 03-31-2006, 8:53 PM
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asimon
Joined on 03-07-2006
Posts 140
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Rapid Forex e-Course Day 4
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===================================
"The Rapid Forex e-Course"
--> a 20-part mini-course series
Published by:
Abundant Freedom, LLC
http://www.rapidforex.com
===================================
To DOWNLOAD the "Insight Trader Package":
follow the instructions on the page below:
http://rapidforex.com/dlInsightV100.shtml
To See the e-Course Table of Contents:
http://rapidforex.com/ecourse.shtml
LESSON #4:
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Buying (going "long") and selling (going
"short") in the FOREX market. How to do it
and calculate your profit or loss (you
won't win ALL the time, but most of the time,
YES, if you've got a good trading method).
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Here's TWO timeless rules of Investing as they relate to
today's lesson:
RULE #1) ~ Cut your losers; let your winners ride.
Let's be frank (we never promised any rose-colored glasses
here did we? Well, at least not the ones you can wear ALL
the time): 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, add up more wins than losses. And, when you KNOW
(based off your trading rules), without a doubt, that YES,
indeed you are, in a losing trade, don't keep losing money
(lowering your stop loss) just to *prove you are right* or
your rules are wrong (however you 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
turn chicken poop into chicken salad. The best trades are
usually "right" immediately (the techniques, rules, methods
and strategies we teach at RapidForex.com will be your best
indicator for just what a "right" trade really is).
Remember, people have been trading the markets for a hundred
and sixty years. The smart traders know there's going to be
another trade. Cut your loses short and compound those
winning positions.
RULE #2) ~ Thou Shalt Not Trade the FOREX Without the
Placing of a Stop Loss Order.
When you place a STOP order, right along with your ENTRY
order, via your online trade station, you've just
automatically prevented a potential loss from "running" too
far.
Before initiating any trade, if you haven't already figured
out at what point you would be wrong and would want to cut
your loses or, at the very least, reevaluate your position
from the sidelines, then you shouldn't be putting on the
trade in the first place.
Show us a FOREX trader who doesn't use stop loss orders and
we'll show you someone who loses a lot of m.oney.
=================
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
(which, if you remember from yesterday's lesson, is paired
first with the U.S. dollar or USD. Since it is paired first,
it is the base currency).
Your trading methods, rules, strategies, etc., tell you that
prices will rise during a particular timeframe. So you buy
the EUR/USD pair (or, technically, you will simultaneously
buy euros, the base currency, and sell dollars).
You open up your handy trading station software (provided to
you for fr^ee 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
the bid 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 the ask 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
pair will 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 you make money.
No worries. This seemingly elaborate process is
handled, and even calculated for you, via the broker's
software mentioned above. The chart software and the quote
board are in agreement with all sides of the currencies.
=================
To illustrate a typical FX SELL trade, consider this
scenario involving the USD/JPY currency pair:
REMEMBER ~ Selling ("going short") the currency pair implies
selling the first, base currency, and buying the second,
quote currency. You sell the currency pair if you believe
the base currency (USD) will go down relative to the quote
currency (JPY), or equivalently, that the quote currency
(JPY) will go up relative to the base currency (USD).
NOTE: while the Profit Calculations, on the Short-sell trade
scenario below, may seem somewhat complicated if you've
never been in the FOREX market before, trust us when we say,
"this process is nearly seamless through your broker's trade
station (software). We're just showing you this thought-
process below so you can SEE how a PROFIT occurs even when
SELLING a currency pair.
============================
The current bid/ask price for USD/JPY is 105.26/105.30,
meaning you can buy $1 US for 105.30 Japanese YEN or sell $1
US for 105.26 YEN.
Suppose you decide that the US Dollar (USD) is overvalued
against the YEN (JPY). To execute this strategy, you would
sell Dollars (simultaneously buying YEN), and then wait for
the exchange rate to rise.
So you make the trade: selling US $100,000 and purchasing
10,526,000 YEN. (Remember, at 1% margin, your initial margin
deposit would be $1,000.)
As you expected, USD/JPY falls to 104.26/104.30, meaning you
can now 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
buy dollars and sell back the YEN to realize any profit.
You buy US $100,000 at the current USD/JPY rate of 104.30,
and receive 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 divide
96,000 by the current USD/JPY rate of 104.30.
Total profit = US $920.42
=============================
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Stay Tuned for tomorrow's email from us. It will have
the following Subject line:
asc, Lesson 5 - The Rapid Forex e-Course
In tomorrow's lesson, we'll cover Candlestick charts
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Health, Happiness & Prosperity,
Robert Borowski & Brian Campbell
Abundant Freedom, LLC
http://www.RapidForex.com
--------------------------
To DOWNLOAD the "Insight Trader Package":
follow the instructions on the page below:
http://rapidforex.com/dlInsightV100.shtml
Inside the "Insight Trader Package" you'll receive:
*Forex Freedom
*10% to 30% Monthly R.O.I.
To See the e-Course Table of Contents:
http://rapidforex.com/ecourse.shtml
-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=
"The Rapid Forex e-Course" is published by:
Abundant Freedom LLC
Visit us at http://RapidForex.com
This publication may be fre_ely redistributed if
copied in its entirety, as long as you do not claim
ownership, or alter the content in any way.
Copyright (c) 2004-5 Abundant Freedom LLC.
The information in this e-Course is provided for
educational purposes only. This information is
offerred as-is, with no warranty of any kind. While
Abundant Freedom LLC, and the author of this e-Course
have taken reasonable measure to assure the accuracy
of this information, the information is not guaranteed
to be accurate, and is subject to change at any time,
without notice.
-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=
Abundant Freedom LLC
758 Kapahulu Ave #335
Honolulu
Hawaii 96816
United States
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