Technical analysis and fundamental analysis are the two basic areas of strategy in the FOREX market which is the exact same as in the equity markets. However, technical analysis is by far the most common strategy that is used by individual FOREX traders. Here is a brief overview of both forms of analysis and how they directly apply to forex trading:
Fundamental Analysis
If you think it's hard enough to value one company, you should try valuing a whole country instead. Fundamental analysis in the forex market is often an extremely difficult one, and it's usually used only as a means to predict long-term trends. However it is important to mention that some traders do trade short term strictly on news releases. There are a lot of different fundamental indicators of the currency values released at many different times. Here are a few of them to get you started:
* Non-farm Payrolls * Purchasing Managers Index (PMI) * Consumer Price Index (CPI) * Retail Sales * Durable Goods
You need to know that these reports are not the only fundamental factors that you have to watch. There are also quite a variety of meetings where you can get some quotes and commentary that can affect markets just as much as any report. These meetings are often brought out to discuss any interest rates, inflation, and other issues that have the ability to affect currency values.
Even changes in how things are worded when addressing certain issues such as the Federal Reserve chairman's comments on interest rates; can cause a volatile market. Two important meetings that you have to watch out for are the Federal Open Market Committee and Humphrey Hawkins Hearings.
Just by reading the reports and examining the commentary, it can help FOREX fundamental analysts to get a better understanding of any and all long-term market trends and also to allow short-term traders to be able to profit from extraordinary happenings. If you do decide to follow a fundamental strategy, you will want to be sure to keep an economic calendar handy at all times so you know when these reports are released. Your broker may also be able to provide you with real-time access to this kind of information.
Technical Analysis
Just like their counterparts in the equity markets, technical analysts of the FOREX trading market analyze price trends. The only real difference between technical analysis in FOREX and technical analysis in equities is the time frame that is involved in that FOREX markets are open 24 hours a day.
Because of this, some forms of technical analysis that factor in time have to be modified so that they can work with the 24 hour FOREX market. Some of the most common forms of technical analysis used in FOREX are:
* The Elliott Waves * Fibonacci studies * Parabolic SAR * Pivot points
A lot of technical analysts have a tendency to combine technical studies to make more accurate predictions on your behalf. (The most common method for them is combining the Fibonacci studies with Elliott Waves.) Others prefer to create trading systems in an effort to repeatedly locate similar buying and selling conditions.
Choosing Your Strategy
Most successful traders will develop a strategy and perfect it over a specific period of time. Some people will focus on one particular study or calculation, while still some others use broad spectrum analysis as a means of determining their trades. Most experts would likely suggest that you try using a combination of both fundamental and technical analysis, with which you can make long-term projections and also determine entry and exit points. Of course, in the end, it is the individual trader who has to decide what works best for him.
When you are ready to get started in the FOREX market, you should open a demo account and paper trade so that you can practice until you can make a consistent profit. Many people who fail have a tendency to jump into the FOREX market and quickly lose a lot of money because of a lack of experience. It is important to take your time and learn to trade properly before you start committing capital.
You also need to be ale to trade without emotion. You can’t keep track of all stop-loss points if you don't have the ability to execute them on time. You must always set your stop-loss and take-profit points to execute automatically, and don't change them unless you absolutely have to. Make your decisions and stick to them. Otherwise you will drive yourself and your brokers crazy.
You should also realize that you need to follow the trends. If you go against the trend, you are just messing with your money because the FOREX market tends to trend more often than anything else and you will have a higher chance of success in trading with the trend.
The FOREX market is the largest market in the world, and every day people are becoming increasingly interested in it. But before you begin trading, make sure your broker meets certain criteria, and take the time to find a trading strategy that works for you.
About The Author
Giles Windholm is a trader, and a forex strategist. He writes for http://www.forexmachine.com/.
Wednesday, March 5, 2008
Explosive Profits: 7 Reasons to Trade Forex
There are many money-making opportunities out there and we’ve been involved with quite a few, namely property marketing, web development, residential construction security, multi-level marketing businesses etc.
We’ve come to a few conclusions with the help of some well-known properity coaches.
Often people with the income they desire don’t have the time to enjoy it. Those that have time don’t often have money. You don’t have to sacrifice your life-style to earn an above-average income. If you focus on the Forex for a few months you can make that dream a reality and create time and money to do what you REALLY want.
To earn a living money is given in exchange for a product or service rendered. It needs to be sold continuously otherwise your income stops abruptly unless it’s a repeat type of product or service.
Money is a medium of exchange. There’s no magical formula to possess it, you need to exchange something of value for it.
What if, you could have access to thousands of customers who are ready, willing and able to buy from you whenever you wanted? Wouldn’t it be great to avoid any hassles like money collection problems (just had a delayed payment from my web business), keeping difficult customers happy (we all know what that’s like), competition stealing your business without providing the same value etc.
All that is possible with Forex. You can also trade from anywhere. Take your laptop with you, find an internet connection and away you go.
Another advantage is that you don’t need experience to get started. Get a traditionally job involves accumulating specialized experience, having a well-polished resume and having the right contacts. With the right training course, you can get started straight away.
Here’s 7 more reasons to trade Forex:
1. It never closes. It’s open around the clock, worldwide. Trading positions open at Monday 7am, New Zealand time and close 5pm New York time on Friday. During this time, you can enter or exit the market whenever you like. It’s a continuous electronic currency exchange. This is great because you can trade whenever you have spare time.
2. Leverage. Standard $100 000 currency lots can be traded with as little as $1000. This is mainly because of the ease with which you can buy and sell, some brokers will leverage up to 200 times, so with $100 you can control a 200 000 unit currency position. It’s the best use of trading capital around, even banks lending on property investments don’t come close.
3. Accurately predict the outcomes. Currency prices generally repeat themselves in predictable cycles so you can see what the trends are. ‘Technical Analysis’ helps to see these trends and profit from them.
4. Low Transaction Cost. In other words, you mistakes won’t cost you a fortune. Good brokers won’ charge commissions to trade or maintain an account even if you have a mini account and trade small volumes.
5. Unlimited Earning Potential. Forex has a daily trading volume of over 1.5 trillion, the largest financial market in the world. It dwarfs the equities market (50 billion daily) and the futures market (30 billion).
6. You can make money in any market conditions. Each market is one currency against another, so when you buy in one, you’re selling in another so there’s no biase towards either currency moving up or down. This means it’s up to you to choose which currency to buy or sell with. Yu can make money going up or down.
7. Market transparency. This is an advantage in any business or trading environment. It means you can manage risk and execute orders within seconds. It’s highly efficient and allows you to avoid unexpected ‘surprises’.
I hope you’re now convinced that Forex is the best investment and income opportunity around.
To continue your journey of Forex Trading success and achieve enormous profits, visit http://www.wealthyforex.com/. You’ll receive all of the resources you need to positively impact your future.
About The Author
Sorna Devadas
Born in Lithgow, Australia, completed a Bachelor of Computer Engineering Degree in 2001. Started building a website development business and after 3 years, now focuses on building own websites that make money. Love people, loves life and loves to help other people prosper. For complete resources for beginners and advanced internet marketers to profit online, visit http://www.internetwealthmentor.com/.
dropv2003@yahoo.co.uk
We’ve come to a few conclusions with the help of some well-known properity coaches.
Often people with the income they desire don’t have the time to enjoy it. Those that have time don’t often have money. You don’t have to sacrifice your life-style to earn an above-average income. If you focus on the Forex for a few months you can make that dream a reality and create time and money to do what you REALLY want.
To earn a living money is given in exchange for a product or service rendered. It needs to be sold continuously otherwise your income stops abruptly unless it’s a repeat type of product or service.
Money is a medium of exchange. There’s no magical formula to possess it, you need to exchange something of value for it.
What if, you could have access to thousands of customers who are ready, willing and able to buy from you whenever you wanted? Wouldn’t it be great to avoid any hassles like money collection problems (just had a delayed payment from my web business), keeping difficult customers happy (we all know what that’s like), competition stealing your business without providing the same value etc.
All that is possible with Forex. You can also trade from anywhere. Take your laptop with you, find an internet connection and away you go.
Another advantage is that you don’t need experience to get started. Get a traditionally job involves accumulating specialized experience, having a well-polished resume and having the right contacts. With the right training course, you can get started straight away.
Here’s 7 more reasons to trade Forex:
1. It never closes. It’s open around the clock, worldwide. Trading positions open at Monday 7am, New Zealand time and close 5pm New York time on Friday. During this time, you can enter or exit the market whenever you like. It’s a continuous electronic currency exchange. This is great because you can trade whenever you have spare time.
2. Leverage. Standard $100 000 currency lots can be traded with as little as $1000. This is mainly because of the ease with which you can buy and sell, some brokers will leverage up to 200 times, so with $100 you can control a 200 000 unit currency position. It’s the best use of trading capital around, even banks lending on property investments don’t come close.
3. Accurately predict the outcomes. Currency prices generally repeat themselves in predictable cycles so you can see what the trends are. ‘Technical Analysis’ helps to see these trends and profit from them.
4. Low Transaction Cost. In other words, you mistakes won’t cost you a fortune. Good brokers won’ charge commissions to trade or maintain an account even if you have a mini account and trade small volumes.
5. Unlimited Earning Potential. Forex has a daily trading volume of over 1.5 trillion, the largest financial market in the world. It dwarfs the equities market (50 billion daily) and the futures market (30 billion).
6. You can make money in any market conditions. Each market is one currency against another, so when you buy in one, you’re selling in another so there’s no biase towards either currency moving up or down. This means it’s up to you to choose which currency to buy or sell with. Yu can make money going up or down.
7. Market transparency. This is an advantage in any business or trading environment. It means you can manage risk and execute orders within seconds. It’s highly efficient and allows you to avoid unexpected ‘surprises’.
I hope you’re now convinced that Forex is the best investment and income opportunity around.
To continue your journey of Forex Trading success and achieve enormous profits, visit http://www.wealthyforex.com/. You’ll receive all of the resources you need to positively impact your future.
About The Author
Sorna Devadas
Born in Lithgow, Australia, completed a Bachelor of Computer Engineering Degree in 2001. Started building a website development business and after 3 years, now focuses on building own websites that make money. Love people, loves life and loves to help other people prosper. For complete resources for beginners and advanced internet marketers to profit online, visit http://www.internetwealthmentor.com/.
dropv2003@yahoo.co.uk
Best Forex Trading Education
There are many forex trading courses and educational material that a person can find online. However how does someone go about finding the best Forex trading education information? Certainly there are huge amounts of information that will educate you about Forex trading, but not all of it will help you to achieve your goals of making a profit rather than losing. Below are some guidelines which should help you to find the best forex trading education course Point 1 - Avoid Day Trading Systems Many people when starting out in Forex trading will be enticed into thinking that the best way of making money is through day trading. Certainly if you were to ask a person who is selling a Forex trading course for details relating to their real time track record with regard to profits relating to day trading they will not be able to provide one to you. So if you are looking to produce an income from your trading then do not waste your time on day trading. Point 2 - Real Time Profit Records When buying any sort of forex education course, you need to be provided with these records. If a person selling their system does not have confidence in the abilities of their system and are not investing their own monies then why should you. Unfortunately some of these courses being offered online today are from people who have either never traded in their lives or have failed when they have used the system themselves. Point 3 - Understand It Once you find a forex trading system which either has a track record or is willing to show their real profits then there are some other things which you will need to take into consideration. It is important that you learn everything you can about the system in question so that you understand it completely. Unfortunately if you have no understanding of how the system works then you will not have the confidence to trust in it and follow the system through to a likely conclusion if you start to suffer losses. By keeping these points in mind, you will find the best Forex trading education that is suited to your kind of personality. There are literally hundreds of places on the web that can offer you an education as well as free advice on Forex trading so do some investigating and you will soon find one that is ideal for you.
About The Author
Ricky Lim is the owner of http://www.learn-forextrading.net/ where he has forex tutorials and tips on forex currency trading for beginners.
Currency Exchange Terms Every Forex Trader Should KnowF
Before jumping into the forex market, you need to arm yourself with some terminology that will be used in any course or software on this subject. The following set of terms were put together with the idea of providing the novice forex trader with the fundamental concepts of the forex trading business. While they sound technical, most are easy to understand and apply. Let us begin with the instruments that are traded in the forex markets. Currencies are traded in pairs so the instrument will always be in this double denomination. The reason for this is simple; the basis of forex currency trading is to exchange one currency for another. So if the pair is the Euro and the US Dollar, and the forex trader is taking a long position or buying the Euro in hopes that it will appreciate, effectively the trader is also selling US Dollars to buy the Euros. The most widely traded pairs are the Great Britain Pound and the US Dollar (indicated as GBP/USD), the Euro and the US Dollar (the EUR/USD pair), the Aussie Dollar and the US Dollar (AUD/USD pair), the USD and the Japanese Yen (USD/JPY pair), and the Canadian Dollar and the USD (USD/CAD pair). These pairs account for well over 80% of the total volume of the trading in the forex market. The advantage to trading in these currency pairs is that they are highly liquid and allow the investor to convert their portfolio to cash very quickly to realize a profit. In every pair, the first currency is called the base currency, over which the second one is countered to imply the price of the pair, or commonly referred to as the "cross currency". The second is therefore called the quote currency and the pair price is recorded in terms of the units of the quote currency required to buy one unit of the base currency. Thus, assuming the price of the GBP/USD pair is 1.5, this implies that 1.5 USD will buy 1 GBP. Every pair is quoted in terms of a bid ask spread. The bid price is the rate at which your forex broker bids to buy the currency at, while the ask price is the rate the forex broker is asking to sell the currency to the forex trader. The bid price will always be less than the ask price and the forex trader will buy at the ask price and sell at the bid price. The bid ask price will be quoted as: GBP/USD 1.532/5, meaning the bid price is 1.532 and the ask price is 1.535. A pip price interest point), as it is commonly called, is the smallest incremental change a currency pair will experience, for instance, a change in the GBP/USD price from 1.532 to 1.542 is a change of 10 pips. A trading margin is a deposit which is a minimum amount or a small percentage of your traded amount that you have to put up. The remaining amount is supplied by your broker. This amount can vary from 1% to 0.25%, also referred to as 100:1 and 400:1. Most often, forex brokers will offer 100:1 or 200:1 to most clients. This is risky but enables the trader to leverage a large amount that he or she would not otherwise have access to. Finally, a margin call can happen when the forex trader allows the balance in the trading account to go below the margin deposit percentage agreed upon with the forex broker. The broker will automatically sell your long positions or buy your short positions and clear the entire trading account, returning the margin amount to the trader to protect the trader from losing more money than they have.
About The Author
Andrew Daigle is the owner, creator and author of many successful websites including a free forex training website called ForexBoost at http://www.forexboost.com/ and CashCurve at http://www.cashcurve.com/ to learn about other online business opportunities.
Day Trading the Forex Market Profitably - Part 2
To trade volatile and liquid markets Since your job as a day trader is to capture intraday swings it is crucial that the market you are trading has enough movement to allow you to do this. It is also important that the market you are trading has enough liquidity so that order fills do not suffer from excessive slippage. You have to select a market that its volatility is permanent and not a temporary occurrence. Since you are basing your trading method on catching intraday price swings you have to know that you are trading in the right place. As a day trader volatility is your ally and you have to know that you can count on it every single day (or at least 90% of the days). Liquid markets will provide you with good order fills. As a day trader this is very important since you are aiming at smaller profit objectives and hence larger slippage will eat away more of your profits. When trading several times a day this adds up and can be the difference between success and failure. As a forex day trader you have to apply all the above rules and principles plus other criteria that are unique to the forex market. Time of day trading The forex market is a 24 hour market. Never stops except on weekends. Within this 24 hour period different currencies behave in different manners. As a day trader it is very important to know the personality of the currency you are trading. For example, the GBP/USD is more volatile in early to mid European session then any other liquid pair. For a day trader trading in these hours it would be wise to take advantage of the price swings the GBP/USD pair offers instead of trading some other currency pair that constantly shows no movement. The USD/CAD pair is silent in the early to mid European session but starts to have more price movement toward the start of the US session. Spread and liquidity Forex brokers do not charge you a commission for every trade you make (at least most forex brokers). Instead, they make their profit on the bid/ask spread which is measured in pips. As a forex day trader you are aiming at capturing small price swings sometimes several time per day. Also, your profit objectives are obviously much smaller than the swing traders profit objectives. All this means one thing: every pip counts. You cannot afford to trade currency pairs with large spreads, if you do your profit will get eaten up to a point where you will not be trading with an adequate risk/reward ratio. Forex day trading must be done with liquid pairs. Most forex brokers will provide you with a very narrow spread for the most liquid currency pairs. As an example, many brokers are now offering a 2 pip spread for EUR/USD and USD/JPY and a 3 pip spread for USD/CHF and GBP/USD. These are the most liquid pairs and the ones a day trader should focus on. Volatility As a day trader volatility is you friend, a friend you cannot afford to trade without. In its basic definition, volatility is simply the amount of price change with relation to time. Volatile currency pairs have various price swings (price changes) during a small period of time (one day). These price swings are what a day trader lives on. In the forex market volatility many times comes hand in hand with liquidity. The most liquid pairs are the ones that are the most volatile. The big 4: EUR/USD, GBP/USD, USD/JPY and USD/CHF are the most liquid pairs that provide the best volatility and hence opportunity for the forex day trader. Within these four pairs, the GBP/USD is the most volatile. Although it is not the most liquid (the EUR/USD is), but it is the most volatility. This pair, traded with the right broker (one that provides a 3 pip spread) can present many profitable opportunities for the astute day trader. In conclusion, the forex day trader has to be prepared not only with the basic day trading rules, skills and principles. His job is to incorporate into his trading the characteristics and uniqueness of the forex market. Remember, every currency pair might present different opportunities and it is your job to always focus on the ones that best fit the purpose and objectives of day trading. I hope to have contributed to your forex trading education and I thank you for taking the time to read this article. Copyright (c) 2006 Avi Frister
About The Author
Avi Frister is a Forex trader and educator. He teaches revolutionary and unique trading methods to consistently profit from the Forex market. For more information please visit http://www.forex-trading-machine.com/.
Finding Reliable Forex Signals
You guys know how hard it's to find a reliable forex signals and most of the forex signals services are very expensive ranging from $199 to $500 per month. And worse of all, there's no guarantee of this.
To find a good service, you must make sure that you get their free trial before you really subscribe to the service. 1 to 2 weeks is good enought to prove that whether they are reliable or not.
You want to find a forex signals service just because you don't have time or you don't have a good skills in trading forex. I understand your felling and that's why I've created a blog for people who want to get the free forex signals.
But I have day job as well. I don't post forex signals every day but if you can catch some, you got your money into the bank! :)
By that, I wish you to have a good trading in forex world!
Take care and God bless.
About The Author
Elisha Gan currently provides FREE forex signals for forex traders all around the world. If you want to get the free forex signals, please visit: http://www.freeforexsignals.blogspot.com/.
To find a good service, you must make sure that you get their free trial before you really subscribe to the service. 1 to 2 weeks is good enought to prove that whether they are reliable or not.
You want to find a forex signals service just because you don't have time or you don't have a good skills in trading forex. I understand your felling and that's why I've created a blog for people who want to get the free forex signals.
But I have day job as well. I don't post forex signals every day but if you can catch some, you got your money into the bank! :)
By that, I wish you to have a good trading in forex world!
Take care and God bless.
About The Author
Elisha Gan currently provides FREE forex signals for forex traders all around the world. If you want to get the free forex signals, please visit: http://www.freeforexsignals.blogspot.com/.
FOREX 101: Make Money with Currency Trading
For those unfamiliar with the term, FOREX (FOReign EXchange market), refers to an international exchange market where currencies are bought and sold. The Foreign Exchange Market that we see today began in the 1970's, when free exchange rates and floating currencies were introduced. In such an environment only participants in the market determine the price of one currency against another, based upon supply and demand for that currency.
FOREX is a somewhat unique market for a number of reasons. Firstly, it is one of the few markets in which it can be said with very few qualifications that it is free of external controls and that it cannot be manipulated. It is also the largest liquid financial market, with trade reaching between 1 and 1.5 trillion US dollars a day. With this much money moving this fast, it is clear why a single investor would find it near impossible to significantly affect the price of a major currency. Furthermore, the liquidity of the market means that unlike some rarely traded stock, traders are able to open and close positions within a few seconds as there are always willing buyers and sellers.
Another somewhat unique characteristic of the FOREX money market is the variance of its participants. Investors find a number of reasons for entering the market, some as longer term hedge investors, while others utilize massive credit lines to seek large short term gains. Interestingly, unlike blue-chip stocks, which are usually most attractive only to the long term investor, the combination of rather constant but small daily fluctuations in currency prices, create an environment which attracts investors with a broad range of strategies.
How FOREX Works
Transactions in foreign currencies are not centralized on an exchange, unlike say the NYSE, and thus take place all over the world via telecommunications. Trade is open 24 hours a day from Sunday afternoon until Friday afternoon (00:00 GMT on Monday to 10:00 pm GMT on Friday). In almost every time zone around the world, there are dealers who will quote all major currencies. After deciding what currency the investor would like to purchase, he or she does so via one of these dealers (some of which can be found online). It is quite common practice for investors to speculate on currency prices by getting a credit line (which are available to those with capital as small as $500), and vastly increase their potential gains and losses. This is called marginal trading.
Marginal Trading
Marginal trading is simply the term used for trading with borrowed capital. It is appealing because of the fact that in FOREX investments can be made without a real money supply. This allows investors to invest much more money with fewer money transfer costs, and open bigger positions with a much smaller amount of actual capital. Thus, one can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital. Marginal trading in an exchange market is quantified in lots. The term "lot" refers to approximately $100,000, an amount which can be obtained by putting up as little as 0.5% or $500.
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 for buying the Pound with a 1% margin at the price of 1.49889 and wait for the exchange rate to climb. At some point in the future, your predictions come true and you decide to sell. You close the position at 1.5050 and earn 61 pips or about $405. Thus, on an initial capital investment of $1,000, you have made over 40% in profits. (Just as an example of how exchange rates change in the course of a day, an average daily change of the Euro (in Dollars) is about 70 to 100 pips.)
When you decide to close a position, the deposit sum 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.
Investment Strategies: Technical Analysis and Fundamental Analysis
The two fundamental strategies in investing in FOREX are Technical Analysis or Fundamental Analysis. Most small and medium sized investors in financial markets use Technical Analysis. This technique stems from the assumption that all information about the market and a particular currency's future fluctuations is found in the price chain. That is to say, that all factors which have an effect on the price have already been considered by the market and are thus reflected in the price. Essentially then, what this type of investor does is base his/her investments upon three fundamental suppositions. These are: that the movement of the market considers all factors, that the movement of prices is purposeful and directly tied to these events, and that history repeats itself. Someone utilizing technical analysis looks at the highest and lowest prices of a currency, the prices of opening and closing, and the volume of transactions. This investor does not try to outsmart the market, or even predict major long term trends, but simply looks at what has happened to that currency in the recent past, and predicts that the small fluctuations will generally continue just as they have before.
A Fundamental Analysis is one which analyzes the current situations in the country of the currency, including such things as its economy, its political situation, and other related rumors. By the numbers, a country's economy depends on a number of quantifiable measurements such as its Central Bank's interest rate, the national unemployment level, tax policy and the rate of inflation. An investor can also anticipate that less quantifiable occurrences, such as political unrest or transition will also have an effect on the market. Before basing all predictions on the factors alone, however, it is important to remember that investors must also keep in mind the expectations and anticipations of market participants. For just as in any stock market, the value of a currency is also based in large part on perceptions of and anticipations about that currency, not solely on its reality.
Make Money with Currency Trading on FOREX
FOREX investing is one of the most potentially rewarding types of investments available. While certainly the risk is great, the ability to conduct marginal trading on FOREX means that potential profits are enormous relative to initial capital investments. Another benefit of FOREX is that its size prevents almost all attempts by others to influence the market for their own gain. So that when investing in foreign currency markets one can feel quite confident that the investment he or she is making has the same opportunity for profit as other investors throughout the world. While investing in FOREX short term requires a certain degree of diligence, investors who utilize a technical analysis can feel relatively confident that their own ability to read the daily fluctuations of the currency market are sufficiently adequate to give them the knowledge necessary to make informed investments.
About The Author
Rich McIver is a contributing writer for The Forex Blog: Currency Trading News ( http://www.forexblog.org/ ).
FOREX is a somewhat unique market for a number of reasons. Firstly, it is one of the few markets in which it can be said with very few qualifications that it is free of external controls and that it cannot be manipulated. It is also the largest liquid financial market, with trade reaching between 1 and 1.5 trillion US dollars a day. With this much money moving this fast, it is clear why a single investor would find it near impossible to significantly affect the price of a major currency. Furthermore, the liquidity of the market means that unlike some rarely traded stock, traders are able to open and close positions within a few seconds as there are always willing buyers and sellers.
Another somewhat unique characteristic of the FOREX money market is the variance of its participants. Investors find a number of reasons for entering the market, some as longer term hedge investors, while others utilize massive credit lines to seek large short term gains. Interestingly, unlike blue-chip stocks, which are usually most attractive only to the long term investor, the combination of rather constant but small daily fluctuations in currency prices, create an environment which attracts investors with a broad range of strategies.
How FOREX Works
Transactions in foreign currencies are not centralized on an exchange, unlike say the NYSE, and thus take place all over the world via telecommunications. Trade is open 24 hours a day from Sunday afternoon until Friday afternoon (00:00 GMT on Monday to 10:00 pm GMT on Friday). In almost every time zone around the world, there are dealers who will quote all major currencies. After deciding what currency the investor would like to purchase, he or she does so via one of these dealers (some of which can be found online). It is quite common practice for investors to speculate on currency prices by getting a credit line (which are available to those with capital as small as $500), and vastly increase their potential gains and losses. This is called marginal trading.
Marginal Trading
Marginal trading is simply the term used for trading with borrowed capital. It is appealing because of the fact that in FOREX investments can be made without a real money supply. This allows investors to invest much more money with fewer money transfer costs, and open bigger positions with a much smaller amount of actual capital. Thus, one can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital. Marginal trading in an exchange market is quantified in lots. The term "lot" refers to approximately $100,000, an amount which can be obtained by putting up as little as 0.5% or $500.
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 for buying the Pound with a 1% margin at the price of 1.49889 and wait for the exchange rate to climb. At some point in the future, your predictions come true and you decide to sell. You close the position at 1.5050 and earn 61 pips or about $405. Thus, on an initial capital investment of $1,000, you have made over 40% in profits. (Just as an example of how exchange rates change in the course of a day, an average daily change of the Euro (in Dollars) is about 70 to 100 pips.)
When you decide to close a position, the deposit sum 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.
Investment Strategies: Technical Analysis and Fundamental Analysis
The two fundamental strategies in investing in FOREX are Technical Analysis or Fundamental Analysis. Most small and medium sized investors in financial markets use Technical Analysis. This technique stems from the assumption that all information about the market and a particular currency's future fluctuations is found in the price chain. That is to say, that all factors which have an effect on the price have already been considered by the market and are thus reflected in the price. Essentially then, what this type of investor does is base his/her investments upon three fundamental suppositions. These are: that the movement of the market considers all factors, that the movement of prices is purposeful and directly tied to these events, and that history repeats itself. Someone utilizing technical analysis looks at the highest and lowest prices of a currency, the prices of opening and closing, and the volume of transactions. This investor does not try to outsmart the market, or even predict major long term trends, but simply looks at what has happened to that currency in the recent past, and predicts that the small fluctuations will generally continue just as they have before.
A Fundamental Analysis is one which analyzes the current situations in the country of the currency, including such things as its economy, its political situation, and other related rumors. By the numbers, a country's economy depends on a number of quantifiable measurements such as its Central Bank's interest rate, the national unemployment level, tax policy and the rate of inflation. An investor can also anticipate that less quantifiable occurrences, such as political unrest or transition will also have an effect on the market. Before basing all predictions on the factors alone, however, it is important to remember that investors must also keep in mind the expectations and anticipations of market participants. For just as in any stock market, the value of a currency is also based in large part on perceptions of and anticipations about that currency, not solely on its reality.
Make Money with Currency Trading on FOREX
FOREX investing is one of the most potentially rewarding types of investments available. While certainly the risk is great, the ability to conduct marginal trading on FOREX means that potential profits are enormous relative to initial capital investments. Another benefit of FOREX is that its size prevents almost all attempts by others to influence the market for their own gain. So that when investing in foreign currency markets one can feel quite confident that the investment he or she is making has the same opportunity for profit as other investors throughout the world. While investing in FOREX short term requires a certain degree of diligence, investors who utilize a technical analysis can feel relatively confident that their own ability to read the daily fluctuations of the currency market are sufficiently adequate to give them the knowledge necessary to make informed investments.
About The Author
Rich McIver is a contributing writer for The Forex Blog: Currency Trading News ( http://www.forexblog.org/ ).
Forex: Benefits of Trading the Forex Market
Trading the Forex market has become very popular in the last years. Why is it that traders around the world see the Forex market as an investment opportunity? We will try to answer this question in this article. Also we will discuss come differences between the Forex market, the stocks market and the futures market.
Some of the benefits of trading the Forex market are:
Superior liquidity.
Liquidity is what really makes the Forex market different from other markets. The Forex market is by far the most liquid financial market in the world with nearly 2 trillion dollars traded everyday. This ensures price stability and better trade execution. Allowing traders to open and close transactions with ease. Also such a tremendous volume makes it hard to manipulate the market in an extended manner.
24hr Market.
This one is also one of the greatest advantages of trading Forex. It is an around the click market, the market opens on Sunday at 3:00 pm EST when New Zealand begins operations, and closes on Friday at 5:00 pm EST when San Francisco terminates operations. There are transactions in practically every time zone, allowing active traders to choose at what time to trade.
Leverage trading.
Trading the Forex Market offers a greater buying power than many other markets. Some Forex brokers offer leverage up to 400:1, allowing traders to have only 0.25% in margin of the total investment. For instance, a trader using 100:1 means that to have a US$100,000 position, only US$1,000 are needed on margin to be able to open that position.
Low Transaction costs.
Almost all brokers offer commission free trading. The only cost traders incur in any transaction is the spread (difference between the buy and sell price of each currency pair). This spread could be as low as 1 pip (the minimum increment in any currency pair) in some pairs.
Low minimum investment.
The Forex market requires less capital to start trading than any other markets. The initial investment could go as low as $300 USD, depending on leverage offered by the broker. This is a great advantage since Forex traders are able to keep their risk investment to the lowest level.
Specialized trading.
The liquidity of the market allows us to focus on just a few instruments (or currency pairs) as our main investments (85% of all trading transactions are made on the seven major currencies). Allowing us to monitor, and at the end get to know each instrument better.
Trading from anywhere.
If you do a lot of traveling, you can trade from anywhere in the world just having an internet connection.
Some of the most important differences between the Forex market and other markets are explained below.
Forex market vs. Equity markets
Liquidity
FX market: Near two trillion dollars of daily volume.
Equity market: Around 200 billion on a daily basis.
Trading hours
FX market: 24hr market, 5.5 days a week.
Equity market: Monday through Friday from 8:30 EST to 5:00 EST.
Profit potential
FX market: In both, rising and falling markets.
Equity market: Most traders/investor profit only from rising markets.
Transaction costs
FX market: Commission free and tight spreads.
Equity market: High Commissions and transaction fees.
Buying power
FX market: Leverage up to 400:1.
Equity market: Leverage from 2:1 to 4:1.
Specialization
FX market: most volume (85%) is made on major currencies (USD, EUR, JPY, GBP, CHF, CAD and AUD.)
Equity market: More than 40,000 stocks to choose from.
Forex market vs. Futures market
Liquidity
FX Market: Near two trillion dollars of daily volume.
Futures market: Around 400 billion dollars on a daily basis.
Transaction costs
FX market: Commission free and tight spreads.
Futures market: High commissions fees.
Margin
FX market: Fixed rate of margin on every position.
Futures market: Different levels of margin on overnight positions than day time positions.
Trade execution
FX market: Instantaneous execution.
Futures market: Inconsistent execution.
All this makes the Forex market very attractive to investors and traders. But I need to make something clear, although the benefits of trading the Forex market are notorious; it is still difficult to make a successful career trading the Forex market. It requires a lot of education, discipline, commitment and patience, as any other market.
About The Author
Raul Lopez is a full time Forex trader and founder of http://www.straightforex.com/ a high quality Forex training company.
Some of the benefits of trading the Forex market are:
Superior liquidity.
Liquidity is what really makes the Forex market different from other markets. The Forex market is by far the most liquid financial market in the world with nearly 2 trillion dollars traded everyday. This ensures price stability and better trade execution. Allowing traders to open and close transactions with ease. Also such a tremendous volume makes it hard to manipulate the market in an extended manner.
24hr Market.
This one is also one of the greatest advantages of trading Forex. It is an around the click market, the market opens on Sunday at 3:00 pm EST when New Zealand begins operations, and closes on Friday at 5:00 pm EST when San Francisco terminates operations. There are transactions in practically every time zone, allowing active traders to choose at what time to trade.
Leverage trading.
Trading the Forex Market offers a greater buying power than many other markets. Some Forex brokers offer leverage up to 400:1, allowing traders to have only 0.25% in margin of the total investment. For instance, a trader using 100:1 means that to have a US$100,000 position, only US$1,000 are needed on margin to be able to open that position.
Low Transaction costs.
Almost all brokers offer commission free trading. The only cost traders incur in any transaction is the spread (difference between the buy and sell price of each currency pair). This spread could be as low as 1 pip (the minimum increment in any currency pair) in some pairs.
Low minimum investment.
The Forex market requires less capital to start trading than any other markets. The initial investment could go as low as $300 USD, depending on leverage offered by the broker. This is a great advantage since Forex traders are able to keep their risk investment to the lowest level.
Specialized trading.
The liquidity of the market allows us to focus on just a few instruments (or currency pairs) as our main investments (85% of all trading transactions are made on the seven major currencies). Allowing us to monitor, and at the end get to know each instrument better.
Trading from anywhere.
If you do a lot of traveling, you can trade from anywhere in the world just having an internet connection.
Some of the most important differences between the Forex market and other markets are explained below.
Forex market vs. Equity markets
Liquidity
FX market: Near two trillion dollars of daily volume.
Equity market: Around 200 billion on a daily basis.
Trading hours
FX market: 24hr market, 5.5 days a week.
Equity market: Monday through Friday from 8:30 EST to 5:00 EST.
Profit potential
FX market: In both, rising and falling markets.
Equity market: Most traders/investor profit only from rising markets.
Transaction costs
FX market: Commission free and tight spreads.
Equity market: High Commissions and transaction fees.
Buying power
FX market: Leverage up to 400:1.
Equity market: Leverage from 2:1 to 4:1.
Specialization
FX market: most volume (85%) is made on major currencies (USD, EUR, JPY, GBP, CHF, CAD and AUD.)
Equity market: More than 40,000 stocks to choose from.
Forex market vs. Futures market
Liquidity
FX Market: Near two trillion dollars of daily volume.
Futures market: Around 400 billion dollars on a daily basis.
Transaction costs
FX market: Commission free and tight spreads.
Futures market: High commissions fees.
Margin
FX market: Fixed rate of margin on every position.
Futures market: Different levels of margin on overnight positions than day time positions.
Trade execution
FX market: Instantaneous execution.
Futures market: Inconsistent execution.
All this makes the Forex market very attractive to investors and traders. But I need to make something clear, although the benefits of trading the Forex market are notorious; it is still difficult to make a successful career trading the Forex market. It requires a lot of education, discipline, commitment and patience, as any other market.
About The Author
Raul Lopez is a full time Forex trader and founder of http://www.straightforex.com/ a high quality Forex training company.
Forex Broker Advice
Do you want to make more money? Investing money is what you should be looking to do. Investing money in Forex broker advice is going to help you build your nest egg, build your wealth and it only takes a few minutes of your times. Using Forex broker advice, you are going to be able to find an investment that will make your money grow faster than a savings account.
A Forex account is an investment in the foreign exchange market. Forex broker advice is going to be all the advice you need about how to get started, where you can invest your money, when you should start investing in Forex systems.
Following your Forex broker advice you will be able to earn interest on the money you invest. You will find it easily to build a retirement plan, and you will be investing in companies that you can research so you always know where your money is going to be used. Forex broker advice is going to be all about how much money you should invest, why you should consider Forex investing instead of stocks, and Forex broker advice is going to be based on solid business decisions that will help you learn the foreign investing world.
Your Forex broker advice is going to be the best advice you will get about the foreign markets. There are so many changes in the market every day and a broker is going to be more apt to read up and be able to tell you where you should invest, and when to pull your money to put it somewhere else. Some people do not like to listen to Forex broker advice, and will like to learn the ropes on their own. That is ok too, but you should know that it would be difficult to learn all the things that a broker can do for you in the Forex market.
To get involved with the Forex market you first want to find a broker. Not all stockbrokers are going to be brokers involved in the Forex markets. Forex broker advice will be found with those companies that deal in foreign markets, such as larger banks, larger investment companies, not many small investment companies actually deal with Forex systems, or have Forex broker advice to offer investors. Start now by reading more about where you can find a Forex systems broker, and then determine which company you want to deal with. From there, you can get involved in making a new nest egg for your family, your retirement or even both!
A Forex account is an investment in the foreign exchange market. Forex broker advice is going to be all the advice you need about how to get started, where you can invest your money, when you should start investing in Forex systems.
Following your Forex broker advice you will be able to earn interest on the money you invest. You will find it easily to build a retirement plan, and you will be investing in companies that you can research so you always know where your money is going to be used. Forex broker advice is going to be all about how much money you should invest, why you should consider Forex investing instead of stocks, and Forex broker advice is going to be based on solid business decisions that will help you learn the foreign investing world.
Your Forex broker advice is going to be the best advice you will get about the foreign markets. There are so many changes in the market every day and a broker is going to be more apt to read up and be able to tell you where you should invest, and when to pull your money to put it somewhere else. Some people do not like to listen to Forex broker advice, and will like to learn the ropes on their own. That is ok too, but you should know that it would be difficult to learn all the things that a broker can do for you in the Forex market.
To get involved with the Forex market you first want to find a broker. Not all stockbrokers are going to be brokers involved in the Forex markets. Forex broker advice will be found with those companies that deal in foreign markets, such as larger banks, larger investment companies, not many small investment companies actually deal with Forex systems, or have Forex broker advice to offer investors. Start now by reading more about where you can find a Forex systems broker, and then determine which company you want to deal with. From there, you can get involved in making a new nest egg for your family, your retirement or even both!
Forex Broker Involvement Optional
To trade on the forex market, the largest financial market on the planet, one must use a forex broker. Not unlike a stock broker, a forex broker can also makes suggestions about which moves to make when exchanging foreign currency. Some forex brokers even supply technical analysis to some of their clients and offer tips on research to improve their success as forex traders.
Typically in the forex market a forex broker is a banking institution who may buy up large amounts of a certain currency. For years, banks were the only ones who had access to the forex markets. But today with the Internet, any forex trader, who subscribes with a forex broker, can access the market 24 hours a day.
Today, as with stock brokers, the brick and mortar institutions, such as banks, are less of an option for the individual forex trader who works from home, monitoring the news and gaining insight into certain technical information to help with his or her trading decisions.
Choosing a forex broker may depend on your needs. If you are new to the field, there are houses, or online forex brokers who may cater to your needs, providing in-depth research, ample time to demo their product and so on. Other forex brokers are geared toward the experienced online forex trader. They too offer advice, but may be less likely to offer instructional help with the information, assuming that you may already know how it may or may not benefit you when you read it. It is advisable to read about and even run a demo on several different online forex brokers before going with one.
About The Author
Jay Moncliff is the founder of http://www.goforexonline.info/ a blog focusing on the latest Forex news, resources and articles. This site provides detailed information on forex trading.
Typically in the forex market a forex broker is a banking institution who may buy up large amounts of a certain currency. For years, banks were the only ones who had access to the forex markets. But today with the Internet, any forex trader, who subscribes with a forex broker, can access the market 24 hours a day.
Today, as with stock brokers, the brick and mortar institutions, such as banks, are less of an option for the individual forex trader who works from home, monitoring the news and gaining insight into certain technical information to help with his or her trading decisions.
Choosing a forex broker may depend on your needs. If you are new to the field, there are houses, or online forex brokers who may cater to your needs, providing in-depth research, ample time to demo their product and so on. Other forex brokers are geared toward the experienced online forex trader. They too offer advice, but may be less likely to offer instructional help with the information, assuming that you may already know how it may or may not benefit you when you read it. It is advisable to read about and even run a demo on several different online forex brokers before going with one.
About The Author
Jay Moncliff is the founder of http://www.goforexonline.info/ a blog focusing on the latest Forex news, resources and articles. This site provides detailed information on forex trading.
FOREX BROKER
Most FOREX traders use a broker to handle their transactions. What exactly is a broker? Strictly speaking, a broker is an individual or a company that buys and sells orders according the investor's decisions. Brokers earn money by charging a commission or a fee for their services.
A FOREX broker needs to be associated with a large financial institution such as a bank in order to provide the funds necessary for margin trading. In the United States a broker should be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.
Before trading FOREX you need to set up an account with a FOREX broker. You may feel overwhelmed by the number of brokers who offer their services online. Deciding on a broker requires a little bit of research on your part, but the time spent will give you insight into the services that are available and fees charged by various brokers.
The best advertising is word-of-mouth advertising, and this is just as valid in FOREX trading as it is for any other type of business. Talk to friends and associates to see who they are dealing with and find if they have any complaints or difficulties in dealing with a particular broker.
You could try selecting a few online brokers and contact their Internet help desks to see how quickly they respond to enquiries and whether or not they answer questions to your satisfaction. Keep in mind, however, that pre-sales service may be better than after sales service. This can be true for any online business, not just FOREX brokers.
Customer satisfaction and safety are just part of the story. You want to find a broker who executes orders quickly and with minimum slippage. All online brokers should offer automatic execution and have clear policies regarding slippage. They should be able to tell you how much slippage can be expected in both normal and fast-moving markets.
Next you want to know the fees involved. What is the spread? Is spread fixed or variable according to the type of account? Are mini accounts subject to wider spreads? Are there any other charges? Smaller spreads mean more profit for the trader, but there may be a trade-off between spread and service. Look at the overall picture before deciding to go with a particular broker.
Margin accounts are the lifeblood of FOREX trading, so be sure you understand the broker's margin terms before setting up an account. You need to know the margin requirements and how margin is calculated. Does margin change according to the currency traded? Is it the same every day of the week? Some brokers may offer different margins for mini and standard accounts.
Trading software is very important for the online FOREX trader. Get a feel for the options that are available by trying out a demo account at a few online brokers. Above all, you are looking for reliability and the ability to perform well in fast-moving markets. The software should offer automatic trading and may have special features such as trailing stops and trading from the chart. Some features may only be available at an extra cost, so be sure you understand what your trading needs are and how much the broker charges to provide them.
Other information to find out about includes the broker's policy regarding minimum account balances, interest payments on account balances, which currencies can be traded and whether or not non-standard sized lots can be traded. You should also find out whether clients' funds are insured and the extent of that insurance.
A FOREX broker needs to be associated with a large financial institution such as a bank in order to provide the funds necessary for margin trading. In the United States a broker should be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.
Before trading FOREX you need to set up an account with a FOREX broker. You may feel overwhelmed by the number of brokers who offer their services online. Deciding on a broker requires a little bit of research on your part, but the time spent will give you insight into the services that are available and fees charged by various brokers.
The best advertising is word-of-mouth advertising, and this is just as valid in FOREX trading as it is for any other type of business. Talk to friends and associates to see who they are dealing with and find if they have any complaints or difficulties in dealing with a particular broker.
You could try selecting a few online brokers and contact their Internet help desks to see how quickly they respond to enquiries and whether or not they answer questions to your satisfaction. Keep in mind, however, that pre-sales service may be better than after sales service. This can be true for any online business, not just FOREX brokers.
Customer satisfaction and safety are just part of the story. You want to find a broker who executes orders quickly and with minimum slippage. All online brokers should offer automatic execution and have clear policies regarding slippage. They should be able to tell you how much slippage can be expected in both normal and fast-moving markets.
Next you want to know the fees involved. What is the spread? Is spread fixed or variable according to the type of account? Are mini accounts subject to wider spreads? Are there any other charges? Smaller spreads mean more profit for the trader, but there may be a trade-off between spread and service. Look at the overall picture before deciding to go with a particular broker.
Margin accounts are the lifeblood of FOREX trading, so be sure you understand the broker's margin terms before setting up an account. You need to know the margin requirements and how margin is calculated. Does margin change according to the currency traded? Is it the same every day of the week? Some brokers may offer different margins for mini and standard accounts.
Trading software is very important for the online FOREX trader. Get a feel for the options that are available by trying out a demo account at a few online brokers. Above all, you are looking for reliability and the ability to perform well in fast-moving markets. The software should offer automatic trading and may have special features such as trailing stops and trading from the chart. Some features may only be available at an extra cost, so be sure you understand what your trading needs are and how much the broker charges to provide them.
Other information to find out about includes the broker's policy regarding minimum account balances, interest payments on account balances, which currencies can be traded and whether or not non-standard sized lots can be traded. You should also find out whether clients' funds are insured and the extent of that insurance.
Tuesday, February 5, 2008
Introduction to the Forex Market
The Foreign Exchange market, also referred to as the "Forex" or "FX" market is the largest financial market in the world, with a daily average turnover of US$3.2 trillion."Foreign Exchange" is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY).
There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency. The other 95% is trading for profit, or speculation.
For speculators, we believe the best trading opportunities are with the most commonly traded (and therefore most liquid) currencies, called "the Majors." Today, more than 85% of all daily transactions involve trading of the Majors, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.
A true 24-hour market from Sunday 5:00 PM ET to Friday 5:00PM ET, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.
The FX market is considered an Over The Counter (OTC) or 'interbank/interdealer' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange, as with the stock and futures markets.
More informationFor more background about the Foreign Exchange market, review the Federal Reserve Banks' "All About the Foreign Exchange Markets in the United States".
what is forex
FOREX (FOReign EXchange market) is an international foreign exchange market, where money is sold and bought freely. In its present condition FOREX was launched in the 1970s, when free exchange rates were introduced, and only the participants of the market determine the price of one currency against the other proceeding from supply and demand.As far as the freedom from any external control and free competition are concerned, FOREX is a perfect market. It is also the biggest liquid financial market. According to various assessments, money masses in the market constitute from 1 to 1.5 trillion US dollars a day. (It is impossible to determine an absolutely exact number because trading is not centralized on an exchange.) Transactions are conducted all over the world via telecommunications 24 hours a day from 00:00 GMT on Monday to 10:00 pm GMT on Friday. Practically in every time zone (that is, in Frankfurt-on-Main, London, New York, Tokyo, Hong Kong, etc.) there are dealers who will quote currencies.FOREX is a more objective market, because if some of its participants would like to change prices, for some manipulative purpose, they would have to operate with tens of billions dollars. That is why any influence by a single participants in the market is practically out of the question. The superior liquidity allows the traders to open and/or close positions within a few seconds. The time of keeping a position is arbitrary and has no limits: from several seconds to many years. It depends only on your trading strategies. Although the daily fluctuations of currencies are rather insignificant, you may use the credit lines, that are accessible even to currency speculators with small capitals ($ 1,000 - 5,000), where the profit may be impressive. (You can learn more about it in the section: The main principles of trading.)The idea of marginal trading stems from the fact that in FOREX speculative interests can be satisfied without a real money supply. This decreases overhead expenses for transferring money and gives an opportunity to open positions with a small account in US dollars, buying and selling a lot of other currencies. That is, on can conduct transactions very quickly, getting a big profit, when the exchange rates go up or down. Many speculative transactions in the international financial markets are made on the principles of marginal trading.Margin trading is trading with a borrowed capital. Marginal trading in an exchange market uses lots. 1 lot equals approximately $100,000, but to open it it is necessary to have only from 0.5% to 4% of the sum.For example, you have analyzed the situation in the market and come to the conclusion that the pound will go up against the dollar. You open 1 lot for buying the pound (GBP) with the margin 1% (1:1000 leverage) at the price of 1.49889 and wait for the exchange rate to go up. Some time later your expectations become true. You close the position at 1.5050 and earn 61 pips (about $ 405). For the calculation of 1 pip click here.Everyday fluctuations of currencies constitute about 100 to 150 pips, giving FX traders an opportunity to make money on these changes.In FOREX, it's not obligatory to buy some currency first in order to sell it later. It's possible to open positions for buying and selling any currency without actually having it. Usually Internet-brokers establish the minimum deposit such as $ 2000, for working in the FOREX market, and grant a leverage of 1:100. That is, opening the position at $100,000, a trader invests $1,000 and receives $99.000 as a credit. The major currencies traded in FOREX, are Euro (EUR), Japanese yen (JPY), British Pound (GBP), and Swiss Franc (CHF). All of them are traded against the US dollar (USD).In order to assess the situation in the market a trader has to be able to use fundamental and/or technical analysis, as well as to make decisions in the constantly changing current of information about political and economic character. Most small and medium players in financial markets use technical analysis. Technical analysis presupposes that all the information about the market and its further fluctuations is contained in the price chain. Any factor, that has some influence on the price, be it economic, political or psychological, has already been considered by the market and included in the price. The initial data for a technical analysis are prices: the highest and the lowest prices, the price of opening and closing within a certain period of time, and the volume of transactions.A technical analysis is founded on three suppositions:Movement of the market considers everything;Movement of prices is purposeful;History repeats itself. That is, technical analysis is a statistical and mathematical analysis of previous quotes and a prognosis of coming prices.A number of technical indicators have been installed into the PRO-CHARTS trading system. Analyzing the indicators one can come to the conclusion about further movements of the quoted currencies. For a more detailed description of the indicators, analyzing price charts and volumes of trading, click here.Fundamental analysis is an analysis of current situations in the country of the currency, such as its economy, political events, and rumors. The country's economy depends on the rate of inflation and unemployment, on the interest rate of its Central Bank, and on tax policy. Political stability also influences the exchange rate. Policy of the Central Bank has a special role, as concentrated interventions or refusal from them greatly influence the exchange rate.At the same time one should not consider fundamental analysis just as an analysis of the economic situation in the country itself. A far bigger role in the FOREX market belongs to the expectations of the market participants and their assessment of these expectations. Various prognoses and bulletins, issued by the participants, have a strong influence on the expectations. Very often an effect of the so-called self-filfilling prophecy occurs when market players raise or lower the exchange rates according to the prognosis. But a deep and thorough fundamental analysis is available only for big banks with a staff of professional analysts and constant access to a wide field of information.In spite of these different approaches, both forms of analyses complement one another. Traders who act on the basis of a fundamental analysis, have to consider some technical characteristics of the market (the main rates of support, such as resistance and resale), and supporters of the technical approach to the market must track the main news (interest rates, important political events).
Main forex markets
Foreign exchange is traded essentially in two distinctive ways. Over an organized exchange and 'over the counter'. Exchange traded foreign exchange represents a very small portion of the total foreign exchange market the great majority of foreign exchange deals being traded between banks and other market participants 'over the counter'.
1. Exchange traded currencies
In the case of an organized exchange like the Chicago Mercantile exchange (CME) in the US, standardized currency contract sizes that represent a certain monetary value are traded in the International money market (IMM). A central clearing house organizes matching of transactions between counter-parties. There are various disadvantages to trading currency futures as outlined in the chapter Advantages of trading FX.
2. Forex market
In comparison the over the counter market is traded around the world by a multitude of participants and price quality, reputation and trading conditions determine who a participant wishes to trade with. It is probably the most competitive market in the world and brokers like ACM must insure they live up to the highest standards of service and be compliant with market standards and practices if they want to acquire new customers and retain their existing ones. In 1998 a survey under the auspices of the Bank for International Settlements (BIS), global turnover of reporting dealers was estimated at about USD 1.49 trillion per day. In comparison, currency futures turnover was estimated at USD 12 billion.
Among the various financial centers around the world, the largest amount of foreign exchange trading takes place in the United Kingdom, even though that nation's currency, the British pound is less widely traded in the market than several others. As shown in the graph underneath, the United Kingdom accounts for about 32 percent of the global total; the United States ranks a distant second with about 18 percent, and Japan is third with 8 percent.
1. Exchange traded currencies
In the case of an organized exchange like the Chicago Mercantile exchange (CME) in the US, standardized currency contract sizes that represent a certain monetary value are traded in the International money market (IMM). A central clearing house organizes matching of transactions between counter-parties. There are various disadvantages to trading currency futures as outlined in the chapter Advantages of trading FX.
2. Forex market
In comparison the over the counter market is traded around the world by a multitude of participants and price quality, reputation and trading conditions determine who a participant wishes to trade with. It is probably the most competitive market in the world and brokers like ACM must insure they live up to the highest standards of service and be compliant with market standards and practices if they want to acquire new customers and retain their existing ones. In 1998 a survey under the auspices of the Bank for International Settlements (BIS), global turnover of reporting dealers was estimated at about USD 1.49 trillion per day. In comparison, currency futures turnover was estimated at USD 12 billion.
Among the various financial centers around the world, the largest amount of foreign exchange trading takes place in the United Kingdom, even though that nation's currency, the British pound is less widely traded in the market than several others. As shown in the graph underneath, the United Kingdom accounts for about 32 percent of the global total; the United States ranks a distant second with about 18 percent, and Japan is third with 8 percent.
Origins of foreign exchange
In order to gain a complete understanding of what foreign exchange market is, it is useful to examine the reasons that lead to its existence in the first place. Exhaustively detailing the historical events that shaped the foreign exchange market into what it is today is of no great importance to the fx trader and therefore we happily will omit lengthy explanations of historical events such as the Bretton Woods accord in favor of a more specific insight into the reasoning behind foreign exchange as a medium of exchange of goods and services.
Originally our ancestors conducted trading of goods against other goods this system of bartering was of course quite inefficient and required lengthy negotiation and searching to be able to strike a deal. Eventually forms of metal like bronze, silver and gold came to be used in standardized sizes and later grades (purity) to facilitate the exchange of merchandise. The basis for these mediums of exchange was acceptance by the general public and practical variables like durability and storage. Eventually during the late middle ages, a variety of paper IOU started gaining popularity as an exchange medium.
The obvious advantage of carrying around 'precious' paper versus carrying around bags of precious metal was slowly recognized through the ages. Eventually stable governments adopted paper currency and backed the value of the paper with gold reserves. This came to be known as the gold standard. The Bretton Woods accord in July 1944 fixed the dollar to 35 USD per ounce and other currencies to the dollar. In 1971, president Nixon suspended the convertibility to gold and let the US dollar 'float' against other currencies.Since then the foreign exchange market has developed into the largest market in the world with a total daily turnover of about 1.5 trillion USD. Traditionally an institutional (inter-bank) market, the popularity of online currency trading offered to the private individual is democratising foreign exchange and widening the retail market.
Originally our ancestors conducted trading of goods against other goods this system of bartering was of course quite inefficient and required lengthy negotiation and searching to be able to strike a deal. Eventually forms of metal like bronze, silver and gold came to be used in standardized sizes and later grades (purity) to facilitate the exchange of merchandise. The basis for these mediums of exchange was acceptance by the general public and practical variables like durability and storage. Eventually during the late middle ages, a variety of paper IOU started gaining popularity as an exchange medium.
The obvious advantage of carrying around 'precious' paper versus carrying around bags of precious metal was slowly recognized through the ages. Eventually stable governments adopted paper currency and backed the value of the paper with gold reserves. This came to be known as the gold standard. The Bretton Woods accord in July 1944 fixed the dollar to 35 USD per ounce and other currencies to the dollar. In 1971, president Nixon suspended the convertibility to gold and let the US dollar 'float' against other currencies.Since then the foreign exchange market has developed into the largest market in the world with a total daily turnover of about 1.5 trillion USD. Traditionally an institutional (inter-bank) market, the popularity of online currency trading offered to the private individual is democratising foreign exchange and widening the retail market.
About Forex
To buy foreign goods or services, or to invest in other countries, companies and individuals may need to first buy the currency of the country with which they are doing business. Generally, exporters prefer to be paid in their country's currency or in U.S. dollars, which are accepted all over the world.
The foreign exchange market, or the "FX" market, is where the buying and selling of different currencies takes place. The price of one currency in terms of another is called an exchange rate.
The foreign exchange market, or the "FX" market, is where the buying and selling of different currencies takes place. The price of one currency in terms of another is called an exchange rate.
Forex Resources
The live forex charts can be used to track ten currency pairs in real time and click on forex rates for a pop-up window of ten currency pairs with live rates for the EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD, NZD/USD, EUR/JPY, EUR/GBP and EUR/CHF, including the daily highs and lows from 17:00 EST. For a selection of free ebooks, trial offers, calculators and tutorials, visit free downloads. For a current snapshot of the foreign exchange market, use the market monitor to display time zones for several key markets, as well as live forex rates, a sentiment indicator and an economic calendar in a detachable window. Use the online money management calculator to calculate the correct position size for your trade based on your risk profile. Browse the selection of forex books on offer in forex books which includes special sections on technical analysis and general trading. There is a great number of forex related resources to be found in the categorised forex directory to help you find a particular niche or service.
Unique Commodity Trading Strategies To Survive And Prosper During Tough Markets
Surviving the rough times to be present for the big moves is the name of the game in commodity trading. With some luck we can even break even while the other participants are getting chopped to pieces. It requires giving up something to get something else. Learn how a few of the big hits can be avoided for a small price. Read about ways to participate in the long haul moves while still sleeping well at night.Let's say our forecast makes us bullish on the market. We want to check out the possibility of buying a future contract and hedging it by buying a put option. There will always be a choice here - either buying an option spread (as in the previous example) or buying a future with an option hedge. One method will always be better than the other. We need to determine this to get our strategy edge on the market. Much depends on the option premiums. Again, this is where it's handy to have an automated option evaluation program.Now we can get creative and more flexible. Let's say you have faith in your forecast that the market is going to rally within 2 - 3 weeks. If it doesn't happen by then, then the trade is suspect. Let's buy a futures contract and also buy a put option as close to the current market price as possible. Hopefully we pay a reasonable price for the put option. The closer you buy it, the less loss and risk if the futures contract declines sharply against you. However, the option premium will be higher too.The put option becomes a synthetic stop loss order for the futures contract. You will lose until the market hits that option strike price and then no matter how far the market drops, the futures contract loss is fixed and limited. Now here's the trick and edge...Select an option with only a small amount of time, like 30 days or so. The option will cost less because of having a short time remaining. If your future contract moves up within 2-3 weeks as you expect, the put option will lose its value quickly and expire within 30 days anyway. The option is the sacrificial lamb that has done its job for a few weeks and then dies. It has protected you against the big potential hit. We dodged the ball. Now it's up to the futures contract. That's where the profit will come from, if the trade is destined to work out.Once the futures contract gets far away from your entry point under the initial protection of the option, you can then move up the future's stop loss order to break-even. A new option could always be bought later if desired to synthetically lock in some profits. However, this is option overuse and the premiums start to catch up with you. We must take on risk or the market will not pay us. We become parasites if we hedge too much, add no liquidity or load risk onto others. In this example we economically used an option to lay off large risk at a critical time. After that brief, partially-hedged window, we again assumed the risk. There are other ways to do this, but beyond the scope of this article. More later.So far we have discussed entry techniques and ways to lower our risk at critical times when our exposure is the greatest. Remember that we are trying NOT to get hit by the dodge-ball and are happy making singles and doubles. Let the newbies swing for the fences and strike out 90% of the time. The idea here is survival until we identify a big market forecast and the move starts. That's the only time to swing for the fences. You want to play it conservative 90% of the time and swing hard 10% at most. To do otherwise is the road to consistent losses. Trade like a guerrilla warfare fighter. Survival first, shoot at our own time and place...sparingly. Let the others line themselves up and face off to their heart's desire. In another article we will discuss methods of using futures and options for synthetic exit strategies. This will include option granting, and futures hedging of options. Good Trading!
Learn Forex Trading to Expand Opportunities
Capitalize on the opportunity to learn forex trading so you can begin the process of branching your portfolio out of domestic stocks and into the global market. Any financial advisor worth his weight will tell you that it is important to diversify your investment portfolio and this is by far the largest volume market in the world. Daily, it does nearly four times the volume of trading than the New York Stock Exchange does. Anyone who holds a basic understanding of how money is converted and exchange rates work can learn forex trading. The sale or trading of currency is at the heart of what forex is. Using one currency to buy another means that your counterpart is using their currency to buy yours. As exchange rates fluctuate and the economies of nations surge and recede, these investments in cash behave in value very much like a traditional stock. As with any new venture, you will need to master the vocabulary that is an inherent part of forex. When you begin to learn forex trading you will be introduced to terms like pip, spread, cross, base currency and trade currency. Foreign exchange trading does have some unique terminologies. While they may be new to you, you will learn them quickly because they describe certain parts of forex quotes that you will need to understand in order to trade. There are quite a few resources available to those who wish to learn forex trading. The reliability of internet access has opened the door to online forex trading, which means that more investors have the ability to participate in trading activity. Since the foreign exchange trade is considered a spot market, the ready availability of internet access is crucial. Business is done on the "spot," thus the name. You can capitalize on many benefits when you learn forex trading. The availability of a 24-hour a day market is one. Since forex involves the trade of currency at banks across the globe, the market never closes. The market is also remarkably liquid, meaning that you will never have trouble finding trading partners. Since most of your trading partners are banks and the medium is cash, you will never be at a loss for customers. Another benefit is the lack of commissions. Since you make the trades on your own, you don't have to spend part of your profit on brokerage commission fees. Taking the time to learn forex trading opens one more investment door for you. As you continue to realize the importance of diversifying your investment portfolio, it may be a good idea to begin looking at what kinds of opportunities are available to you in foreign exchange trading. You may be surprised to see who else is capitalizing on this market and just how easy it is.
Forex - You Need A Real System!
Although it has been some years since I was actively involved in trading, I have just returned to the markets and have begun to trade a small account on my own behalf. This has perhaps given me a slightly skewed perspective of the markets, almost like a new entrant, but one with a lot of experience.There have been some big changes whilst I have been inactive, not least in the number of online brokerages fighting for every dollar.But many things stay the same, at the heart of which is one, I guess, unbreakable truth. Trading is basically a very simple business, with any trading stocks, options, FOREX, whatever only really involving three steps:1. Find several possible trades evaluate them and decide which to go for,2. Calculate how much to trade, and decide at what points to enter and exit the market3. Keeping an eye on, or monitoring, open market positionsNow, these three steps were basically all there was to it a few years ago, and they still And, guess what, people are still getting totally bogged down right here, at this early stage of the trading process, generally, for one of two reasons.The first possible reason is that they simply are not aware that these are the steps involved in the trading process, or (the second reason) they have no clearly defined rules for actioning these steps. Thus, less experienced, more nervous, traders can often take hours to evaluate a small number of potential trades.Experienced day traders, on the other hand, are fully aware that, with little time available to execute their trading, they must have a process plan and they must stick to it.A day trader will set out his (or her) plan of action something like this:1. Recognize the opportunity, enter the market2. Stay in the trade for as long as possible if it is going for him or3. Get the heck out of there with minimum losses, as soon as it is clear it is going to go the wrong wayThat s it! That s essentially what a day trader in any market was doing years ago, and that is what a day trader is still doing today, with little or no change to their working practices brought about by the vastly more advanced technology of today.Savvy day traders learn very quickly that they must plan ahead of time, so that they are in prime position to take full advantages of the opportunities that occur in real time.Thus, day trading, which on paper at least is a pretty dangerous and risky manner of working markets is, in fact, one of the most disciplined trading schools! By the nature of market movements and the way they operate, day traders simply cannot afford to run their trading business on a wing and a prayer!
Swing Trading For Profit a Live Example
Swing trading is one of the best ways to make money in forex trading, it's also a lot easier psychologically than trend following.It's therefore a great way to trade for novice traders. Over the last few weeks we have looked at some live examples:Banked 4 profits, scratched one trade at break even and have one open. Let's look at it and another potential opportunity.First why is swing trading an easy way to trade?When we say is easy, we mean psychologically.You get in quick with low pre defined risk and you're normally out in 2 - 5 days with a good profit.This is much easier than long term trend following, in that you do not have to wait for months and see dips eat into your open profit.Long term trend following is highly profitable but requires a lot more discipline.We personally mix the two ways of trading to gain some diversification of style and smooth the equity curve.Swing trading basicsWe normally look for important chart support and resistance and trade contrary to it.We wait for prices to test these areas and watch for stochastic momentum to fall against resistance or rise against support.Then we know the level has held and trade off it.We also use RSI and Bollinger bands to define targets and that's it.Nice ands simple, but can be very profitable you can read more about this method in our other articles.British PoundWe are short at recent nearby highs and would look for a pop to the downside to Fridays low or near the middle of the Bollinger band.Stochastic is weak at present and odds favor a bit more to the downside.With swing trading you don't want to hang around to long, get out on specific target and that's very close now.Another opportunityLets look at another potential opportunity that's could be shaping up. The euro is trading near its highs and the spike high on the chart is resistance. Stochastic momentum is waning and a cross with bearish divergence will put the odds in favor of the bears.The important point is to wait for confirmation of the crossover - the target is then Fridays low just above the middle of the center of the Bollinger band.FinallyThe tools used swing trade are simple and easy to use, but that doesn't mean they can't make profits as we have shown.Importantly, for novice traders the discipline needed to trade this way is a lot easier.If you practice a bit and learn to spot the set ups you will soon be able to spot some great low risk high reward trades - Good Luck
Choose Your Online Forex Broker
Online Forex brokers are known to be a required evil if you are going to trade in currency. There are also those people who are eligible to trade without outside assistance, but for the normal trader, enforcing to trade on the Online Forex market with no broker is like trying to chase a grizzly bear with a soup spoon. Your chances of achievement are actually very low, and there is a distinct option you would get hurt quite badly. Of course choosing the incorrect forex broker might return results same as to the sick fated bear hunt. That is why it is significant that you select a broker in the right way.First thing to be considered is to be sure that the broker you choose has the proper qualifications. When you look at the brokerage firms in the United States, immediately exclude those that are not registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC). This is again important as this designation means that you are confined against scam and any possible abusive forex trading practices. Covering your personal security before a forex trade has been made is a high-quality way to wade gradually into the forex currency market.Once you have removed the ones who do not have the required qualifications, and now have a short list of potential, the internet comes into picture. Just don't go with the brokerage firm, which has the best profitable, or gets the most excellent "Law and Order" individuality to assist in the following advertising, research your choices. A superior idea is to send some effective emails to your customer service people. Estimate how long it takes them to get in touch to you. This is, after all, a customer examine ambitious profession.Once you are pleased with a firm's experience and customer service practices, its time to get down to your self-assurance tacks. Online forex trading speed is forever an issue, so find out how fast it takes your own potential online forex broker to carry out an order. Also, you would desire to know how much slippage could be expected. This needs information, which could be discovered in a phone call, or any email to customer service. You would desire these answers not only for regular markets, but for fast moving ones as well.
A Look at Online Forex Brokers
An online forex broker is a firm that facilitates retail trading using Internet technologies. Global Forex Trading (GFT), one of the popular online forex brokers. It provides retail traders with a free demo trading account, allows users to open a live account, gives live help, provides software called DealBook FX 2, and allows viewing of account documents. (DealBook FX 2 can be downloaded for the demo trading account).Gain Capital Group's Online Forex offers 200:1 leverage. In some cases, the total return on investment is higher due to leverage. For example, with $1000 cash in a margin account, the investor can control up to $200,000 in notional value. Of course, trading on leverage magnifies both the investor's profits and losses. GCI Financial Ltd. offers commission-free online trading in forex. GCI offers Internet trading software, fast and efficient execution, and 0.5% margin requirements. This broker offers USD or Euro denominated trading accounts. The spreads are 3 pips in EUR/USD and USD/JPY, and are 4 to 5 pips for other major commissions. Clients can hedge by opening positions in the same currency in opposite directions. Risk to the investor is limited to the deposited funds. Market analysis and research, real-time charts, and forex trading signals are available at no charge.ACM, part of the REFCO group, offers 3 pip spreads on all major currencies, which works out to between 0.02% and 0.03% on the dollar value. They also offer commission-free trading, and forex trading with a 1% margin, which means that a trader can control $1,000,000 with $10,000 in his account.There are many online forex brokers that offer free demo accounts for potential forex traders to practice trading. It is only a matter of registering and starting demo trading to get a feel for forex trading. In addition, at most sites, traders can find free forex news to assist them with their trade strategies
Choose Your Online Forex Broker
Online Forex brokers are known to be a required evil if you are going to trade in currency. There are also those people who are eligible to trade without outside assistance, but for the normal trader, enforcing to trade on the Online Forex market with no broker is like trying to chase a grizzly bear with a soup spoon. Your chances of achievement are actually very low, and there is a distinct option you would get hurt quite badly. Of course choosing the incorrect forex broker might return results same as to the sick fated bear hunt. That is why it is significant that you select a broker in the right way.First thing to be considered is to be sure that the broker you choose has the proper qualifications. When you look at the brokerage firms in the United States, immediately exclude those that are not registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC). This is again important as this designation means that you are confined against scam and any possible abusive forex trading practices. Covering your personal security before a forex trade has been made is a high-quality way to wade gradually into the forex currency market.Once you have removed the ones who do not have the required qualifications, and now have a short list of potential, the internet comes into picture. Just don't go with the brokerage firm, which has the best profitable, or gets the most excellent "Law and Order" individuality to assist in the following advertising, research your choices. A superior idea is to send some effective emails to your customer service people. Estimate how long it takes them to get in touch to you. This is, after all, a customer examine ambitious profession.Once you are pleased with a firm's experience and customer service practices, its time to get down to your self-assurance tacks. Online forex trading speed is forever an issue, so find out how fast it takes your own potential online forex broker to carry out an order. Also, you would desire to know how much slippage could be expected. This needs information, which could be discovered in a phone call, or any email to customer service. You would desire these answers not only for regular markets, but for fast moving ones as well.
Introduction to the Forex Market
The Foreign Exchange market, also referred to as the "Forex" or "FX" market is the largest financial market in the world, with a daily average turnover of US$3.2 trillion."Foreign Exchange" is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY).There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency. The other 95% is trading for profit, or speculation.For speculators, we believe the best trading opportunities are with the most commonly traded (and therefore most liquid) currencies, called "the Majors." Today, more than 85% of all daily transactions involve trading of the Majors, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.A true 24-hour market from Sunday 5:00 PM ET to Friday 5:00PM ET, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.The FX market is considered an Over The Counter (OTC) or 'interbank/interdealer' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange, as with the stock and futures markets.More informationFor more background about the Foreign Exchange market, review the Federal Reserve Banks' "All About the Foreign Exchange Markets in the United States".
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