First Thing To Keep In Mind – Confine Your Emotions – Ideally speaking, there shouldn’t be even a trace of fear, panic, excitement or greed in the calculations of Forex traders. However these traders are human beings and hence it is not possible for them to completely restrain their emotions. Thus, the ideal solution would be to find a way of controlling the emotions and minimizing their effects on one’s Forex investment decisions. Amateurs or beginners are advised to start with small amounts. This will also help the investor to understand his/her long term goals.

Second Thing to Keep In Mind – PIPS – The second thing that you ought to know before starting Forex trading is the definition of PIPS. A pip can be defined as the smallest possible measurement of change between two pairs of currencies. PIPS typically have two or four decimal places. So the changes which have three or five decimal places are known as pipettes or pips. For example – a EURUSD pip is 0.0001.

Third Thing to Keep In Mind – Currency – Of course, how can one ignore currency when dealing in the world of Forex trading? Before stepping into the Forex world, it would be useful to understand that currencies always exist in pairs and they are denoted by their symbols for convenience purpose. Therefore, you will be dealing in currency pairs such as EUR/JPY, EUR/USD, USD/JPY, EUR/INR, etc. It also helps to have the symbols memorized for smoother transactions.

Fourth Thing To Keep In Mind – Start Off With A Demo Account Always – This is something that a lot of amateur Forex traders often forget or overlook. Since you are comparatively new to the world of Forex trading, therefore it would be in your interest to sign up for a free demo account to practice Forex trading with virtual currency in your account balance. This is just like balance wheels for bicycles, once you are used to it you can have them removed or in this case, close the account and start trading live.

Fifth Thing To Keep In Mind – Determining The Trend By Looking At Forex Charts – As an amateur, you are advised to observe Forex charts to find out the resistance, trend and support of the currency you are dealing with. Such charts can be observed at different time segments like a day, an hour, four hours, fifteen minutes, five minutes, one minute, etc. When you are able to identify the trend you will also be able to predict the same and stop your loss or calculate your profit as per the support or resistance level.

Thanks to Sara Muler from Loans For People With Very Bad Credit ™ for writing this interesting article. 

Look for the most liquid currencies

The underlying philosophy behind scalping is liquidity. The faster and more actively a currency is traded in the market, more easily you can get in and get out of the market. Usually the most liquid pairs which are traded in the market include dollar/yen, euro/dollar, pound/dollar etc. In terms of liquidity, these are popular scalping options. In some situations, liquid crosses, which do not include dollar, are also good options for the experienced scalpers. These liquid crosses may be euro/pound, euro/yen etc. Adherence to liquid currencies raises the chance to emerge out successful as a scalper.

Give entry orders fast

If a scalper takes more time in trading, he may lose out profits. So the traders must be able to get in and get out of the market very quickly. Delay in scalping reduces the degree of control of the scalpers and consequently it increases the market risks. So, you as scalper must give your entry orders fast so as to reap maximum benefit.

Train yourself about scalping

To become a successful scalper it is very challenging too. Before entering into this you must gather sufficient knowledge about this trade. It is advised that you must enroll into forex scalping training program before entering into this field.

Hence, afore mentioned are a few important things that you must know about forex scalping.

This is a guest post by Christina Jones, a writer & editor with a few financial communities and personal finance blogs. She has also been contributing to many personal finance blogs as a guest columnist since long.

Oh yeah, by the way… Happy 2012 to all!

This strategy is based in the principle that it’s very difficult to find same size candles for 2 consecutive days on a daily chart. The main fact that it’s going to influence us from this conclusion is that prices are moving steady either up or down without producing “noise”, an element always present on smaller time frames.

Entry

The entrance hour should be at the 00:00 according to your local time or according to your trading platform. In this moment, the daily candle is newly formed and you will be able to find the highest and lowest price of the day for the previous daily bar.

If the price bar (including shadows) is less than 90 pips long we recommend not to open new trades the next day (this is a requirement for GBP/USD pair, but can be changed for other currency pairs).

If you suddenly discover that the previous day bar becomes an Inside bar you should be careful with entries the following day. While an Inside bar candle gives a good breakout opportunity the following day, it can also be a dual whipsaw breakout, the most unwanted scenario for Forex Scalping.

If anyways you decide to trade the next day you will be depending on the candle of the day before so, establish a Buy Stop order at the top (the highest price +5 pips) and a Sell stop order at the bottom (-5 pips). Over the time you will be able to adjust these additional pips s and stops depending on the currency pair you are trading with.

Exit

You should exit once that one of the orders is filled. At midnight with the new daily candle open, adjust your orders and stops according to the previous daily candle, following the same routine; keep on scalping the market until you raise +100 pips, then you can close current and enjoy the benefits of a well done job because your profits will arrive soon.

You should quickly close your current open positions (with either profit or loss) in two different cases: first of all if a daily candle becomes a Doji candle (or it’s about to become). The second occasion in which you should close your trades is if you met a Shooting Star candlestick in an uptrend or a Hammer candlestick in a downtrend.

The first one in composed by the hedgers account that represent less than the 5%, consists on business and other kind of organizations competing in the international trade. Their main aim is to diminish or neutralize the currency fluctuations’ impact by using different market tools.

The other percentage (95%) is composed by the speculators account, the private companies and individuals, the public organizations and banks. Their purpose is to get profit from the fluctuations in the exchange of currencies, ought to that the Forex market can enjoy its liquidity.

Talking about the individuals acting in the Forex market we also have to mention the market makers. Almost all the deals are made by traders (mention above) and market makers in conjunction.

The market makers are the counter part to the clients, they don’t operate as trustee intermediaries. They perform their clients’ hedging according to their policy that covers different guidelines and agreements. The commonest examples are banks or trading platforms, they don’t represent the client as an intermediary, but use their money for buying and selling financial instruments. They don’t have a fluid relationship with their clients and they usually manage all the positions as a whole, detecting interesting movements and acting for all their clients at the same time.

The charts can be used in both kinds of analysis, the fundamental and the technical ones. While the technical analyses are focused on the “micro” movements, the fundamental ones are focused on the “macro” events (or external factors) that affect the trend of the market.

Among the main types of charts we can distinguish:

The line chart: is the simplest one, in each time unit shows the closing rates creating a homogeneous line. Although it doesn’t show what happened during the time unit selected by the users, is such a good tool for helping to set support and resistance levels.

Point and figure charts: these charts are focused on the price without time specifications. Instead of showing a linear representation of time they show the different trends in the price. This kind of chart is especially useful to filter out non-significant price movements helping the trader to determine the critical support and resistance levels.

Bar chart: this type of chart shows in each time unit that we select three different rates for each one. The common rates shown by bar charts are the high, the low and the closing, but we can also find charts that show one more rate, the opening of the period of time.Candlestick chart: this type of charts comes from Japan. The units represented are similar as the ones in the bar charts, they show the prices at their opening, high, low and closing rates in candles form for each unit selected. We can find two kinds of candles, the transparent ones that show increase and the dark or full ones, which show decrease. The length of the candle’s body represents the range between the opening and the closing, while the whole candle (top and bottom included) show the whole range of trading prices for the selected time unit.

1. Fully fixed exchange rates

In these systems, the government or the central bank intervenes in the currency market to maintain the exchange rate in a fixed quantity. This kind of systems doesn’t allow fluctuations from their central rate.

2. Semi fixed exchange rates

These systems are characterized for permitting a little movement in a determinate range. The exchange rate is the dominant target of the economic policy-making and the interest rates are established to meet the target exchange rate.

The advantage of both kinds of fixed rates is the less speculative activity of the market, providing a great certainty for exporters and importers.

3. Free floating exchange rates

In these cases, the value of the currency depends on the foreign exchange market’s demand and supply. Ought to that, the trade and the capital flows are the main elements that affect the exchange rate.

The main characteristic of these systems is the exchange rates’ possibility of moving according to the market force, always without the intervention of the government or economical institutions.  The currency can experiment a change on its value due to the changes in the supply and demand.

These systems are not very common as the governments usually try to control and manage the value of their currencies.

4. Managed floating exchange rates

These systems are the preferred for most of the countries, where the value of the currency is determinate by the market forces and where the government can intervene if needed.

In the case of the floating exchange rates we can highlight two different advantages, the first one is the fact that the large balance o payment deficit that some countries could experimented can be solved by an automatic adjustment provided by the fluctuations in the exchange rate. The second advantage is the possibility of the government to flexibly determine the interest rates.

The aim in using this strategy consists on identify the levels where the price could be rebound. For drawing the Fibonacci extension is important to identify the beginning and the end of the price movement that we want to extend.

As an example, in the five minute chart of the USD/CHF pair we can identify a sudden and sharp movement, we draw its extension after the first red bar; drawing the extension in the indicated area we will notice the 61.8, 100 and 161.8 extensions of the first movement.

Examining the chart above, we can see not only the fact that the price rebounded several times between the extension levels of the indicator, but also we can realize that these levels strongly act pulling the price towards themselves. The rest of the extension level supports the price preventing it to “fall through” twice.

The other two levels similarly created performance bars for the trend which, once broken, created further momentum for the trend. It’s not recommend to trade against the trend because of the risk of sudden reversals. Applying the Fibonacci levels we will identify the general direction of the trend and even if we register some losses, our gains will justify the trading activity.

In this example we scalp the market buying  at the red arrows shown on the chart; if we detect that the price is returning to the resistance that the level indicate us, we should stop trading until the market shows some clarity. The secret is scalping between the extension levels as long as the trend continue intact.

With the Fibonacci extension level through a reasonable degree of accuracy we can guess the main momentum of the price action and reach incredible profits.

Among the main indicators we can highlight:

• Parabolic SAR indicator: this indicator is a tool that can give us a trade entry or exit signal. The important thing is to see the PSAR flipping to the side of our favor when we would like to begin trading and exit whenever we see the PSAR flipping to the side against our position.

• Stochastic indicator: the main aim of this indicator is to help us to prevent low winning probability trade, as there is no point in entering a long position when the market is already overbought. The stochastic indicator helps us to improve our trading accuracy by mapping out the current situation of the market. When the stochastic hits the overbought or oversold zone and reverse, the price will usually retrace and this is the best time for you to scalp the movement. By using this indicator we will be able to predict the retracement of the market.

• Pivot Point: support and resistance are the most important terms for a scalper. When the price hits a support or resistance  it has the possibility of been repelled, and this is what a scalper is looking for. The daily pivot point can help us to identify major support and resistance. The pivot point is so powerful because it is usually used by those commercial traders and thus has more significant than other levels. When we see the price getting closer to the pivot levels is time to take a look at the stochastic and PSAR for an entry chance.

The Bretton-Woods Agreement was established in 1944 and pretended to protect the national currencies against the dollar fixed rate of USD 35 per ounce of gold. Bretton Woods was aimed at establishing international first monetary stability avoiding the speculation in foreign currencies.

The weakness of the gold standard system was its facility to create boom-bust economies. A strengthened economy would import a good deal ending with all the gold reserves required to support its currency; as a result, the money supply would diminish, interest rate would increase and the economic activity would slow down until the point of recession.

The Bretton-Woods Agrement was established just at the end of the World War II to regulate the international Forex market. All the countries involved agreed to maintain their currency value within a narrow margin against the dollar and an equivalent rate of gold. With the agreement, the dollar gained a premium position as a reference currency dominating the Europe and USA markets.

In 1971 the dollar ceased to be exchangeable for gold so the agreement was scrapped. Throughout the 1970s the supply and demand forces were in control of the currencies which began to move freely across borders. Prices were floated daily, with volumes, speed and price volatility all increasing while new financial tools as the market deregulation or trade liberalization emerged.

In 1980, the boom of the computer technology began, increasing the transactions in foreign markets. The capital movements through Asia, Europe and America increased from almost 70 billion dollar a day in the 1980s to more than 2 trillion dollar at the beginning of 2000.

With the rapid development of the Euro/Dollar market (we can define it as US dollars deposited in banks outside the US) the Forex trade market experienced an injection of speediness.  Similarly, Euro markets are those where currencies are deposited outside their country of origin. Both markets are in a leading position nowadays in the Forex trade market.