If you ask most people what the key to wealth is, they will probably say making a lot of money. It makes sense… if you are making a lot of money, you have more money to spend, save, etc. which will help make you wealthy. However, in practice, that’s not what wealth is about. The biggest key to wealth is saving money, and spending less than you earn (no matter if you make a lot of money or a little). If you are able to do that, no matter how much money you make, you can become wealthy. Obviously it can be a lot easier to do this when you are making a lot of money, but it is not absolutely necessary. You just have to have the discipline to save and look ahead to your future.

Just think about it. We all know people that may make a lot of money but always seem to be broke. Why? Because they fail to save any money, spending it frivolously on the things they want and think they need. Are these people really wealthy? I will say that just because someone may be accumulating a lot of “things” and “luxuries” does not necessarily make them wealthy, as this doesn’t go toward securing financial security later in life, which is what you do when you really become wealthy. Read the rest of this entry »

The two foremost analyses in predicting the capital markets are the fundamental analysis and the technical analysis. Both have their own advantages and limitations. Many investors use both of them together as complementary to one another.

Basis of Technical Analysis

The fundamental principle behind technical analysis is that the fundamentals get quickly absorbed in the price of an asset and, therefore, it is enough to concentrate only on technical. According to believers of technical analysis, it is not at all necessary to ponder over fundamentals of a stock or currency.

It is hard to comprehend and to accurately predict all the factors impacting the price of a traded unit. Moreover, it may also not be necessary to try to give too much attention to all the factors behind the prices of securities and currencies. Therefore, it may not be possible to grasp all the fundamental factors.

We are living in a highly informative age. Whenever there is any important news, it spreads quickly and all the players adjust their positions accordingly and fast. There are hardly any lags. All their actions get immediately reflected in the price of an asset. Therefore, price is the main barometer of the movement of a stock. That is the spirit behind technical analysis. Read the rest of this entry »

In general terminology the abbreviation “pip” may refer to many things like Protective Industrial Products, Picture-in-Picture, Personal Identity Provider, Partners in Protection, Preferred Internet Provider, Performance Index Paper etc.

In currency trading “pip” stands for “percentage in point”. This is the smallest increment of change in forex trade. It is the smallest number in quotation of a currency.

In foreign exchange market, rates are quoted to the fourth decimal point. For example, if the price of a burger in the market is $1.22, in forex market the same burger will be quoted as 1.2200. Under this example, the 4th decimal point will constitute one pip and normally equals 1/100th of 1%. Read the rest of this entry »

Currency trading scams can take many forms. Essentially it means defrauding individual traders by convincing them that they can make huge profits by trading in foreign currency.

A retail trader can be asked to pay commissions, buy some sort of software promising high profits, participating in fake managed accounts, false advertising, ponzi or HYIP schemes and plain fraud. All of these will constitute currency scams.

Foreign currency trading involves equal potential for both profits and losses. If somebody claims that there is minimal risk and great profit potential in forex trading, that is also forex scam. Forex scams mostly occur with non-bank forex traders. The main reason being ignorance of individuals, greed, lack of education, improper selection of brokers or trading platforms and lack of control. Read the rest of this entry »

Courage Under Stressful Conditions When the Outcome is Uncertain All the foreign exchange trading knowledge in the world is not going to help, unless you have the nerve to buy and sell currencies and put your money at risk. As with the lottery “You gotta be in it to win it”. Trust me when I say that the simple task of hitting the buy or sell key is extremely difficult to do when your own real money is put at risk.

You will feel anxiety, even fear. Here lies the moment of truth. Do you have the courage to be afraid and act anyway? When a fireman runs into a burning building I assume he is afraid but he does it anyway and achieves the desired result. Unless you can overcome or accept your fear and do it anyway, you will not be a successful trader.

However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction can become an issue – you’re overconfident and not focused enough on the risk you’re taking.

Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one. Read the rest of this entry »

Forex trading is done in pairs of currencies. One currency is called the base and the second constitutes the quote or counter currency.

For example, EUR/USD is one pair of currency. Under this pair, EURO is the base currency and USD or US dollar is the counter currency. Here, it has to be seen how many units of the counter currency are needed in order to buy a unit of the base currency. The quotation EUR/USD 1.2500 will mean that 1.25 of US dollar will be needed to buy one unit of Euro.

The above rate may go up or down as USD strengthens or weakens. Trading always takes place in combination of two currencies or currency pairs.

There is always a long (bought) and short (sold) side to any forex transaction. One buys Euro (long) in exchange for yen (short) or sell sterling pound (short) in exchange for Euro (long). Profits or losses are reflected in the second currency. Read the rest of this entry »