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Example Of A Profitable Transaction In Forex.
By Adrian Pablo, Thu Dec 8th
As it was mentioned earlier, there are TWO timeless rules ofInvesting in FOREX: RULE #1) ~ Cut your losers; let your winners ride. YOU WILL HAVE LOSING TRADES.
We do. Every FOREX trader does. The key to being a consistent,predictable, reliable trader is to, at the end of the day, addup more wins than losses. And, when you KNOW (based off yourtrading rules), without a doubt, that YES, indeed you are, in alosing trade, don't keep losing money (lowering your stop loss)just to *prove you are right* or your rules are wrong (howeveryou want to look at it). Let's face it - you can't turn a sow's ear into a silk purse.You can't change the spots of a leopard and you can't turnchicken poop into chicken salad. The best trades are usually"right" immediately (the techniques, rules, methods andstrategies we teach at RapidForex.com will be your bestindicator for just what a "right" trade really is). Remember, people have been trading the markets for a hundred andsixty years. The smart traders know there's going to be anothertrade. Cut your loses short and compound those winning positions. RULE #2) ~ Thou Shall Not Trade the FOREX Without the Placing ofa Stop Loss Order. When you place a STOP order, right along with your ENTRY order,via your online trade station, you've just automaticallyprevented a potential loss from "running" too far. Before initiating any trade, if you haven't already figured outat what point you would be wrong and would want to cut yourloses or, at the very least, reevaluate your position from thesidelines, then you shouldn't be putting on the trade in thefirst place. Show us a FOREX trader who doesn't use stop loss orders andwe'll show you someone who loses a lot of money. To make a profit, in the FOREX, a trader (possibly YOU soon?)can enter the market as a *buy position* (known as going "long")or a *sell position* (known as going "short"). For discussion, let's assume you've been studying the EURO. Your trading methods, rules, strategies, etc., tell you thatprices will rise during a particular timeframe. So you buy theEUR/USD pair (or, technically, you will simultaneously buyeuros, the base currency, and sell dollars). You open up your handy trading station software (provided to youfor free by the online broker), which resides on your desktop,and you see that the EUR/USD pair is trading at: << EUR/USD: 1.3242/45 >> REMEMBER: the quote to the left of the / (1.3242) refers to thebid or "sell" price (what you obtain in USD when you sell EUR).The quote to the right of the / (1.3245) is used to obtain
Gold Prices Dropped while Silver was Unchanged ? USD Up vs JPY but Down vs EUR <b>...</b>
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<a href="http://www.bestsyndication.com/?q=20120206_futures_forex_signals_gold_euro_dollar_yen.htm" style="font-size:1.2em">Gold Prices Dropped while Silver was Unchanged ? USD Up vs JPY but Down vs EUR <b>...</b></a>
<br> <span style="color:#888888;">Best Syndication</span> - <span style="white-space:nowrap">1 hour ago </span>
<div style="width:80%;">(Best Syndication News) Brent crude oil advanced today as tensions between Iran and the United States continued to fester (see forex and commodities charts below).</div>
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British Pound Sterling: Currency continues advance against EUR, safe haven <b>...</b>
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<a href="http://www.euro-exchangerate.com/british-pound-eur-safe-haven-06021355.html" style="font-size:1.2em">British Pound Sterling: Currency continues advance against EUR, safe haven <b>...</b></a>
<br> <span style="color:#888888;">Euro Exchange Rate News</span> - <span style="white-space:nowrap">21 hours ago </span>
<div style="width:80%;">The Pound continued its advance against the Euro this morning, but the UK currency declined for a second day versus the US Dollar, as market speculation escalates over the prospect of further quantitative easing from the Bank of England this week.</div>
<a href="http://www.economy-news.co.uk/british-pound-sterling/1097-british-pound-up-as-eco-data-provides-a-boost-43534543">British Pound Sterling | Currency News Views and Outlook</a> - <span style="color:#888888">Economy News</span><br>
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Forex Trading and Currency Exchange Rates ? USD/JPY rises as EUR/USD drops
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<a href="http://www.bestsyndication.com/?q=20120205_forex_signals_usd_jpy_eur.htm" style="font-size:1.2em">Forex Trading and Currency Exchange Rates ? USD/JPY rises as EUR/USD drops</a>
<br> <span style="color:#888888;">Best Syndication</span> - <span style="white-space:nowrap">Feb 6, 2012 </span>
<div style="width:80%;">(Best Syndication News) The dollar is trending higher early Monday as stock markets in Europe open lower (see forex tables below).</div>
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Currency Futures: Forex Speculators cut US Dollar bets. Aussie, Kiwi & Peso <b>...</b>
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<a href="http://countingpips.com/fx/2012/02/05/currency-futures-forex-speculators-cut-us-dollar-bets-aussie-kiwi-peso-positions-continue-rise/" style="font-size:1.2em">Currency Futures: Forex Speculators cut US Dollar bets. Aussie, Kiwi & Peso <b>...</b></a>
<br> <span style="color:#888888;">CountingPips (blog)</span> - <span style="white-space:nowrap">Feb 5, 2012 </span>
<div style="width:80%;">By CountingPips.com The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures speculators cut back on their US dollar long positions last week and Euro short ...</div>
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Forex Trading and Commodities ? Gold and Silver Prices Advance while USD was <b>...</b>
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<a href="http://www.bestsyndication.com/?q=20120202_forex_signals_futures_gold_silver.htm" style="font-size:1.2em">Forex Trading and Commodities ? Gold and Silver Prices Advance while USD was <b>...</b></a>
<br> <span style="color:#888888;">Best Syndication</span> - <span style="white-space:nowrap">Feb 3, 2012 </span>
<div style="width:80%;">(Best Syndication News) Gold prices jumped again today as traders took advantage of the long-term policy signals from the Federal Reserve (see forex and futures charts below).</div>
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British Pound Sterling: Currency in 10-week high vs USD while falls vs EUR <b>...</b>
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<a href="http://www.euro-exchangerate.com/british-pound-high-vs-us-dollar-01021330.html" style="font-size:1.2em">British Pound Sterling: Currency in 10-week high vs USD while falls vs EUR <b>...</b></a>
<br> <span style="color:#888888;">Euro Exchange Rate News</span> - <span style="white-space:nowrap">Feb 1, 2012 </span>
<div style="width:80%;">Also boosting the pound sterling is news that UK manufacturing kicked back into life in January. British Pound Sterling (GBP) in US Dollar (USD): GBPUSD is unchanged at 1.5757.</div>
<a href="http://www.economy-news.co.uk/british-pound-sterling/1093-british-pound-gbp-up-against-us-dollar-usd-456456456">British Pound Sterling: Currency faces 'another slug of QE' of 75bn GBP should <b>...</b></a> - <span style="color:#888888">Economy News</span><br>
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Gold Prices Climb as Silver Slips? USD Higher vs EUR but Lower vs JPY ? Brent <b>...</b>
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<a href="http://www.bestsyndication.com/?q=20120131_forex_trading_usd_eur_jpy_gold_silver_prices.htm" style="font-size:1.2em">Gold Prices Climb as Silver Slips? USD Higher vs EUR but Lower vs JPY ? Brent <b>...</b></a>
<br> <span style="color:#888888;">Best Syndication</span> - <span style="white-space:nowrap">Feb 1, 2012 </span>
<div style="width:80%;">(Best Syndication News) Gold and silver prices moved in opposite directions Tuesday as traders looked for safe-havens (see forex and futures charts below).</div>
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British Pound Sterling: Currency finds GfK consumer confidence data of no use <b>...</b>
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<a href="http://www.euro-exchangerate.com/british-pound-to-euro-31011325.html" style="font-size:1.2em">British Pound Sterling: Currency finds GfK consumer confidence data of no use <b>...</b></a>
<br> <span style="color:#888888;">Euro Exchange Rate News</span> - <span style="white-space:nowrap">Jan 31, 2012 </span>
<div style="width:80%;">This morning the pound euro pair continues to be driven by events in the eurozone as domestic UK data fails to make an impact. British Pound Sterling (GBP) in US Dollar (USD): GBPUSD is 0.37% higher at 1.5770.</div>
<a href="http://www.economy-news.co.uk/british-pound-sterling/1078-quantitative-easing-in-february-3444354334-and-the-pound">British Pound Sterling: Currency fins support vs EUR and USD as Miles says QE <b>...</b></a> - <span style="color:#888888">Economy News</span><br>
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British Pound Sterling: Currency to fall further against US Dollar says <b>...</b>
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<a href="http://www.euro-exchangerate.com/pound-dollar-exchange-rate-forecast-27011314.html" style="font-size:1.2em">British Pound Sterling: Currency to fall further against US Dollar says <b>...</b></a>
<br> <span style="color:#888888;">Euro Exchange Rate News</span> - <span style="white-space:nowrap">Jan 27, 2012 </span>
<div style="width:80%;">Once the euphoria is over we should also see the euro dollar exchange rate retreating once more. British Pound Sterling (GBP) in Euro (EUR): GBPEUR is 0.13% lower at 1.1958.</div>
<a href="http://www.economy-news.co.uk/british-pound-sterling/1072-british-pound-and-quantitative-easing-forecasts-3435435435">British Pound Sterling: Analysts speculate on Quantitative Easing - 25bn, 50bn <b>...</b></a> - <span style="color:#888888">Economy News</span><br>
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DFC Global Corp. Announces Record Fiscal Second Quarter Results
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<a href="http://www.marketwatch.com/story/dfc-global-corp-announces-record-fiscal-second-quarter-results-2012-01-26" style="font-size:1.2em">DFC Global Corp. Announces Record Fiscal Second Quarter Results</a>
<br> <span style="color:#888888;">MarketWatch (press release)</span> - <span style="white-space:nowrap">Jan 26, 2012 </span>
<div style="width:80%;">BERWYN, Pa., Jan 26, 2012 (BUSINESS WIRE) -- DFC Global Corp. /quotes/zigman/6411860/quotes/nls/dllr DLLR +2.55% , a leading international diversified financial services company serving primarily unbanked and under-banked consumers for over 30 years, ...</div>
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theask or "buy" price (what you have to pay in USD if you buy EUR). So, since you believe that the market price for the EUR/USD pairwill go higher, you will enter a *buy position* in the market.For simplicities sake, let's say you bought one lot at 1.3245.As long as you sell back the pair at a higher price, then youmake money. But, no worries. This seemingly elaborate process is handled,and even calculated for you, via the broker's software mentionedabove. The chart software and the quote board are in agreementwith all sides of the currencies. To illustrate a typical FX SELL trade, consider this scenarioinvolving the USD/JPY pair: REMEMBER ~ Selling ("going short") the pair impliesselling the first, base currency, and buying the second, quotecurrency. You sell the pair if you believe the basecurrency (USD) will go down relative to the quote currency(JPY), or equivalently, that the quote (JPY) will go uprelative to the base (USD). NOTE: while the Profit Calculations, on the Short-sell tradescenario below, may seem somewhat complicated if you've neverbeen in the FOREX market before, trust us when we say, "thisprocess is nearly seamless through your broker trade station(software). We're just showing you this thought- process belowso you can SEE how a PROFIT occurs even when SELLING a currencypair. The current bid/ask price for USD/JPY is 105.26/105.30, meaningyou can buy $1 US for 105.30 Japanese YEN or sell $1 US for105.26 YEN. Suppose you decide that the US Dollar (USD) is overvaluedagainst the YEN (JPY). To execute this strategy, you would sellDollars (simultaneously buying YEN), and then wait for theexchange rate to rise. So you make the trade: selling US $100,000 and purchasing10,526,000 YEN. (Remember, at 1% margin, your initial margindeposit would be $1,000.) As you expected, USD/JPY falls to 104.26/104.30, meaning you cannow buy $1 US for $104.30 Japanese YEN or sell $1 US for 104.26 Since you're short dollars (and are long YEN), you must now buydollars and sell back the YEN to realize any profit. You buy US $100,000 at the current USD/JPY rate of 104.30, andreceive 10,430,000 YEN. Since you originally bought (paid for)10,526,000 YEN, your profit is 96,000 YEN. To calculate your P&L in terms of US dollars, simply divide96,000 by the current USD/JPY rate of 104.30. Total profit = US $920.42
About the author:Adrian Pablo, FOREX Trader and Freelance Writer. http://www.1-forex.com
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