Forex Trading FAQ

What is currency trading?
Simply stated, each country has its own currency. Currency trading occurs when one country's currency is traded for another country's currency at the prevailing exchange rate.
How is currency traded?
All currency trading is traded in LOTS. Each lot has a different amount of currency. For example; a Swiss Franc lot has 125,000 Swiss Francs in it. A trader does not buy lots in order to buy and sell it or trade it. A trader opens a margin account, enabling him the right to trade it.
What is a margin account?
A margin account is a bond account. It is like a savings account. Before you can trade, you need to place a certain amount of money in what is called a margin account. You are guaranteeing other traders that you can pay them if you lose. That account is overseen by your broker. He monitors your account when you trade. He usually will not allow you to risk more than what is in your margin account. The margin account exists so, as you win on a daily basis, they have a place to deposit your money. Conversely, when you lose, they have an account to withdraw the money.
How is money made trading currencies?
Currencies are traded on a point or pip system. A pip is another word for a point in the currency trading arena. Traders are trying to capture points. Depending on the currency, each point is worth a different amount. For example; the British Pound is worth about $10 per point that is traded per lot. If you trade 1 lot and capture 40 points, you just made $400. If you trade 10 lots and capture 40 points, you just made $4,000.00, etc.
What is the difference between Futures and FOREX?
Currencies are the money that represent the monetary system from different countries. For example; the Japanese Yen, Canadian dollar, Brazilian Real, Swiss Franc, etc. Futures trading of currencies is done in trading pits, where you are trading those currencies today, but for future prices. FOREX trading is trading actual currencies at today's exchange rate with banks. All trades are done through brokers or market makers
Am I buying actual currencies when I trade?
No. With your margin account, you are buying the right to trade one "lot" of a currency. Each lot equals a different amount of currency, depending on the currency being traded verses the US dollar.
What is Day Trading?
Day Trading is when a trader buys and sells his lots or stocks that same day. He is in and out of the market that same day. He does not hold his position overnight or for a week, etc.
What percent of people really earn money on the FOREX?
10 % make money, and 90% lose money! Why? The 90% who enter the market are driven by emotions such as greed and fear. They lack a sound equity management plan and know very little about the techniques of trading. The fact is they are lacking adequate and proper education for the task at hand.
Why do Professional Traders earn so much money?
Most Professional Traders are part of the 10% earning money. The 10% earning money actually receive the 90% money that is lost . If the 90% are paying the 10%, you can easily figure out that the 10% are being paid quite handsomely.
Can I become a successful Professional Trader?
Absolutely! Trading is a profession that most anyone can learn. However, it doesn't happen over night or in a few weeks. You must go through the same processes of education and mentoring that all professionals go through. Generally, we are becoming conditioned by numerous national ads into believing that trading is simple. If it is that easy why do we hear the horror stories about day traders? Why do 90% of people lose on the FOREX?
Is trading a form of gambling?
All forms of trading and investment can be construed as a form of gambling, although neither are the same as playing the lottery, roulette or betting. Traders seek price fluctuations and investors seek return on investment. Both require a calculated risk that is minimized by knowledge. You are always gambling when you don't know what you are uneducated, trading emotionally or with a " hot tip". Calculated risks are taken in all investments. People risk huge sums of money and not every one succeeds. Even when there is a track record of success as in many franchises there is still no guarantee. Their investment becomes a calculated risk. The FOREX market is no different. When you trade not knowing what you are doing, or off a tip, you are gambling. When you trade after you have been educated or mentored by a successful program, or by other successful traders, you are now taking a calculated risk.
Can I lose everything when trading the FOREX?
No. You can't lose everything you own. The under-educated will more than likely lose their margin account. The educated will more than likely capture the loser's margin account money.
Why don't we hear more about the FOREX?
Reliable sources indicate that about 1.5 trillion dollars of currency is traded daily on the FOREX. The majority of the volume historically is generated by major investors, banks, financial institutions and governments. Thanks to the Internet, more and more people like us are beginning to learn of the opportunities and are getting involved.
How can I get started?
You need to be very careful and exercise due diligence. There are growing numbers of international firms offering various approaches to FOREX trading. Look before you leap. Do your homework and check references. Many companies prey on the greedy promising phenomenal returns that are the exception, not the rule! Find a company that doesn't promise the moon. If it sounds too good to be true, it usually is. Reputable firms have credentials. Beware of "Black Box" systems. It is against FTC regulations for a firm to offer any guarantee of performance of any system. What one can guarantee and offer is that their trading methodology is sound, productive and profitable. Trading decisions should not be made by computer only. A professional trader is a human being, with emotions, intuition and a brain to interpret what the computer tells him/her. A trader is not a computer. A professional trader has been educated and is disciplined to live by his or her trading methodology of good judgment trading.
What Is good judgment trading?
Good judgment trading is the exact opposite of a Black Box System. It's a complete understanding of the market and its constantly changing environment. It is a clear trading methodology utilizing high probabilities. When a trader is educated, he no longer takes a shot gun approach to the market. He takes a very focused "rifle and target" approach.
How much money can I make?
If you get involved with the right company offering the proper education and mentoring, you can expect to create a financial performance expectation plan. Your plan will depend on how much you start out with, how knowledgeable and how unemotional you are. Never enter the market without first paper trading, which is trading pretend money. Once you achieve a track record of consistently completing successful trades and prove to yourself you can trade, then and only then, should you enter the market with your own money.
What do emotions have to do with It?
Where money is involved so are emotions. Many people are quite knowledgeable about trading but can't handle the emotions. Your emotions will be your biggest obstacle to successful trading. Not the techniques. To be a successful trader you cannot trade emotionally. You must trade logically. Our egos drive us to be successful 100% of the time, but in reality no one is successful 100% of the time. Not even the professionals. Successful professional traders clearly understand the market is about logic, not emotions. They trade logically, not emotionally and they are the 10% who trade successfully all the time!
Are there books I can buy to educate myself?
Hundreds of books are available on this site and we encourage you to read. However, no one has written a "how to - step by step" book on how to become a millionaire over night or even in a month. Why? Because successful trading is a process, it does not happen over night. The market is vast and complex. Hundreds of authors have written books about most of the characteristics of the markets. There is a lot to know. Success in trading comes by focusing on one or two markets and specializing in those markets. One must decide what they want to trade, educate themselves and then focus in on that area of the market.
What can Market Traders Institute do for me?