If you have been in the forex market for some time, you would have come across this saying many times "the trend is your friend". Most of the time, traders who use this saying use it when they have made a loss in a counter-trading position.

Forex traders become very sad because they have lost a deposit, and again they were not part of the reverse trend movement which will have brought back the profits to the table.

In order for you to be successful with your trading, we encourage you take a look at some tecniques that will help you indentify when a trend is in place, with the use of indicators to drive your way to making reasonable profits from it. If you are a forex trader and you don't have a strategy inplace, then you might not be successful in forex trading.

The movement of prices of currencies have been shown to move in a trending pattern, because of long-term macroeconomic elements which moves these rates of exchange. These elements include interest rates, global trade imbalances, and many others.


Identifying a trend
With regards to the meaning of trend, it means a sustained market movement in a specific direction, which is either a uptrend or a downtrend. Many forex traders could give different and several meanings to what trend is. But to give a good meaning of trends, it is a predicted response to price at support/resistance levels which changes with time.

As an example, when there is an uptrend, the main visible feature is the rebound of prices when they reach levels of support, thereby creating new highs. In a downtrend, it means the same thing but in the opposite direction. As soon as you see this on a chart, it simply means there is a trend in place.


Now the major tool to identify this trend is trendline analysis. This tool (trendline analysis) is used to make an establishment of resistance and support levels for your market prices.

So in the next topic we will be talking about trendlines analysis fully, so that you can understand the use of technical indicators to identify such trends. They have worked for many forex traders, and it will surely work for you if you apply them correctly.

The application of these analysis are what guarantees you a smooth ride through your trend movement.

There are many advantages of trading Forex, and they will be outline for you shortly.

1. Execution costs
Other financial market will charge commissions for trade, but the Forex market does not. The cost of execution is the difference in price between the Bid/Ask. This is called the spread.

This spread varies from broker to broker.


2. Trendiness
There are usually trends in the Forex markets, which has been noticed and seen over time. The trend moves differs from one currency to another because they all have their specific uniqueness.

Once this trends are identified, moving with it can bring about great profits in the Forex market.


3. Focus
Unlike stocks and other financial markets where you have lots and lots of stocks, bonds, and others, the Forez market only concentrates on 1-4 currencies. The most common are the British Pounds, Japanese Yen, Swiss Franc, and the Euro. Successful traders will usually concentrate on just a few currency pairs, and beginners usually take one pair for their Forex trading.


4. Margin Accounts
Before the commencement of trading, you need to open a margin account. The margin account varies from broker to broker. Some require a high margin account of about $5,000, while some will require only $1,000.

Your trading period will also determine your margin account. If you want to hold a position for a day, it requires a low margin account, but if you wish to hold a trade for days, weeks, months, you should be expecting a high margin account.
All orders are to be carried out through a Forex broker.

Note: A margin account is just like a performance bond. To become a Forex trader you need a margin account. When profits are made, they are automatically deposited into your account, and when you make losses, they are also taken out of you account. This system makes it plain and reliable, as you can see your account balance yourself.
You should also be sure that your profits can get back to you, not just sit in your account. Forex brokers will usually advice that you withdraw profits from time to time to allow you gain confidence with the system.

When a trader withdraws his profit, he feels so comfortable and willing to trade more as to increase his account balance for the next withdrawal.

You profits can also get back to you in various ways. It can be wire transferred, or sent by cheques.

Forex trading in carried out in currency lots. Every lot is approximately 100,000 US dollars of foreign currency. In order to be a ble to carry out trades on Forex market, you must have a margin account with a Forex broker.

Actually, this is like a bank account from which losses will be subtracted and profits deposited. The use of this account is instant, that is as soon as you open or close a trade position, losses are subtracted and profits deposited.

There are different regulations on margin accounts depending on your Forex Broker. Many Forex broker will require about $1,000 deposit to begin day trading a currency lot. The meaning of day trading as the name implies is the opening and closing a trade position in one day.

For a long-term position, may Forex broker will require about $2,000 per lot deposit.
In contrast to stock trading and other market, you need at least 50% margin account of your intended stock trade. But in Forex trading, you can control a large lot with just a small margin account. This is done through leverage. As an example i can open a 2 lot position with just 2% of the worth value.

The execution quality of the Forex market is very perfect. Because of the liquidity of the Forex market, many trade can be opened and closed at the current market price.
Although slippage can not be avoided in Forex markets, just like all other fast moving markets, many Forex broker's software have tried to beat it. That is you are notified of your exact opening price just before execution, and you will be given the opportunity to avoid or accept the slippage.

Your trade positions are confirmed immediately, and the internet user only needs to print a copy of these confirmations for record purposes. There are also many sayings about internet Forex trading being safer than the telephone trading. This is because you see the price it is, and you can decide to accept or reject it.

Also the telephone trading also has its advantages. In the case of internet disconnection, telephone calls can be made to your Forex broker to help you close or open trades.

You can be sure that your account informations are secure because Forex brokers uses systems that are protected by firewalls.

If you trade forex on a good platform, you would not need to be calculating your profits and losses with few cents and dollars, the platform is designed to automatically calculate it for you.

All you need to do is look into your account and see what's there, and if it is losses, sorry. But we expect that you will take advantage of certain forex resources to help you determine your ability and capacity to survive as a forex trader.

Calculating your profits and losses or knowing how it is calculated will enable you understand the general principles of its calculation. For a proper understanding of how this is calculated, some examples will be given so that you can have a vivid illustrations of the principles. In this forex account, this calculation was made: The current bid/ask quote for the EUR/USD is 1.2200/1.2203. This means that you can purchase 1 euro for 1.2203 dollars, and you can see 1 euro for 1.2200 dollars.

So in the case where you go long on this currency pair, that is you buy this pair, you will need to pay $122,030. This is because the size of a lot of the EUR/USD is 100,000 units. So if your anticipation and speculation is right, and your current price is now at 1.3000/13003, you have made a gain of about 800 pips. This means that the price went up with 700 points.

Now selling this currency pair will be at your bid price which is usually the lower price. Now you have to sell the 100,000 units at about $130,000.
Subtracting your initial buy price of $122,030 ($130,000 - $122,030), you get a profit of about $797. This profit is not bad for a one day trading, and with consistent planning and correct speculation, you can earn much more than that. You also have to be aware that the losses invloved in forex is very great, as you can lose all your deposit, so getting the correct planning strategy is the key.

Education first, then trading next.