Forex Knowledge Strategy | Increase Profit Forex Commodity Trading

Every day, millions of ordinary people around the world wake up, turn on their computers, and try to make a living by trading the financial markets. Some are successful, some fail, but the possibility of hitting it big attracts many to the business. As currency strategists and traders, authors Kathy Lien and Boris Schlossberg have been active in the markets for more than a decade, meeting many successful individual traders along the way.In Millionaire Traders, Lien and Schlossberg interview twelve ordinary individuals who have transformed themselves into extraordinary traders. These people aren’t hedge fund managers or employees of large money center banks with billions at their disposal, but regular folks who started with as little as $1,000 and turned those modest initial investments into six- to seven-figure fortunes.The traders you’ll encounter come from all walks of life, live around the world, and trade a variety of electronic markets. Some focus on equities and options, while others deal in futures or foreign exchange. Each has a very different style of trading—many that are even in direct conflict with each other—but all share the common traits of discipline, persistence, and the willingness to always cut losses.Some of the individuals who share their experiences in the art of trading include:Dana “Dan” Allen: the man who buys crashes and thrives on making bids when most other market participants are running for the exitsChuck Hayes: who breaks many of the sacrosanct rules of trading yet thrives in the chaotic world of e-mini stock index futures, where the difference between fortune and failure can be measured in secondsIndi Jones (this is an alias): who trades options for volatility as well as directionality, using sentiment and psychology to select his winning contrarian ideasRoland Campbell: who likes to trade news flow, but only the news that catches the market off guardWhile none of the traders highlighted throughout this book were successful from the start, all learned from their early failures and used those experiences to improve performance. Now, with Millionaire Traders, they’ll show you how to make serious money in today’s financial markets—whether it be through stocks, futures, or forex.

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Forex Knowledge is what I say to explain all about Forex. This blog will give anything information about Forex such forex indikator, forex strategy, forex broker, forex tutorial, ebook forex, and all information about forex. So let's start increase your forex knowledge with this introduction.

What is FOREX? The Foreign Exchange market, also referred to as the "FOREX" or "Forex" or "Retail forex" or “FX” or "Spot FX" or just "Spot" is the largest financial market in the world, with a volume of over $2 trillion a day. If you compare that to the $25 billion a day volume that the New York Stock Exchange trades, you can easily see how enormous the Foreign Exchange really is. It actually eq9 P a g e uates to more than three times the total amount of the stocks and futures markets combined! Forex rocks! What is traded on the Foreign Exchange? The simple answer is money. Forex trading is the simultaneous buying of one currency and the selling of another. Currencies are traded through a broker or dealer, and are traded in pairs; for example the Euro dollar and the US dollar (EUR/USD) or the British pound and the Japanese Yen (GBP/JPY). Because you're not buying anything physical, this kind of trading can be confusing. Think of buying a currency as buying a share in a particular country. When you buy, say, Japanese Yen, you are in effect buying a share in the Japanese economy, as the price of the currency is a direct reflection of what the market thinks about the current and future health of the Japanese economy. In general, the exchange rate of a currency versus other currencies is a reflection of the condition of that country's economy, compared to the other countries' economies. Unlike other financial markets like the New York Stock Exchange, the Forex spot market has neither a physical location nor a central exchange. The Forex market is considered an Over-the-Counter (OTC) or 'Interbank' market, due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period. Until the late 1990’s, only the “big guys” could play this game. The initial requirement was that you could trade only if you had about ten to fifty million bucks to start with! Forex was originally intended to be used by bankers and large institutions - and not by us “little guys”. However, because of the rise of the Internet, online Forex trading firms are now able to offer trading accounts to 'retail' traders like us. All you need to get started is a computer, a high-speed Internet connection, and the information contained within this site.

Tip 1. Gamblers go to casino. All unproved, spontaneous actions in Forex trading — are a part of pure gambling.Any attempt to trade without analysis and studying the market is equal to a game. Game is fun except when you are losing real money...
Tip 2. Never invest money into a real Forex account until you practice on a Forex Demo account! Allow at least 2 month for demo trading. Consider this: 90% of beginners fail to succeed in the real money market only because of lack of knowledge, practice and discipline. Those remaining 10% of successful traders had been sharpening and shaping their skills on demo accounts for years before entering the real market.A good demo account to start practicing with could be.
Tip 3. Go with the trend! Trend is your friend. Trade with the trend to maximize your chances to succeed. Trading against the trend won't "kill" a trader, but will definitely require more attention, nerves and sharp skills to rich trading goals.
Tip 4. Always take a look at the time frame bigger than the one you've chosen to trade in. It gives the bigger picture of market price movements and so helps to clearly define the trend. For example, when trading in 15 minute time frame, take a look at 1 hour chart; trading hourly would require obtaining a picture of daily, weekly price movements.
If a trend is hard to spot — choose a bigger time frame. Up and down market patterns are always present. Always make sure you know the dominant trend, unless you are a scalper. Scalpers have no need to spend their time studying big trends, what's happening in the market here and now (during 5-10 minute time frame) should be of only importance to a Forex scalper.
Tip 5. Never risk more than 2-3% of the total trading account. One important difference between a successful and an unsuccessful trader is that the first is able to survive under unfavorable conditions on the market, while an unsuccessful trader will blow up his account after 5-10 unprofitable trades in the row.
Even with the same trading system 2 traders can get opposite results in the long run. The difference will be again in money management approach. To introduce you to money management, let's get one fact: losing 50% of total account requires making 100% return from the rest of money just to restore the original balance.
Tip 6. Put emotions down. Trade calm. Don't try to revenge after losing the trade. Don't be greedy by adding lots of positions when winning.Overreaction blocks clear thinking and as a result will cost you money. Overtrading can shake your money management and dramatically increase trading risks.
Tip 7. Choose the time frame that is right for you. Choosing wise means that you are comfortable and have time enough to analyze the market, place and close orders etc. Some people can't wait for hours for the price to make a move, they like action and therefore prefer smaller time frames. On the contrary, for others 10-15 minutes is a hustle to be able to make the right decision.

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Hot Trading Secrets

Master the market for maximum profits with HOT TRADING SECRETS Playing the trading game takes audacious confidence, but winning takes more. It's about making chances instead of taking chances. As founder of the remarkably successful Taipan Group-a team of independent financial analysts-author J. Christoph Amberger knows: ""There is always an opportunity to make exceptional stock market profits . . . as long as you know how to read the signs."" In Hot Trading Secrets,
Amberger gives you a blueprint for making big money in any financial climate. He will teach you: How to trade on ""insider information"" legally and profitably The secret strategies of CBOE floor traders How to profit from the ""Red Zones"" How to become a stone-cold profit predator In a simple step-by-step presentation, Amberger will liberate you from restrictive conventional fallacies. Using Hot Trading Secrets as your guide, you will learn to exploit volatile market events to achieve consistent profits-whether the market is up or down.

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Traders· fondly refer to the MACD as "the mac-dee." The acronym stands for "moving average convergence-divergence" (say that fast three times!). Multifaceted, the MACD not only acts as an indicator, it also plays the role of an oscillator. Developed by Gerald Appel, publisher of Systems and Forecasts, the MACD is a trend-following momentum indicator/oscillator that illustrates the relationship between the 26-day and 12-day exponential moving averages of an equity's price pattern. A 9-day exponential moving average, referred to as the "signal line," overlays the MACD and indicates buy/sell setups.
Since the MACD is a "lagging" indicator, meaning it delivers signals from information that's already taken place (the S&P and Nasdaq 100 futures are "leading" indicators), it is best used in strongly rending markets. Because the traditional MACD usually arrives a bit late to the party (read: trend reversal), short-term traders may leave money on the table by adhering strictly to its signals. To obtain faster signals, I recommend using the MACD histogram, available on most charting programs. The MACD Histogram (MACD-H) represents the difference between the MACD and its 9-day exponential MA. Don't worry if your brain tangles over that one. Your charting program understands it! Just insert it on your chart, above the volume indicator. The MACD-H will snake above and below its zero line, moving into positive (above zero) or negative (below zero) territory.
MACD-H signals are:
Crossovers. Buy signal (bullish) equals when the MACD-H rises above its zero line. Sell signal (bearish) equals when the MACD-H tumbles below the zero line.
Overbought/oversold indicators. As an overbought/oversold oscillator, when the MACD-H rises to the top of its scale and resembles a majestic mountain, the stock may. be overbought and ready to pullback. When the MACD-H edges below the zero line and digs a deep scoop to the downside, the stock is oversold. WQen the histogram bars shorten and edge back up, the stock should be preparing to bounce.Fun to do: Use a MACD-H on a weekly chart to generate a long-term buy/sell signal. Then, go to a daily chart of the same stock, and only trade in the direction of that longer-term signal.

Traders sometimes refer to the Stochastic (pronounced sto kas tik) Oscillator, as "Stochastics," because it employs two lines to give a single signal. An overbought/oversold indicator developed by Dr.. George Lane, the Stochastic Oscillator compares where a stock's price closed at to its price range over a specific period of time. The driving principle: as a price rises in an uptrend, the closing price moves to the upper end of the recent price range. In a downtrend, closing prices usually sink to the b,ottom of the range. We won't study the actual calculation here. And believe me, if you ever see it, you'll be glad we didn't! Again, the Stochastic Oscillator is displayed in two lines. The major line is called the "%K." The second line is referred to as the "%D," and is a 3-day moving average of the %K. Many times you'll see the % K as a solid line and the % D as a dotted line. Stochastics come in two flavors-fast Stochastics,and slow Stochastics. The one described in the previous paragraph is fast Stochastics. In slow Stochastics, the slow %K equals the fast %D, with the slow %D equaling
a 3-day average of the fast %D.
Got that? If not, cheer up. Your charting software understands the equations needed to calculate the display. For the record, I prefer the fast Stochastics, although slow Stochastics has a smoother look. In tandem, the %K and %D lines rise and fall between zero and 100. Readings above 80 are considered overbought, and readings below 20 are oversold. The Stochastics buy/sell signal is as follows:
Buy-when the lines are below 20, and the faster %K line crosses above the slower %D line. (Watch out for short-term crossovers. Use indicators to confrrm the reversal.)
Sell-when the lines are above 80, and the %K crosses the %D to the downside.
Look for divergences, just as you do with the RSI. An example: Bossy Bank makes a new high. At the same time, the Stochastics moves sideways or hooks to the downside. That's called a "bearish divergence." Assume the price will soon follow the Stochastics south. Or, while Bossy Bank experiences a normal consolidation period in an uptrend, the Stochastic suddenly hooks up. Referred to as a "bullish divergence," it tells you to prepare for a continuation of Bossy Bank's uptrend within the next few time periods.

Book Description Profiting with Forex introduces investors to all the advantages of the global foreign exchange market and shows them how to capitalize on it. Readers will learn why forex is the perfect supplement to stock and bond investing; why it is unrivaled in terms of protection, profit potential, and ease of use; and how it can generate profits, whether the other markets are up of down. Written by two leading forex experts, this complete investing resource uses basic economic principles, solid technical analysis, and lots of common sense to develop an arsenal of tools and techniques that will lead to winning results in the lucrative foreign exchange marketplace. Profiting with Forex includes everything that investors need to know about: # The many advantages of the forex market: huge market size, ease of entry, profit potential, tax incentives, 24-hour trading, no commissions, increased leverage, and guaranteed stops # The basic terms of forex trading: definitions of important concepts, including "pip," "currency pair," "contract" or "lot," and more # Genesis and growth of the forex market: how the forex market emerged out of a changing global financial landscape and continues to changes and adapt with that same volatile landscape # Fundamental factors that shape the Forex market: the U.S. government, inflation, the U.S. stock market, China and other emerging markets, oil, and breaking news # Fundamental tools for tracking Forex market changes: interest rates, Treasury International Capital Data, Consumer Price Index, S&P 500, U.S. dollar vs. Chinese yuan, balance of trade, crude oil futures, and news media # Technical analysis tools and indicators for gauging market sentiment: moving averages, oscillating indicators such as, stochastics, Commodity Channel Index, Relative Strength Index, Fibonacci analysis, and others Filled with over 150 illustrations and figures, Profiting with Forex also shows investors how to combine their newly acquired knowledge of Forex fundamentals with proven trading techniques that can generate great rewards in the market.

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Analysis in Forex
There are 2 basic types of analysis you can take when approaching the forex:
1. Fundamental analysis
2. Technical analysis.
There has always been a constant debate as to which analysis is better, but to tell you thetruth, you need to know a little bit of both. So let’s break each one down and then come back and put them together.
Fundamental Analysis
Fundamental analysis is a way of looking at the market through economic, social and political forces that affect supply and demand. In other words, you look at whose economy is doing well, and whose economy sucks. The idea behind this type of analysis is that if a country’s economy is doing well, their currency will also be doing well. This is because the better a country’s economy, the more trust other countries have in that currency. For example, the U.S. dollar has been gaining strength because the U.S. economy is gaining strength. As the economy gets better, interest rates get higher to control inflation and as a result, the value of the dollar continues to increase. In a nutshell, that is basically what fundamental analysis is. Later on in the course you will learn which specific news events drive currency prices the most. For now, just know that the fundamental analysis of the Forex is a way of analyzing a currency through the strength of that country’s economy.

Technical Analysis
The most IMPORTANT thing you will ever learn in technical analysis is the trend! Many, many, many, many, many, many people have a saying that goes, “The trend is your friend”. The reason for this is that you are much more likely to make money when you can find a trend and trade in the same direction. Technical analysis can help you identify
these trends in its earliest stages and therefore provide you with very profitable trading
opportunities. Now I know you’re thinking to yourself, “Geez, these guys are smart. They use crazy words like "technical" and "fundamental" analysis. I can never learn this stuff!” Don't worry yourself too much. After you're done with the School of Pipsology, you too will be just as....uhmmm..."smart?" as us.

So which type of analysis is better?
Ahh, the million dollar question. Throughout your journey as an aspiring Forex trader you will find strong advocates for both fundamental and technical trading. You will have those who argue that it is the fundamentals alone that drive the market and that any patterns found on a chart are simply coincidence. On the other hand, there will be those who argue that it is the technicals that traders pay attention to and because traders pay attention to it, common market patterns can be found to help predict future price movements. Do not be fooled by these one sided extremists! One is not better than the other... Technical analysis is the study of price movement. In one word, technical analysis = charts. The idea is that a person can look at historical price movements, and, based on the price action, can determine at some level where the price will go. By looking at charts, you can identify trends and patterns which can help you find good trading opportunities. In order to become a true Forex master you will need to know how to effectively use both types of analysis. Don't believe me? Let me give you an example of how focusing on only one type of analysis can turn into a disaster.
• Let’s say that you’re looking at your charts and you find a good trading opportunity. You get all excited thinking about the money that’s going to be raining down from the sky. You say to yourself, “Man, I’ve never seen a more perfect trading opportunity. I love my charts.”
• You then proceed to enter your trade with a big fat smile on your face (the kind where all your teeth are showing).

What to look for in an online Forex broker/dealer:
1. Low Spreads.
In Forex trading the ‘spread’ is the difference between the buy and sell price of any given currency pair. Lower spreads save you money.
2. Low minimum account openings.
For those that are new to Forex trading and for those that don’t have millions of dollars in risk capital to trade, being able to open a micro trading account with only $250 (we recommend at least $1,000) is a great feature for new traders.
3. Instant automatic execution of your orders.
This is very important when choosing a Forex broker. Don’t settle with a firm that re-quotes you when you click on a price or a firm that allows for price ‘slippage’. This is very important when trading for small profits. You want what we call a WYSIWYG (pronounced wiz-ee-wig) broker! This means you want instant execution of your orders and the price you see and "click" is the price that you should get...WYSIWYG = What You See Is What You Get!
4. Free charting and technical analysis
Choose a broker that gives you access to the best charting and technical analysis available to active traders. Look for a broker that provides free professional charting services and allows traders to trade directly on the charts.
5. LeverageLeverage can either make you super rich or super broke. Most likely, it will be the latter. As an inexperienced trader, you don't want too much leverage. A good rule of thumb is to not use more than 100:1 leverage for Standard (100k) accounts and 200:1 for Mini (10k) accounts.

There are some basic order types that all brokers provide and some others that sound
weird. The basic ones are:
• Market order
A market order is an order to buy or sell at the current market price. For example,EUR/USD is currently trading at 1.2140. If you wanted to buy at this exact price, you would click buy and your trading platform would instantly execute a buy order at that exact price. If you ever shop on Amazon.com, it's (kinda) like using their 1-Click ordering. You like thecurrent price, you click once and it's yours! The only difference is you are buying or selling one currency against another currency instead of buying Britney Spears CDs.
• Limit order
A limit order is an order placed to buy or sell at a certain price. The order essentially contains two variables, price and duration. For example, EUR/USD is currently trading at 1.2050. You want to go long if the price reaches 1.2070. You can either sit in front of your monitor and wait for it to hit 1.2070 (at which point you would click a buy market order), or you can set a buy limit order at 1.2070 (then you could walk away from your computer to attend your ballroom dancing class). If the price goes up to 1.2070, your trading platform will automatically execute a buy order at that exact price. You specify the price atwhich you wish to buy/sell a certain currency pair and also specify how long you want the order to remain active (GTC or GFD).
• Stop-loss order
A stop-loss order is a limit order linked to an open trade for the purpose of preventing additional losses if price goes against you. A stop-loss order remains in effect until the position is liquidated or you cancel the stop-loss order. For example, you went long (buy) EUR/USD at 1.2230. To limit your maximum loss, you set a stop-loss order at 1.2200. This means if you were dead wrong and EUR/USD drops to 1.2200 instead of moving up, your trading platform would automatically execute a sell order at 1.2200 and close out your position for a 30 pip loss (eww!). Stop-losses are extremely useful if you don't want to sit in front of your monitor all day worried that you will lose all your money. You can simply set a stop-loss order on any open positions so you won't miss your basket weaving class.
• GTC (Good ‘til canceled)
A GTC order remains active in the market until you decide to cancel it. Your broker will not cancel the order at any time. Therefore it's your responsibility to remember that you have the order scheduled.
• GFD (Good for the day)
A GFD order remains active in the market until the end of the trading day. Because foreign exchange is a 24-hour market, this usually means 5pm EST since that that's U.S. markets close, but I’d recommend you double check with your broker.
• OCO (Order cancels other)
An OCO order is a mixture of two limit and/or stop-loss orders. Two orders with price and duration variables are placed above and below the current price. When one of the orders is executed the other order is canceled. Example: The price of EUR/USD is 1.2040. You want to either buy at 1.2095 over the resistance level in anticipation of a breakout or initiate a selling position if the price falls below 1.1985. The understanding is that if 1.2095 is reached, you will buy order will be triggered and the 1.1985 sell order will be automatically canceled.

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The FX market, you buy or sell currencies. Placing a trade in the foreign exchange market is simple: the mechanics of a trade are very similar to those found in other markets (like the stock market), so if you have any experience in trading, you should be able to pick it up pretty quickly.
The object of Forex trading is to exchange one currency for another in the expectation that the price will change, so that the currency you bought will increase in value compared to the one you sold.
Example of making money by buying Euros
Trader's Action EUR USD You purchase 10,000 euros at the EUR/USD exchange rate of 1.18
Two weeks later, you exchange your 10,000 euros back into US dollars at the exchange rate of 1.2500.
you earn a profit of $700. 0 +700
EUR $10,000 x 1.18 = US $11,800
EUR $10,000 x 1.25 = US $12,500
An exchange rate is simply the ratio of one currency valued against another currency. For example, the USD/CHF exchange rate indicates how many U.S. dollars can purchase one Swiss franc, or how many Swiss francs you need to buy one U.S. dollar. How to Read an FX Quote Currencies are always quoted in pairs, such as GBP/USD or USD/JPY. The reason they are quoted in pairs is because in every foreign exchange transaction you are simultaneously buying one currency and selling another. Here is an example of a foreign exchange rate for the British pound versus the U.S. dollar:
GBP/USD = 1.7500
The first listed currency to the left of the slash ("/") is known as the base currency (in this example, the British pound), while the second one on the right is called the counter or quote currency (in this example, the U.S. dollar). When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency. In the example above, you have to pay 1.7500 U.S. dollar to buy 1 British pound. When selling, the exchange rate tells you how many units of the quote currency you get for selling one unit of the base currency. In the example above, you will receive 1.7500 U.S. dollars when you sell 1 British pound. The base currency is the “basis” for the buy or the sell. If you buy EUR/USD this simply
means that you are buying the base currency and simultaneously selling the quote currency.
You would buy the pair if you believe the base currency will appreciate (go up) relative to the quote currency. You would sell the pair if you think the base currency will depreciate (go down) relative to the quote currency.
Long/Short
First, you should determine whether you want to buy or sell. If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader's talk, this is called "going long" or taking a "long position". Just remember: long = buy.
If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called "going short" or taking a "short position". Short = sell. Bid/Ask Spread
All Forex quotes include a two-way price, the bid and ask. The bid is always lower than the ask price. The bid is the price in which the dealer is willing to buy the base currency in exchange for the quote currency. This means the bid is the price at which you (as the trader) will sell. The ask is the price at which the dealer will sell the base currency in exchange for the quote currency. This means the ask is the price at which you will buy. The difference between the bid and the ask price is popularly known as the spread. Let's take a look at an example of a price quote taken from a trading platform:
On this GBP/USD quote, the bid price is 1.7445 and the ask price
is 1.7449. Look at how this broker makes it so easy for you to
trade away your money.
If you want to sell GBP, you click "Sell" and you will sell pounds
at 1.7445. If you want to buy GBP, you click "Buy" and you will
buy pounds at 1.7449.
In the following examples, we're going to use fundamental analysis to help us decide whether to buy or sell a specific currency pair. If you always fell asleep during your economics class or just flat out skipped economics class, don’t worry! We will cover fundamental analysis in a later lesson. For right now, try to pretend you know what’s going on…
EUR/USD
In this example Euro is the base currency and thus the “basis” for the buy/sell. If you believe that the US economy will continue to weaken, which is bad for the US dollar, you would execute a BUY EUR/USD order. By doing so you have bought euros in the expectation that they will rise versus the US dollar. if you believe that the US economy is strong and the euro will weaken against the US dollar you would execute a SELL EUR/USD order. By doing so you have sold Euros in the expectation that they will fall versus the US dollar.
USD/JPY
In this example the US dollar is the base currency and thus the “basis” for the buy/sell. If you think that the Japanese government is going to weaken the Yen in order to help its export industry, you would execute a BUY USD/JPY order. By doing so you have bought U.S dollars in the expectation that they will rise versus the Japanese yen. If you believe that Japanese investors are pulling money out of U.S. financial markets and converting all their U.S. dollars back to Yen, and this will hurt the US dollar, you would execute a SELL USD/JPY order. By doing so you have sold U.S dollars in the expectation that they will depreciate against the Japanese yen.
GBP/USD
In this example the GBP is the base currency and thus the “basis” for the buy/sell. If you think the British economy will continue to do better than the United States in terms of economic growth, you would execute a BUY GBP/USD order. By doing so you have bought pounds in the expectation that they will rise versus the US dollar. If you believe the British's economy is slowing while the United State's economy remains strong like bull, you would execute a SELL GBP/USD order. By doing so you have sold pounds in the expectation that they will depreciate against the US dollar.
USD/CHF
In this example the USD is the base currency and thus the “basis” for the buy/sell. If you think the Swiss franc is overvalued, you would execute a BUY USD/CHF order. By doing so you have bought US dollars in the expectation that they will appreciate versus the Swiss Franc. If you believe that the US housing market bubble burst will hurt future economic growth, which will weaken the dollar, you would execute a SELL USD/CHF order. By doing so you have sold US dollars in the expectation that they will depreciate against the Swiss franc. I don't have enough money to buy $10,000 euros. Can I still trade?
You can with margin trading! Margin trading is simply the term used for trading with borrowed capital. This is how you're able to open $10,000 or $100,000 positions with as little as $50 or $1,000. You can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital. Margin trading in the foreign exchange market is quantified in “lots”. For now, just think of the term "lot" as the minimum amount of currency you have to buy. When you go to the grocery store and want to buy an egg, you can't just buy a single egg; they come in dozens or "lots" of 12. In Forex, it would be just as foolish to buy or sell $1 EUR, so they usually come in "lots" of $10,000 or $100,000 depending on the type of account you have.
For Example:
• You believe that signals in the market are indicating that the British Pound will go up
against the US Dollar.
• You open 1 lot ($100,000) for buying the Pound with a 1% margin at the price of
1.5000 and wait for the exchange rate to climb. This means you now control $100,000
worth of British Pound with $1,000. Your predictions come true and you decide to
sell.
• You close the position at 1.5050. You earn 50 pips or about $500. (A pip is the
smallest price movement available in a currency). So for an initial capital investment
of $1,000, you have made 50% return. Return equals your $500 profit divided by your
$1,000 you risked to trade.
Your Actions GBP USD
Your Money
You buy 100,000 pounds at the GBP/USD exchange
rate of 1.5000
+100,000 -150,000 $1,000
You blink for two seconds and the GBP/USD
exchange rate rises to 1.5050 and you sell.
-100,000 +150,500** $1,500
You have earned a profit of $500. 0 +500
When you decide to close a position, the deposit that you originally made is returned to you and a calculation of your profits or losses is done. This profit or loss is then credited to your account.
We will also be discussing margin more in-depth in the next lesson, but hopefully you're
able to get a basic idea of how margin works.

source: School of Pipsology

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There are many benefits and advantages to trading Forex. Here are just a few reasons why
so many people are choosing this market:
• No commissions.
No clearing fees, no exchange fees, no government fees, no brokerage fees. Brokers are compensated for their services through something called the bid-ask spread.
• No middlemen.
Spot currency trading eliminates the middlemen, and allows you to trade directly with the market responsible for the pricing on a particular currency pair.
• No fixed lot size.
In the futures markets, lot or contract sizes are determined by the exchanges. A standard-size contract for silver futures is 5000 ounces. In spot Forex, you determine your own lot size. This allows traders to participate with accounts as small as $250 (although we explain later why a $250 account is a bad idea).
• Low transaction costs.
The retail transaction cost (the bid/ask spread) is typically less than 0.1 percent under normal market conditions. At larger dealers, the spread could be as low as .07 percent. Of course this depends on your leverage and all will be explained later.
• A 24-hour market.
There is no waiting for the opening bell - from Sunday evening to Friday afternoon EST, the Forex market never sleeps. This is awesome for those who want to trade on a part-time basis, because you can choose when you want to trade--morning, noon or night.
• No one can corner the market.
The foreign exchange market is so huge and has so many participants that no single entity (not even a central bank) can control the market price for an extended period of time.
• Leverage.
In Forex trading, a small margin deposit can control a much larger total contract value. Leverage gives the trader the ability to make nice profits, and at the same time keep risk capital to a minimum. For example, Forex brokers offer 200 to 1 leverage, which means that a $50 dollar margin deposit would enable a trader to buy or sell $10,000 worth of currencies. Similarly, with $500 dollars, one could trade with $100,000 dollars and so on. But leverage is a double-edged sword. Without proper risk management, this high degree of leverage can lead to large losses as well as gains.
• High Liquidity.
Because the Forex Market is so enormous, it is also extremely liquid. This means that under normal market conditions, with a click of a mouse you can instantaneously buy and sell at will. You are never "stuck" in a trade. You can even set your online trading platform to automatically close your position at your desired profit level (a limit order), and/or close a trade if a trade is going against you (a stop loss order).
• Free “Demo” Accounts, News, Charts, and Analysis.
Most online Forex brokers offer 'demo' accounts to practice trading, along with breaking Forex news and charting services. All free! These are very valuable resources for “poor” and SMART
traders who would like to hone their trading skills with 'play' money before opening a live trading account and risking real money.
• “Mini” and “Micro” Trading:
You would think that getting started as a currency trader would cost a ton of money. The fact is, compared to trading stocks, options or futures, it doesn't. Online Forex brokers offer "mini" and “micro” trading accounts, some with a minimum account deposit of $300 or less. Now we're not saying you should open an account with the bare minimum but it does makes Forex much more accessible to the average (poorer) individual who doesn't have a lot of start-up trading capital.

sorce:School of Pipsology