FOREX trader. If you ever find yourself thinking to yourself that you have got everything figured out, that you have nothing more to learn and money is yours for the taking in the FOREX market, you probably suffer from an overconfidence bias.

Dangers of Overconfidence
Overconfident traders tend to get themselves into trouble by trading too frequently or by placing extremely large trades as they go for the home run. Inevitably, an overconfident trader will end up either trading in and out and in and out of trades—churning the trader’s account—or risking too much on the one trade that goes bad and wipes out most of the trader’s account.

Are You Overconfident
If you want to know if you have any overconfidence tendencies, ask yourself, “Have I ever jumped right back into a trade I had just been stopped out of not because I saw another entry opportunity but because I couldn’t believe I was wrong?”
You can also ask yourself, “Have I ever put more on a trade than I normally would because I was just sure this trade was going to be the one?” If you have, you need to be aware of those tendencies

Overcoming Overconfidence
The best way to overcome an overconfidence bias is to establish a strict set of risk-management rules. These rules should at least cover how many trades you will allow yourself to be in at one time, how much of your account you are willing to risk on any one trade and how much of your account are you willing to lose before you take a break from trading and re-evaluate your trading strategy.By limiting the number of trades you are willing to be in and the amount of risk you are willing to take, you can spread your risk out evenly over your portfolio

Anchoring Bias
Anchoring bias is a propensity to believe that the future is going to look extremely similar to the status quo. When you anchor yourself too closely to the present, you fail to see the dramatic changes that are possible as currency pairs fluctuate and the underlying fundamentals shift.

Dangers of Anchoring
Anchored traders tend to get themselves into trouble by convincing themselves that the current trend will never end and a reversal in the economic strength of a particular country is next to impossible. Alas, they become emotionally attached to the previous trend of a currency pair, and they continue to place trades that go against the new, current trend. With each trade, they lose more and more money because they are bucking the trend.

Are You Anchoring?
If you want to know if you have any anchoring tendencies, ask yourself, “Have I ever lost money because I couldn’t accept that the trend had ended?” If you have, you need to be aware of that tendency.

Overcoming Anchoring
The best way to overcome anchoring is to look at multiple time frames on your charts. If you usually trade on the hourly charts, take a look at the daily and weekly charts every now and then to see where some of the longer-term levels of support and resistance are and what the Longer-term trends look like. You should also take a look at the shorter-term charts to see when the shorter-term trends are reversing.Broadening your perspective will help you avoid anchoring yourself to any one point.

Everything is relative in the FOREX market. The euro, by itself, is neither strong nor weak. The same holds true for the U.S. dollar. By itself, it is neither strong nor weak. Only when you compare two currencies together can you determine how strong or weak each currency is in relation to the other currency. Currencies always trade in pairs. You never simply buy the euro or sell the U.S. dollar. You trade them as a pair. Some of the most well-known currency pairs are:
 

EUR/USD	(Euro / U.S. dollar)
GBP/USD	(British pound / U.S. dollar)
USD/JPY	(U.S. dollar / Japanese yen)

Investors, just like you, make money every day by trading currency pairs. By determining what is going to happen to a currency pair in the future, investors can act today to take advantage of coming price movements.