It is also good to understand the means be which the
currency conversion is expressed. The comparison is usually
made in a ratio known as the cross-rate. In this
configuration, the two currencies are listed in an XXX/YYY
ratio, with the XXX position referred to as the base currency.
The base currency is usually expressed as a whole number,
while the YYY position is expressed as the decimal that most
closely matches the based currency rate. It is sort of like
making reference to miles per gallon or rotations per minute
on a car – a direct comparison of one to the other in the
form of a ratio.
The smallest fraction, or decimal, in which a currency can be
traded, is called a pip and this is usually the degree to which
a cross-rate is expressed. For example, if the British pound
sterling can be traded in thousandths, the currency will be
expressed to the third decimal place. The U.S. dollar is
often expressed to the hundredth of a cent (the fourth
decimal place).
In one cross-rate expression example, one U.S. dollar may
be equivalent to 117.456 Japanese yen. This ratio would be
expressed as 1.000/117.456. The base currency is almost
always expressed as a single unit (as in one dollar as
opposed to ten dollars), and frequently that unit of
measurement is the U.S. dollar. Since the whole number
value (or big figure, as it is referred to) of the secondary
currency, or the currency in the YYY position in terms of
conversion changes so infrequently, often only the decimal
portion of the number is mentioned in the Foreign Exchange
Market.
Therefore, in the ratio above, you may hear that the yen is
trading at .456, with no mention at all of the 117 whole yen
that is shown in the ratio. This is because the exchange rate
may vary from 117.456 to 117.423, but not to 119.024.
Experiencing a change in the big figure – the whole number
ahead of the decimal – unless it was only because the
number was already within a few thousandths, would
represent much too large a shift in value for a single tradingperiod and would be a rare occurrence that could cause the
entire market to make a drastic swing in one direction or the
other.
The most common currencies found in Forex are the U.S.
dollar, the British pound sterling, the Euro, the Japanese
yen, and the Australian dollar. In the past, there would
have been many more currencies to keep track of (such as
the franc, the lira, or the Deutschmark). However, with the
consolidation of most of the European market trading on
Forex to the Euro, many currencies have been eliminated,
making trade on Forex for other lands less complicated.
If you purchase a commodity in a particular currency, and
that currency’s value falls against the U.S. dollar, you can
actually make money by selling that same commodity in
dollars. The same is true in reverse should the value of a
foreign currency increase against a U.S. dollar. Of course,
you can only take advantage of such a situation should the
commodity be traded in both currencies and both markets in
question. We will discuss this process, as well as other ways
to take advantage of the Foreign Exchange Market (like
arbitrage) in more depth in future chapters.
Once you are able to discern a base value of each particular
currency and its conversion rate against others traded on
Forex, you will be able to more closely monitor the change
in currency conversion, including its inconsistency and
volatility. Such ideas will not seem so “foreign”, and you
will be caught up and knowledgeable right along with the
pros. Then, you will need to learn how to read, understand,
and ultimately interpret additional market trends.
Tuesday, February 24, 2009
Forex:Working With Multiple Currencies
Since Forex is the Foreign Exchange Market, you obviously
cannot expect everyone within the market to trade in U.S.
dollars (and why not, you might ask? – but remember that
not everyone covets the U.S. dollar). With so many
variables and volatile currencies being exchanged, how can
you know a good buy or sell when you see one without
complete awareness of the value of foreign currency?
The first step is to find a source that will give you a basic
idea of the current exchange rate between your domestic
currency and the foreign currency in question. You should
do this as a base listing for any currency that with which you
might become involved. Of course, this will not be
consistent down to the cent or fraction of a particular
currency throughout an entire business day, but at least you
will have your starting point from which to begin, almost like
North on a compass. Such sources can be found all over the
Internet, as well as through many brokers, both on line and
in person.
cannot expect everyone within the market to trade in U.S.
dollars (and why not, you might ask? – but remember that
not everyone covets the U.S. dollar). With so many
variables and volatile currencies being exchanged, how can
you know a good buy or sell when you see one without
complete awareness of the value of foreign currency?
The first step is to find a source that will give you a basic
idea of the current exchange rate between your domestic
currency and the foreign currency in question. You should
do this as a base listing for any currency that with which you
might become involved. Of course, this will not be
consistent down to the cent or fraction of a particular
currency throughout an entire business day, but at least you
will have your starting point from which to begin, almost like
North on a compass. Such sources can be found all over the
Internet, as well as through many brokers, both on line and
in person.
Forex Today
While some countries have still not accepted the currency as
their own (such as Britain, who still uses the sterling pound),
the process of currency conversion has been simplified
without the large number of various currencies that were
previously dealt with. Instead of dozens of currencies, the
main countries trade in five – U.S. dollars, Australian
dollars, British pounds sterling, the Euro, and the Japanese
Yen.
Today, the Foreign Exchange Market is international and
worldwide. The market is open 24 hours a day, 5 days a
week, to accommodate all of the time zones for all of the
major players. These now include most of Europe, the
United States, and Asian markets, especially Japan. Even
Australia has joined the international trading markets, and
since such nations are halfway around the world from some
of the other top players, time zones obviously must be taken
into consideration.
Another completely separate but perhaps more important
concern with trading in Forex is understanding how trade
works in multiple currencies. How can you compare the
value of a stock across international lines if the values are
expressed in two separate, non-equivalent currencies? And
how do you measure gains and losses when conversion rate
is constantly changing?
their own (such as Britain, who still uses the sterling pound),
the process of currency conversion has been simplified
without the large number of various currencies that were
previously dealt with. Instead of dozens of currencies, the
main countries trade in five – U.S. dollars, Australian
dollars, British pounds sterling, the Euro, and the Japanese
Yen.
Today, the Foreign Exchange Market is international and
worldwide. The market is open 24 hours a day, 5 days a
week, to accommodate all of the time zones for all of the
major players. These now include most of Europe, the
United States, and Asian markets, especially Japan. Even
Australia has joined the international trading markets, and
since such nations are halfway around the world from some
of the other top players, time zones obviously must be taken
into consideration.
Another completely separate but perhaps more important
concern with trading in Forex is understanding how trade
works in multiple currencies. How can you compare the
value of a stock across international lines if the values are
expressed in two separate, non-equivalent currencies? And
how do you measure gains and losses when conversion rate
is constantly changing?
The History Of Forex
When foreign trade began, it was not an international trade
market. It was borne out of the Bretton Woods agreement
in 1944, which set forth that foreign currencies would be
fixed against the dollar, which was valued at $35 per ounce
of gold. This precedent was first put into practice in 1967,
when a bank in Chicago refused to fund a loan to a professor
in sterling pound. Of course, his intention was to sell the
currency, which he felt was priced too high against the
dollar, then buy it back later when the value had declined,
turning a quick profit.
After 1971, when the dollar was no longer convertible to
gold and the domestic market was stronger, the Bretton
Woods agreement was abandoned, and the currency
conversion process became more variable. This allowed for
a stronger backing in the foreign markets, and the United
States and Europe began a strong trade relationship. In the
1980s, the market hours and usage was extended through
the use of computers and technology to include the Asian
time zones as well. At this time, foreign exchange equaled
about $70 billion a day. Today, about twenty years later,
the trade level has skyrocketed, with trade equaling close to
$1.5 trillion daily.
Originally, trading across international lines was more
difficult, with several different currencies involved across
Europe. Though the major players in the European market
were deeply involved in and veterans of international trade
by the time other markets joined in, there were more
currencies to keep track of – the franc, the pound, the lira,
and many more – than was reasonable. With the birth of
the European Union in 1992, the wheels were set in motion
to create a single currency that would be used across most
of Europe, and the Euro was finally established and put into
circulation in 1999.
market. It was borne out of the Bretton Woods agreement
in 1944, which set forth that foreign currencies would be
fixed against the dollar, which was valued at $35 per ounce
of gold. This precedent was first put into practice in 1967,
when a bank in Chicago refused to fund a loan to a professor
in sterling pound. Of course, his intention was to sell the
currency, which he felt was priced too high against the
dollar, then buy it back later when the value had declined,
turning a quick profit.
After 1971, when the dollar was no longer convertible to
gold and the domestic market was stronger, the Bretton
Woods agreement was abandoned, and the currency
conversion process became more variable. This allowed for
a stronger backing in the foreign markets, and the United
States and Europe began a strong trade relationship. In the
1980s, the market hours and usage was extended through
the use of computers and technology to include the Asian
time zones as well. At this time, foreign exchange equaled
about $70 billion a day. Today, about twenty years later,
the trade level has skyrocketed, with trade equaling close to
$1.5 trillion daily.
Originally, trading across international lines was more
difficult, with several different currencies involved across
Europe. Though the major players in the European market
were deeply involved in and veterans of international trade
by the time other markets joined in, there were more
currencies to keep track of – the franc, the pound, the lira,
and many more – than was reasonable. With the birth of
the European Union in 1992, the wheels were set in motion
to create a single currency that would be used across most
of Europe, and the Euro was finally established and put into
circulation in 1999.
Forex Functionality
While the functionality of Forex is the same as a domestic
stock exchange, the commodities and prices are more
volatile, and there are additional factors to take into
considerations besides the typical risks associated with a
domestic market. You will have to contend with not only the
value of your stocks and your currency, but also the foreign
currencies involved in any trades or exchanges on Forex, as
well as the inconsistencies of values of particular goods and
services across international borders. It is like driving a car
with a standard transmission as opposed to an automatic.
On the domestic front, the work is mostly done for you, and
all you have to do is navigate, much like an automatic
transmission. However, shifting gears is quite similar to
having to constantly take part in the currency conversion. It
can be distracting, and it certainly complicates the act of
driving.
Because the financial situation of many countries is not as
secure as that of the United States, this can pose a
formidable problem in determining where to invest your
money and what to expect next in the international market.
Knowing what countries and currencies are involved in Forex
can assist you by allowing you to more closely monitor the
financial situation in the nations with which you will be
interacting.
stock exchange, the commodities and prices are more
volatile, and there are additional factors to take into
considerations besides the typical risks associated with a
domestic market. You will have to contend with not only the
value of your stocks and your currency, but also the foreign
currencies involved in any trades or exchanges on Forex, as
well as the inconsistencies of values of particular goods and
services across international borders. It is like driving a car
with a standard transmission as opposed to an automatic.
On the domestic front, the work is mostly done for you, and
all you have to do is navigate, much like an automatic
transmission. However, shifting gears is quite similar to
having to constantly take part in the currency conversion. It
can be distracting, and it certainly complicates the act of
driving.
Because the financial situation of many countries is not as
secure as that of the United States, this can pose a
formidable problem in determining where to invest your
money and what to expect next in the international market.
Knowing what countries and currencies are involved in Forex
can assist you by allowing you to more closely monitor the
financial situation in the nations with which you will be
interacting.
An Introduction to Forex
Forex is the nickname for the Foreign Exchange Market. In
the United States, there are several branches of the stock
market, each with their own name. For instance, some
stocks trade on the Dow Jones, others on Nasdaq. Of
course, all stock market transactions in the United States
take place on the New York Stock Exchange (NYSE). In
other countries the same is true. There may be one or more
distinct markets.
However, international trade takes place on the market
termed the Foreign Exchange Market, or Forex. Several
countries across the world in almost every time zone
participate in trade on Forex, with multiple currencies being
utilized and stocks and commodities from all participating
countries being offered for trade. Because there are so
many nations and time zones involved, Forex does not
function as a “business day” entity like most domestic stock
markets. It remains open for trade 24 hours a day, 5 days a
week.
Of course, these additional hours increase the risk factor
intensely for those of us who are human and obviously
cannot monitor our investments 24 hours a day. This means
that the value of your holdings could potentially plummet
overnight, while you sleep, because other countries are still
trading while you are in a dream world. Again, it is like a
car – there are many moving pieces under the hood, and
just because you cannot see them does not mean they are
not functioning.
This is one reason for several safety options, like limit
orders, which we will discuss later. This is also why it is
strongly recommended that your first attempts to make
money on the stock market are not transactions that take
place within the Foreign Exchange Market but on a standard
nine-to-five domestic trading market. In our car analogy,
this would be comparable to having asked someone who has
never driven or even changed the oil in a car to rebuild the
engine.
the United States, there are several branches of the stock
market, each with their own name. For instance, some
stocks trade on the Dow Jones, others on Nasdaq. Of
course, all stock market transactions in the United States
take place on the New York Stock Exchange (NYSE). In
other countries the same is true. There may be one or more
distinct markets.
However, international trade takes place on the market
termed the Foreign Exchange Market, or Forex. Several
countries across the world in almost every time zone
participate in trade on Forex, with multiple currencies being
utilized and stocks and commodities from all participating
countries being offered for trade. Because there are so
many nations and time zones involved, Forex does not
function as a “business day” entity like most domestic stock
markets. It remains open for trade 24 hours a day, 5 days a
week.
Of course, these additional hours increase the risk factor
intensely for those of us who are human and obviously
cannot monitor our investments 24 hours a day. This means
that the value of your holdings could potentially plummet
overnight, while you sleep, because other countries are still
trading while you are in a dream world. Again, it is like a
car – there are many moving pieces under the hood, and
just because you cannot see them does not mean they are
not functioning.
This is one reason for several safety options, like limit
orders, which we will discuss later. This is also why it is
strongly recommended that your first attempts to make
money on the stock market are not transactions that take
place within the Foreign Exchange Market but on a standard
nine-to-five domestic trading market. In our car analogy,
this would be comparable to having asked someone who has
never driven or even changed the oil in a car to rebuild the
engine.
Monday, February 23, 2009
Forex:Signal Strategy Trading
Day Forex Signal Strategy Trading is based on the ‘buy’ and ‘sell’ recommendations
delivered by a third party. Many forex traders can improve the profitability significantly
by using one or more such strategies while conducting the day forex trading.
Many of the online brokerage firms offering their services are backed with day forex
signal strategy trading software for generating non-linear technical signal for major
currencies. They can be obtained simply by setting the criteria on the software depending
on the present situation.
The Day Forex Signal Strategy Trading software uses non-linear advanced algorithms to
identify precise entry and exit levels with mechanical volatility-adjusted risk parameters.
These signals are updated twice per 24-hour trading day for all the major currency pairs
like EUR/USD, USD/JPY, USD/CHF, GBP/USD, and USD/CAD.
Some Day forex signal strategy trading systems use the mathematical concept of
Probability Advantage. The software based on Binary Equation System can predict the
signal for the trades investing in Forex.
The advantages of such Day forex Signal Strategy Trading Software are:
Ensures precise entry and exit signals
Offers controlled risk
Superior profit potential
Proven technical system
Commission-free Forex account setup
While you are engaged in day forex signal strategy trading you may adopt any of these
three types of trading to make your transactions fruitful. First you may watch for
Directional trade in which you keep the USD as the common currency and view the
moves of the other major currencies while performing the trade.
Second is the Strategic trade - watch carefully the movements of other majors like
EURO, GBP, JPY, CHF and AUD while trading with USD. The third is a Technical
trade, which is based on the short and long build-up in the market from time to time; so
you can do your trading for a quick return.
You should always take care to limit your losses while engaged in Day forex signal
strategy trading. One of the most useful strategies is not to retain the forex transaction
when the day ends.
As the Forex market is operational round the clock, any emergency situation arising in
some countries with a time difference can affect the market instantly. If you retain your
acquired Forex to gain more in the next day, you may face a huge loss in this sudden
development.
You should never invest all your money in day forex signal strategy trading. Keep some
money with you so that you can recover any loss you faced as quickly as possible.
You should never panic while performing the day forex signal strategy trading if the
market shows signs of unexpected moves. If your trading platform is backed by hedging
and advance hedging facilities, you can hedge the positions till the market comes to
hedging level. In this way you can hedge with 30-50 pips moves in your day forex signal
strategy trading before starting either way trades to earn back the money.
delivered by a third party. Many forex traders can improve the profitability significantly
by using one or more such strategies while conducting the day forex trading.
Many of the online brokerage firms offering their services are backed with day forex
signal strategy trading software for generating non-linear technical signal for major
currencies. They can be obtained simply by setting the criteria on the software depending
on the present situation.
The Day Forex Signal Strategy Trading software uses non-linear advanced algorithms to
identify precise entry and exit levels with mechanical volatility-adjusted risk parameters.
These signals are updated twice per 24-hour trading day for all the major currency pairs
like EUR/USD, USD/JPY, USD/CHF, GBP/USD, and USD/CAD.
Some Day forex signal strategy trading systems use the mathematical concept of
Probability Advantage. The software based on Binary Equation System can predict the
signal for the trades investing in Forex.
The advantages of such Day forex Signal Strategy Trading Software are:
Ensures precise entry and exit signals
Offers controlled risk
Superior profit potential
Proven technical system
Commission-free Forex account setup
While you are engaged in day forex signal strategy trading you may adopt any of these
three types of trading to make your transactions fruitful. First you may watch for
Directional trade in which you keep the USD as the common currency and view the
moves of the other major currencies while performing the trade.
Second is the Strategic trade - watch carefully the movements of other majors like
EURO, GBP, JPY, CHF and AUD while trading with USD. The third is a Technical
trade, which is based on the short and long build-up in the market from time to time; so
you can do your trading for a quick return.
You should always take care to limit your losses while engaged in Day forex signal
strategy trading. One of the most useful strategies is not to retain the forex transaction
when the day ends.
As the Forex market is operational round the clock, any emergency situation arising in
some countries with a time difference can affect the market instantly. If you retain your
acquired Forex to gain more in the next day, you may face a huge loss in this sudden
development.
You should never invest all your money in day forex signal strategy trading. Keep some
money with you so that you can recover any loss you faced as quickly as possible.
You should never panic while performing the day forex signal strategy trading if the
market shows signs of unexpected moves. If your trading platform is backed by hedging
and advance hedging facilities, you can hedge the positions till the market comes to
hedging level. In this way you can hedge with 30-50 pips moves in your day forex signal
strategy trading before starting either way trades to earn back the money.
Flexibility to trade In Forex
Forex market is characterized by high liquidity and high flexibility and as such traders get
the freedom to make choices as per their wishes. They are not bound by the whims of the
markets.
So, when you try to determine the best time to trade the forex market this information
would prove very useful. Trades have almost always the same relative frequency and till
the forex market remains open, the probability of finding a trade whenever you look is
almost the same. This is all about volume of trade. It is determined by the number of
markets that are open and the number of times each of these markets overlap with each
other.
Keeping in mind the forex volume is extremely essential. It is generally seen that the
volume of transactions remains high all through the day but when does it peak? The
answer is when the Asian markets with Australia and New Zealand, the European
markets and the US markets open simultaneously. And this is the best time to trade the
forex market.
Market times
Let's have a look of the timings of some of these markets.
New York Market : 8 am – 4 pm EST
London Market : 2 am - 12 noon EST
Great Britain Market : 3 am – 11 am EST
Tokyo Market : 8 pm – 4 am EST
Australian Market : 7 pm – 3 pm EST
Just have a look at the above schedule carefully. What do you see? Yes, there are tow
times when two of the major markets overlap during the trading hours-between 2 am and
4 am EST (Asian/Europe) and between 8 am to 12 pm EST (European/N. American).
This is the time you have to target to make profits, the best time to trade the forex
markets.
the freedom to make choices as per their wishes. They are not bound by the whims of the
markets.
So, when you try to determine the best time to trade the forex market this information
would prove very useful. Trades have almost always the same relative frequency and till
the forex market remains open, the probability of finding a trade whenever you look is
almost the same. This is all about volume of trade. It is determined by the number of
markets that are open and the number of times each of these markets overlap with each
other.
Keeping in mind the forex volume is extremely essential. It is generally seen that the
volume of transactions remains high all through the day but when does it peak? The
answer is when the Asian markets with Australia and New Zealand, the European
markets and the US markets open simultaneously. And this is the best time to trade the
forex market.
Market times
Let's have a look of the timings of some of these markets.
New York Market : 8 am – 4 pm EST
London Market : 2 am - 12 noon EST
Great Britain Market : 3 am – 11 am EST
Tokyo Market : 8 pm – 4 am EST
Australian Market : 7 pm – 3 pm EST
Just have a look at the above schedule carefully. What do you see? Yes, there are tow
times when two of the major markets overlap during the trading hours-between 2 am and
4 am EST (Asian/Europe) and between 8 am to 12 pm EST (European/N. American).
This is the time you have to target to make profits, the best time to trade the forex
markets.
The Best time to trade In Forex
The one thing marks a forex market is its dynamic nature. Here fortunes change in
seconds and minutes. If taken positively, this feature also allows a trader to enter the
market many times in a single day and garner some profit for himself.
Timing is one thing that would actually determine your success in the forex market and
that is why it is essential to find the best time to trade the forex market, the best time with
regards to activity, volume of trade etc.
There are some salient features of forex market and until and unless these are understood
one cannot find out the best time to trade the forex market.
24 Hour trading
Forex markets work 24 hours. It starts from Sunday 5 pm EST through Friday 4 pm EST
and rollovers at 5 pm EST. Forex trading starts from New Zealand and then is followed
by Australia, Asia, the Middle East, Europe and America. The most prominent forex
market is undoubtedly the US and the UK. They account for more than half of the total
market transactions.
If it comes to major forex markets, London, New York and Tokyo would win hands
down. Around 75% of market activities in the New York markets are witnessed in the
morning hours while the European markets are still open. And if you want to know when
the forex trading is the heaviest, well look for the time when the major markets overlap.
One thing must be evident from this discussion. There is never a cease down in the forex
market. When it is daytime for you, it is nighttime for someone else, and vice versa.
Markets close somewhere and simultaneously, markets open somewhere else. That is
what offers traders this tremendous opportunity to make some serious money.
seconds and minutes. If taken positively, this feature also allows a trader to enter the
market many times in a single day and garner some profit for himself.
Timing is one thing that would actually determine your success in the forex market and
that is why it is essential to find the best time to trade the forex market, the best time with
regards to activity, volume of trade etc.
There are some salient features of forex market and until and unless these are understood
one cannot find out the best time to trade the forex market.
24 Hour trading
Forex markets work 24 hours. It starts from Sunday 5 pm EST through Friday 4 pm EST
and rollovers at 5 pm EST. Forex trading starts from New Zealand and then is followed
by Australia, Asia, the Middle East, Europe and America. The most prominent forex
market is undoubtedly the US and the UK. They account for more than half of the total
market transactions.
If it comes to major forex markets, London, New York and Tokyo would win hands
down. Around 75% of market activities in the New York markets are witnessed in the
morning hours while the European markets are still open. And if you want to know when
the forex trading is the heaviest, well look for the time when the major markets overlap.
One thing must be evident from this discussion. There is never a cease down in the forex
market. When it is daytime for you, it is nighttime for someone else, and vice versa.
Markets close somewhere and simultaneously, markets open somewhere else. That is
what offers traders this tremendous opportunity to make some serious money.
Pips and Spreads In Forex
A pip is the smallest unit by which a Forex cross price quote changes. So, in Forex
trading, if EUR/USD bid is quoted at 0.9767 and it moves up Forex 2 pips, it will be
quoted at 0.9769.
The spread is the difference between the bid and asking price. You will note that while
trading the currency market, there will also be a difference between the current value of
the currency and what you pay for it. That is spread and that is where the forex brokers
make their profit. Remember, because of this profit the brokers can offer you a forex
account for free - without any fees!
Let's say the current EUR/USD price is 1.27237 and your forex broker has a Forex 2 pip
spread, then you will pay 1.2739 when you buy. You will also note that the Forex 2 pip
spread is usually available for major currency pairs like EUR/USD, USD/JPY, EUR/JPY
etc.
Look at another example of Forex 2 pip spread: the GBP/USD pair is quoted at 1.9346
Bid and 1.9348 Ask, meaning that it would cost you 1.9348 to buy this contract (at this
moment) but you would only get 1.9346 if you sold it (at the same moment). These
quotes change frequently, as trades are made and new price levels are established.
Sometimes the changes are only seconds apart.
In the above example there is a 2 Pip difference in the Bid and Ask price, representing a
Forex 2 Pip spread. The spread in this contract is likely to remain the same for a very
long time; the spread difference does not normally change for a given foreign exchange
market.
Spread is accepted as a cost of doing business in Forex market. When your entry
transaction is made you have already sustained a paper loss equal to the spread. If you are
a buyer, your contract must appreciate by 2 Pips (in our example above) before you break
even. This is how the market maker makes money from the transaction. However,
without such a dealer facilitating the trade, you would never be able to trade.
Forex 2 pip spread can be offered by those brokers who have huge monthly trading
volume in forex market and have established liquidity relationships with the world’s top
forex banks. With the banking relationships in place the company can have access to over
$1 billion in market liquidity. Consequently the company is able to pass along even
smaller spreads like Forex 2 pip to most active trading customers.
trading, if EUR/USD bid is quoted at 0.9767 and it moves up Forex 2 pips, it will be
quoted at 0.9769.
The spread is the difference between the bid and asking price. You will note that while
trading the currency market, there will also be a difference between the current value of
the currency and what you pay for it. That is spread and that is where the forex brokers
make their profit. Remember, because of this profit the brokers can offer you a forex
account for free - without any fees!
Let's say the current EUR/USD price is 1.27237 and your forex broker has a Forex 2 pip
spread, then you will pay 1.2739 when you buy. You will also note that the Forex 2 pip
spread is usually available for major currency pairs like EUR/USD, USD/JPY, EUR/JPY
etc.
Look at another example of Forex 2 pip spread: the GBP/USD pair is quoted at 1.9346
Bid and 1.9348 Ask, meaning that it would cost you 1.9348 to buy this contract (at this
moment) but you would only get 1.9346 if you sold it (at the same moment). These
quotes change frequently, as trades are made and new price levels are established.
Sometimes the changes are only seconds apart.
In the above example there is a 2 Pip difference in the Bid and Ask price, representing a
Forex 2 Pip spread. The spread in this contract is likely to remain the same for a very
long time; the spread difference does not normally change for a given foreign exchange
market.
Spread is accepted as a cost of doing business in Forex market. When your entry
transaction is made you have already sustained a paper loss equal to the spread. If you are
a buyer, your contract must appreciate by 2 Pips (in our example above) before you break
even. This is how the market maker makes money from the transaction. However,
without such a dealer facilitating the trade, you would never be able to trade.
Forex 2 pip spread can be offered by those brokers who have huge monthly trading
volume in forex market and have established liquidity relationships with the world’s top
forex banks. With the banking relationships in place the company can have access to over
$1 billion in market liquidity. Consequently the company is able to pass along even
smaller spreads like Forex 2 pip to most active trading customers.
The Major Pairs and Principles of Trading In Forex
If you look at the quotation structure of Forex currency market, you will see something
like USD/EUR or GBP/USD. These are the Forex currency pairs.
All Forex trades that involve buying of one currency and selling of another, are done in
Forex currency pairs. E.g. you buy Euros with US Dollars anticipating that the price of
Euro will increase in value relative to the US Dollar. So, when the Euro rises relative to
Dollar, you sell it and make profits.
Common trading pairs
The Forex currency pair is a single unit, an instrument that is bought or sold in the forex
market. Though there are many currency pairs available in a Forex trading system the
most commonly traded Forex currency pairs are:
EUR/USD – Euro vs. U.S. Dollar
GBP/USD: British Pound vs. U.S. Dollar
USD/JPY: U.S. Dollar vs. Japanese YEN
USD/CHF: U.S. Dollar vs. Swiss franc
In the Forex currency pairs, the value of one currency is determined by its comparison to
another currency. When the Forex currency pairs are quoted, the first currency is referred
as base currency and the second currency is called counter or quote currency.
The base currency is always equal to 1 monetary unit of exchange (e.g. 1 EUR, 1 GBP, 1
USD). The currency pair shows how much of the quote currency is needed to purchase
one unit of the base currency.
Buying and selling
The Forex currency pairs are usually traded and quoted with a ‘bid’ and ‘ask’ price. The
‘bid’ is the price at which the broker is willing to buy and the ‘ask’ is the price at which
he is willing to sell.
For example, if the USD/EUR currency pair is quoted as - USD/EUR = 1.5 and you
purchase the pair, this means that for every 1.5 euros that you sell, you get US$1. If you
sold the currency pair, you receive 1.5 euros for every US$1 you sell.
Base Currency
This is the first currency quoted in a Forex currency pair. It is also known as domestic
currency or accounting currency and sometimes referred to as the primary currency of a
Forex currency pair. For example, CAD/USD currency pair. Here the Canadian dollar is
the base currency while the U.S. dollar is the quote currency.
The price represents how much of the quote currency is needed to get one unit of the base
currency.
Major base currencies:
Euro - EUR/USD, EUR/GBP, EUR/CHF, EUR/JPY, EUR/CAD
British Pound - GBP/USD, GBP/CHF, GBP/JPY, GBP/CAD=
US Dollar - USD/CAD, USD/JPY, USD/CHF
Quote Currency
This is the second currency quoted in a Forex currency pair. This is also referred to as the
foreign currency, secondary currency or counter currency.
Major quote currencies:
U.S. dollar
British pound
Euro
Japanese yen
Swiss franc
Canadian dollar
like USD/EUR or GBP/USD. These are the Forex currency pairs.
All Forex trades that involve buying of one currency and selling of another, are done in
Forex currency pairs. E.g. you buy Euros with US Dollars anticipating that the price of
Euro will increase in value relative to the US Dollar. So, when the Euro rises relative to
Dollar, you sell it and make profits.
Common trading pairs
The Forex currency pair is a single unit, an instrument that is bought or sold in the forex
market. Though there are many currency pairs available in a Forex trading system the
most commonly traded Forex currency pairs are:
EUR/USD – Euro vs. U.S. Dollar
GBP/USD: British Pound vs. U.S. Dollar
USD/JPY: U.S. Dollar vs. Japanese YEN
USD/CHF: U.S. Dollar vs. Swiss franc
In the Forex currency pairs, the value of one currency is determined by its comparison to
another currency. When the Forex currency pairs are quoted, the first currency is referred
as base currency and the second currency is called counter or quote currency.
The base currency is always equal to 1 monetary unit of exchange (e.g. 1 EUR, 1 GBP, 1
USD). The currency pair shows how much of the quote currency is needed to purchase
one unit of the base currency.
Buying and selling
The Forex currency pairs are usually traded and quoted with a ‘bid’ and ‘ask’ price. The
‘bid’ is the price at which the broker is willing to buy and the ‘ask’ is the price at which
he is willing to sell.
For example, if the USD/EUR currency pair is quoted as - USD/EUR = 1.5 and you
purchase the pair, this means that for every 1.5 euros that you sell, you get US$1. If you
sold the currency pair, you receive 1.5 euros for every US$1 you sell.
Base Currency
This is the first currency quoted in a Forex currency pair. It is also known as domestic
currency or accounting currency and sometimes referred to as the primary currency of a
Forex currency pair. For example, CAD/USD currency pair. Here the Canadian dollar is
the base currency while the U.S. dollar is the quote currency.
The price represents how much of the quote currency is needed to get one unit of the base
currency.
Major base currencies:
Euro - EUR/USD, EUR/GBP, EUR/CHF, EUR/JPY, EUR/CAD
British Pound - GBP/USD, GBP/CHF, GBP/JPY, GBP/CAD=
US Dollar - USD/CAD, USD/JPY, USD/CHF
Quote Currency
This is the second currency quoted in a Forex currency pair. This is also referred to as the
foreign currency, secondary currency or counter currency.
Major quote currencies:
U.S. dollar
British pound
Euro
Japanese yen
Swiss franc
Canadian dollar
Forex:Market Terminology
Spot Deal
A deal taking part between two parties who can deliver a certain amount of different
currencies to each other within 2 business days of each other (excluding Canadian dollar
where the trade is executed within 1 business day)
Market Order
This is the execution you make when deciding to buy a currency. In other words you see
a currency exchange rate quote on screen and you place a ‘market order’ when you click
the button to execute the trade.
Entry Orders
This is basically and advance order, you decide at what price you want to buy or sell a
currency and you place an ‘entry order’. As soon as the currencies reaches this rate your
trade is exucted.
Stop-Loss Order
This is a function offered by some brokers which is aimed at reducing your risk, you can
decide the maximum and minimum amount of profit or loss you want to exit a trade at. In
other words if you decide you are happy to make $1,000 from one trade but don’t want to
lose anymore than $1,000 should the trade go the other way you can place this safety net
on your trade.
Bid
This is the currency rate that you wish to buy or sell at.
Offer
This is the currency rate you will actually get when buying or selling
Spread
The difference between the bid and offer rates
Pip
This is the last decimal of the exchange rate with the exception of the Japanese Yen
where it is the second decimal.
Lot
The amount of units of the base currency when you enter the market.
Margin
The minimum amount of money you need for each lot to trade, for example the margin
may be 1 lot for $100 and therefore you would need $300 in your account to trade 3 lots.
Trend
The direction the market is currently moving in.
Long Position
This is used to describe a market in a long-term buy trend
Short Position
This is used to describe a market in a short-term sell trend
A deal taking part between two parties who can deliver a certain amount of different
currencies to each other within 2 business days of each other (excluding Canadian dollar
where the trade is executed within 1 business day)
Market Order
This is the execution you make when deciding to buy a currency. In other words you see
a currency exchange rate quote on screen and you place a ‘market order’ when you click
the button to execute the trade.
Entry Orders
This is basically and advance order, you decide at what price you want to buy or sell a
currency and you place an ‘entry order’. As soon as the currencies reaches this rate your
trade is exucted.
Stop-Loss Order
This is a function offered by some brokers which is aimed at reducing your risk, you can
decide the maximum and minimum amount of profit or loss you want to exit a trade at. In
other words if you decide you are happy to make $1,000 from one trade but don’t want to
lose anymore than $1,000 should the trade go the other way you can place this safety net
on your trade.
Bid
This is the currency rate that you wish to buy or sell at.
Offer
This is the currency rate you will actually get when buying or selling
Spread
The difference between the bid and offer rates
Pip
This is the last decimal of the exchange rate with the exception of the Japanese Yen
where it is the second decimal.
Lot
The amount of units of the base currency when you enter the market.
Margin
The minimum amount of money you need for each lot to trade, for example the margin
may be 1 lot for $100 and therefore you would need $300 in your account to trade 3 lots.
Trend
The direction the market is currently moving in.
Long Position
This is used to describe a market in a long-term buy trend
Short Position
This is used to describe a market in a short-term sell trend
Forex: What is a Market Maker?
A Market Maker is the counterparty to the client. The Market Maker does not operate as
an intermediate or trustee.
A Market Maker performs the hedging of its clients' positions according to its policy,
which includes offsetting various clients' positions, hedging via liquidity providers
(banks) and its equity capital, at its discretion.
Who are the Market Makers in the Forex industry?
Banks, for example, or trading platforms who buy and sell financial instruments at the
market. That is contrary to intermediates, which represent clients, basing their income on
commission.
In recent times there has been a big boom of online Forex brokers, there are no longer
just one or two dominant market makers. Even more recently trading platforms have
begun to reduce their minimum deposit levels bringing in accounts known as Mini-Forex
accounts. These accounts often have minimum deposit levels of less than $100 making
Forex a far more attractive market for the public than ever before.
Do Market Makers go against a client's position?
By definition, a Market Maker is the counter party to all its clients' positions, and he
always offers a two-sided quote (two rates: BUY and SELL). Therefore, there is nothing
personal with the trading conduct between the Market Maker and the customer.
Market Makers regard the total positions of their clients as a whole, same goes for banks
and other market makers in the Forex market. They offset between clients' opposite
positions, and hedge their net exposure according to authorities' guidelines and their risk
management policies.
Certain market makers such as trading platforms will offer a managed Forex account, this
means that they will work with you to help ensure you are always trading effectively.
Because of the genetic make-up of the Forex industry a managed account can be very
beneficial to both the trader and the platform.
Do market makers and clients have a conflict of interest?
Market makers are not intermediates, neither portfolio managers, nor advisors who
represent customers (while earning commission), but rather they buy and sell goods to the
customer. By definition, the Market Maker always provides a two-sided quote (the sell
and the buy price), hence maintains neutrality as for the client.
Banks do that, same with merchants in the markets, who buy goods and sell it to
customers. The relationship between the trader (the customer) and the Market Maker (the
bank; the trading platform; etc.) is simply based on fundamental market forces: supply
and demand.
Think of a market maker as a shop, they buy in certain currencies and then sell the
currencies on based on demand. Of course they may sell some currencies for more than
they bought them for hence they make money. The advantage of this for the day trader is
that no commissions are charged on transactions so the shine of a profitable trade cannot
be taken away!
Can a Market Maker influence market prices against clients' position?
Definitely not, because the Forex market is the nearest to being a "perfect market" (as
defined by economics theory).
This is the biggest market today, reaching a daily volume of 3 trillion dollars throughout
the globe. That means that there is no single participant in the market, banks and
governments included, who can consistently push the price in a certain direction. It is the
traders and the public that determine the demand for currencies and therefore their price
and any rises are falls in value.
How do Market Makers manage their exposure?
The way most Market Makers hedge their exposure is to hedge on bulk. They aggregate
all clients' positions and pass some, or all, of their net risk to their liquidity providers.
Think of it this way, a large distributor buys in thousands of units of a product and then
re-sells them for a higher price, the distributor does not need to sell all of its stock at full
price to make a profit since it acquired the product at a cheaper than retail price in the
first place. Whilst the Forex market obviously has some major differences, the principles
are the same.
an intermediate or trustee.
A Market Maker performs the hedging of its clients' positions according to its policy,
which includes offsetting various clients' positions, hedging via liquidity providers
(banks) and its equity capital, at its discretion.
Who are the Market Makers in the Forex industry?
Banks, for example, or trading platforms who buy and sell financial instruments at the
market. That is contrary to intermediates, which represent clients, basing their income on
commission.
In recent times there has been a big boom of online Forex brokers, there are no longer
just one or two dominant market makers. Even more recently trading platforms have
begun to reduce their minimum deposit levels bringing in accounts known as Mini-Forex
accounts. These accounts often have minimum deposit levels of less than $100 making
Forex a far more attractive market for the public than ever before.
Do Market Makers go against a client's position?
By definition, a Market Maker is the counter party to all its clients' positions, and he
always offers a two-sided quote (two rates: BUY and SELL). Therefore, there is nothing
personal with the trading conduct between the Market Maker and the customer.
Market Makers regard the total positions of their clients as a whole, same goes for banks
and other market makers in the Forex market. They offset between clients' opposite
positions, and hedge their net exposure according to authorities' guidelines and their risk
management policies.
Certain market makers such as trading platforms will offer a managed Forex account, this
means that they will work with you to help ensure you are always trading effectively.
Because of the genetic make-up of the Forex industry a managed account can be very
beneficial to both the trader and the platform.
Do market makers and clients have a conflict of interest?
Market makers are not intermediates, neither portfolio managers, nor advisors who
represent customers (while earning commission), but rather they buy and sell goods to the
customer. By definition, the Market Maker always provides a two-sided quote (the sell
and the buy price), hence maintains neutrality as for the client.
Banks do that, same with merchants in the markets, who buy goods and sell it to
customers. The relationship between the trader (the customer) and the Market Maker (the
bank; the trading platform; etc.) is simply based on fundamental market forces: supply
and demand.
Think of a market maker as a shop, they buy in certain currencies and then sell the
currencies on based on demand. Of course they may sell some currencies for more than
they bought them for hence they make money. The advantage of this for the day trader is
that no commissions are charged on transactions so the shine of a profitable trade cannot
be taken away!
Can a Market Maker influence market prices against clients' position?
Definitely not, because the Forex market is the nearest to being a "perfect market" (as
defined by economics theory).
This is the biggest market today, reaching a daily volume of 3 trillion dollars throughout
the globe. That means that there is no single participant in the market, banks and
governments included, who can consistently push the price in a certain direction. It is the
traders and the public that determine the demand for currencies and therefore their price
and any rises are falls in value.
How do Market Makers manage their exposure?
The way most Market Makers hedge their exposure is to hedge on bulk. They aggregate
all clients' positions and pass some, or all, of their net risk to their liquidity providers.
Think of it this way, a large distributor buys in thousands of units of a product and then
re-sells them for a higher price, the distributor does not need to sell all of its stock at full
price to make a profit since it acquired the product at a cheaper than retail price in the
first place. Whilst the Forex market obviously has some major differences, the principles
are the same.
The advantages of trading Forex
Liquidity: In the FOREX market there is always a buyer and a seller. The FOREX
absorbs trading volumes and per trade sizes which dwarfs the capacity of any other
market. On the simplest level, liquidity is a powerful attraction to any investor as it
suggests the freedom to open or close a position at will 24 hours a day.
Access: The FOREX is open 24 hours a day, any individual trader can react to news
when it breaks, rather than waiting for the opening bell of other markets when everyone
else-has the same information. This allows traders to take positions before the news
details are fully factored into the exchange rates.
Two-Way Market: Currencies are traded in pairs, for example dollar/yen, or
dollar/Swiss franc. Every position involves the selling of one currency and the buying of
another. If a trader believes the Swiss franc will appreciate against the dollar, the trader
can sell dollars and buy francs (“selling short’). If one holds the opposite belief, that
trader can buy dollars and sell Swiss francs (“buying long”). The potential for profit
exists because there is always movement in the exchange rates (prices).
This is what helps make the Forex unique since it is possible to profit from both rises or
falls in the price of any given currency!
Trends: Over long and short historical periods, currencies have demonstrated
substantial and identifiable trends. Each individual currency has its own “personality,”
and each offers a unique historical pattern of trends, providing diversified trading
opportunities within the spot FOREX market.
There are many, many other advantages of trading the Forex and we recommend that you
choose your broker wisely since the broker you choose can be critical in determining
your success (or otherwise) when trading currencies online.
absorbs trading volumes and per trade sizes which dwarfs the capacity of any other
market. On the simplest level, liquidity is a powerful attraction to any investor as it
suggests the freedom to open or close a position at will 24 hours a day.
Access: The FOREX is open 24 hours a day, any individual trader can react to news
when it breaks, rather than waiting for the opening bell of other markets when everyone
else-has the same information. This allows traders to take positions before the news
details are fully factored into the exchange rates.
Two-Way Market: Currencies are traded in pairs, for example dollar/yen, or
dollar/Swiss franc. Every position involves the selling of one currency and the buying of
another. If a trader believes the Swiss franc will appreciate against the dollar, the trader
can sell dollars and buy francs (“selling short’). If one holds the opposite belief, that
trader can buy dollars and sell Swiss francs (“buying long”). The potential for profit
exists because there is always movement in the exchange rates (prices).
This is what helps make the Forex unique since it is possible to profit from both rises or
falls in the price of any given currency!
Trends: Over long and short historical periods, currencies have demonstrated
substantial and identifiable trends. Each individual currency has its own “personality,”
and each offers a unique historical pattern of trends, providing diversified trading
opportunities within the spot FOREX market.
There are many, many other advantages of trading the Forex and we recommend that you
choose your broker wisely since the broker you choose can be critical in determining
your success (or otherwise) when trading currencies online.
Commercial banks play two roles in the FOREX market:
(1) They facilitate transactions between two parties, such as companies wishing to
exchange currencies (consumers), and
(2) They speculate by buying and selling currencies. The banks take positions in certain
currencies because they believe they will be worth more (if “buying long”) or less (if
“selling short”) in the future. It has been estimated that international banks generate up to
70% of their revenues from currency speculation. Other speculators include many of the
worlds’ most successful traders, such as George Soros.
The Forex market is so large and is composed of so many participants, that no one player,
even the government central banks, can control the market. In comparison to the dailytrading volume averages of the $300 billion in the U.S. Treasury Bond market and the
approximately $100 billion exchanged in the U.S. stock markets, the FOREX is huge, and
has grown in excess of $1.5 trillion daily. It is easy to see why trading Forex online has
become such an attractive prospect for those ‘would be’ professional investors.
If we are being honest the word ‘market’ is not entirely true for Foreign Exchange since
there is no one central location for trading activity. Whilst most of the trade volume is
performed through around 300 large international banks, there are millions of trades
being executed all around the globe both online and over the telephone.
exchange currencies (consumers), and
(2) They speculate by buying and selling currencies. The banks take positions in certain
currencies because they believe they will be worth more (if “buying long”) or less (if
“selling short”) in the future. It has been estimated that international banks generate up to
70% of their revenues from currency speculation. Other speculators include many of the
worlds’ most successful traders, such as George Soros.
The Forex market is so large and is composed of so many participants, that no one player,
even the government central banks, can control the market. In comparison to the dailytrading volume averages of the $300 billion in the U.S. Treasury Bond market and the
approximately $100 billion exchanged in the U.S. stock markets, the FOREX is huge, and
has grown in excess of $1.5 trillion daily. It is easy to see why trading Forex online has
become such an attractive prospect for those ‘would be’ professional investors.
If we are being honest the word ‘market’ is not entirely true for Foreign Exchange since
there is no one central location for trading activity. Whilst most of the trade volume is
performed through around 300 large international banks, there are millions of trades
being executed all around the globe both online and over the telephone.
An Overview of Forex
Forex is derived from the words Foreign Exchange and is also occasionally referred to as
‘Spot FX’ or simply ‘FX’.
As a simple definition, Forex trading is the exchange of currencies at varying exchange
rates, which result in profit (or loss) for those who participate as traders.
Forex is derived from the words Foreign Exchange and is also occasionally referred to as
‘Spot FX’ or simply ‘FX’. As a simple definition, Forex trading is the exchange of
currencies at varying exchange rates, which result in profit (or loss) for those who
participate as traders.
The History:-
Established in 1971 when floating exchange rates began to materialize, the Forex market
has enjoyed huge growth, particularly since the Internet advanced to a level that enables
trade to be made easily 24 hours a day. More recently, the minimum deposit level for an
account has fallen below the $100 mark meaning currency trading is now possible by
people from all walks of life.
Historically, the FOREX interbank market was not available for small speculators. With a
previous minimum transaction size and often-stringent financial requirements, the small
trader was excluded from participation in this market. But today market maker brokers
are allowed to break down the large interbank units and offer small traders the
opportunity to buy or sell any number of these smaller units (lots).
‘Spot FX’ or simply ‘FX’.
As a simple definition, Forex trading is the exchange of currencies at varying exchange
rates, which result in profit (or loss) for those who participate as traders.
Forex is derived from the words Foreign Exchange and is also occasionally referred to as
‘Spot FX’ or simply ‘FX’. As a simple definition, Forex trading is the exchange of
currencies at varying exchange rates, which result in profit (or loss) for those who
participate as traders.
The History:-
Established in 1971 when floating exchange rates began to materialize, the Forex market
has enjoyed huge growth, particularly since the Internet advanced to a level that enables
trade to be made easily 24 hours a day. More recently, the minimum deposit level for an
account has fallen below the $100 mark meaning currency trading is now possible by
people from all walks of life.
Historically, the FOREX interbank market was not available for small speculators. With a
previous minimum transaction size and often-stringent financial requirements, the small
trader was excluded from participation in this market. But today market maker brokers
are allowed to break down the large interbank units and offer small traders the
opportunity to buy or sell any number of these smaller units (lots).
How do I trade Forex?
You select the pair of currencies with which you wish to make a Forex deal. You
determine the volume (the amount of the deal). You deposit the "margin" (collateral
needed to facilitate the deal. Usually - only a very small portion of the whole deal, say:
1% or 1:100).
Before you finally activate the deal, you can still "freeze" it for a few seconds (only
available at selected brokers). That enables you to either change the terms, or accept it as
is, or altogether regret the whole idea.
When your Forex deal is running, you can monitor its status and check scenarios online,
whenever you wish. You may change some terms in the deal, or close it. Ultimately, you
remain in control, only you can decide when the time is right to cash in your profit!
Some Forex brokers will even let you determine a "take-profit" rate, with which the deal
will close automatically for you, when and if such rate occurs in the market. Meaning:you do not have to stay near your computer waiting for the right moment, you can go to
work, go shopping, or even got to the beach while the money is rolling in!
determine the volume (the amount of the deal). You deposit the "margin" (collateral
needed to facilitate the deal. Usually - only a very small portion of the whole deal, say:
1% or 1:100).
Before you finally activate the deal, you can still "freeze" it for a few seconds (only
available at selected brokers). That enables you to either change the terms, or accept it as
is, or altogether regret the whole idea.
When your Forex deal is running, you can monitor its status and check scenarios online,
whenever you wish. You may change some terms in the deal, or close it. Ultimately, you
remain in control, only you can decide when the time is right to cash in your profit!
Some Forex brokers will even let you determine a "take-profit" rate, with which the deal
will close automatically for you, when and if such rate occurs in the market. Meaning:you do not have to stay near your computer waiting for the right moment, you can go to
work, go shopping, or even got to the beach while the money is rolling in!
What is Forex?
The market:-
The currency trading (FOREX) market is the biggest and the fastest growing market on
earth. Its daily turnover is more than 2.5 trillion dollars, which is 100 times greater than
the NASDAQ daily turnover.
FOREX is one of the latest crazes to sweep the world. Unlike the stock market which is
often ruled by those with inside knowledge, FOREX gives everyone an equal footing,
you can make good money even with very little experience.
FOREX is a thrill ride that just has to be experienced!
So, I'm not trading in companies?
No, The Forex goods (or merchandise) are the currencies of various countries. You buy
Euro, paying with US dollars, or you sell Japanese Yens for Canadian dollars. That's all.
No expert knowledge of an industry is needed, that is the beauty of FOREX, thousands
can be made whether you are 18 or 80!
How does one profit in Forex?
Very simple and obvious: buy cheap and sell for more! The profit is generated from the
fluctuations (changes) in the currency exchange market.
The nice thing about the FOREX market, is that regular daily fluctuations, say - around
1%, are multiplied by 100! That gives you absolutely massive earning potential!
If, for example, the exchange rate of "your" pair of currencies increased by 0.6% in the
last 4 hours, your profit will be 60% on your investment! Such can happen in one
business day, or in a few hours, even minutes!
Moreover, you cannot lose more than your "margin"! You may profit unlimited amounts,
but you never lose more than what you initially risked and invested.
The currency trading (FOREX) market is the biggest and the fastest growing market on
earth. Its daily turnover is more than 2.5 trillion dollars, which is 100 times greater than
the NASDAQ daily turnover.
FOREX is one of the latest crazes to sweep the world. Unlike the stock market which is
often ruled by those with inside knowledge, FOREX gives everyone an equal footing,
you can make good money even with very little experience.
FOREX is a thrill ride that just has to be experienced!
So, I'm not trading in companies?
No, The Forex goods (or merchandise) are the currencies of various countries. You buy
Euro, paying with US dollars, or you sell Japanese Yens for Canadian dollars. That's all.
No expert knowledge of an industry is needed, that is the beauty of FOREX, thousands
can be made whether you are 18 or 80!
How does one profit in Forex?
Very simple and obvious: buy cheap and sell for more! The profit is generated from the
fluctuations (changes) in the currency exchange market.
The nice thing about the FOREX market, is that regular daily fluctuations, say - around
1%, are multiplied by 100! That gives you absolutely massive earning potential!
If, for example, the exchange rate of "your" pair of currencies increased by 0.6% in the
last 4 hours, your profit will be 60% on your investment! Such can happen in one
business day, or in a few hours, even minutes!
Moreover, you cannot lose more than your "margin"! You may profit unlimited amounts,
but you never lose more than what you initially risked and invested.
Introduction About Forex
Forex is one of the hottest trading markets in the world today. Derived from the words
‘Foreign’ and ‘Exchange’, Forex is the practice of currency trading. If you have been
abroad on holiday or business you have already done it. You exchanged your domestic
currency for that of the currency of the country you were travelling to, of course no doubt
you did not make any money in doing this, you probably lost some because of the
commissions usually charged by banks for currency exchange.
The Forex market is different though, by actively engaging in online trading using broker
platforms you can buy and sell currencies for huge profits. This is because you trade with
a leverage so that even a small amount of money can quickly become a huge amount if
you make the right trade.
Before throwing yourself feet first in to real money trading you should take the time to
familiarize yourself with the principles of trading and ensure you have a good level of
understanding of how it all works. We recommend you also start off small, sure it is
tempting to make your first trade with a large sum of money because the ultimate profit
potential is higher, however, good things come to those who wait and those who start off
with small trades are usually the most successful.
This Site if you like is designed to educate you on what Forex is all about and
the key principles of trading. By reading this guide in full and following our advice you
will have given yourself the best chance of success. You will understand every core area
of trading and will be well equipped to start trading profitably from the outset.
Finally for this introduction I will cover a bit about myself as you may be wondering who
I am and why I have written this guide. Well, my name is Paul and I started trading
online 3 years ago after dabbling a little offline in both Forex and stocks and shares.
When I started trading Forex was still fairly new to the Internet and as such very little
information was available to the new trader. I tried lots of different platforms, training
courses and strategies and whilst I got stung sometimes I also uncovered some products
that were absolute gems.
After about 8 months of trying different products I finally started making some big
profits. I managed to break even consistently after a couple of months but after 8 months
I began to make around 50-100 pips profit per month (pips will be covered in more detail
later). 2 years on and I have been able to consistently make around 500-1000 pips profit
per month.
‘Foreign’ and ‘Exchange’, Forex is the practice of currency trading. If you have been
abroad on holiday or business you have already done it. You exchanged your domestic
currency for that of the currency of the country you were travelling to, of course no doubt
you did not make any money in doing this, you probably lost some because of the
commissions usually charged by banks for currency exchange.
The Forex market is different though, by actively engaging in online trading using broker
platforms you can buy and sell currencies for huge profits. This is because you trade with
a leverage so that even a small amount of money can quickly become a huge amount if
you make the right trade.
Before throwing yourself feet first in to real money trading you should take the time to
familiarize yourself with the principles of trading and ensure you have a good level of
understanding of how it all works. We recommend you also start off small, sure it is
tempting to make your first trade with a large sum of money because the ultimate profit
potential is higher, however, good things come to those who wait and those who start off
with small trades are usually the most successful.
This Site if you like is designed to educate you on what Forex is all about and
the key principles of trading. By reading this guide in full and following our advice you
will have given yourself the best chance of success. You will understand every core area
of trading and will be well equipped to start trading profitably from the outset.
Finally for this introduction I will cover a bit about myself as you may be wondering who
I am and why I have written this guide. Well, my name is Paul and I started trading
online 3 years ago after dabbling a little offline in both Forex and stocks and shares.
When I started trading Forex was still fairly new to the Internet and as such very little
information was available to the new trader. I tried lots of different platforms, training
courses and strategies and whilst I got stung sometimes I also uncovered some products
that were absolute gems.
After about 8 months of trying different products I finally started making some big
profits. I managed to break even consistently after a couple of months but after 8 months
I began to make around 50-100 pips profit per month (pips will be covered in more detail
later). 2 years on and I have been able to consistently make around 500-1000 pips profit
per month.
How Investment Works In Stock
Any time you are going to be putting your money into a
fund; it is a good idea to start by understanding what you
are buying into. The stock market is a complicated entity,
and doing minimal business in trading requires a fair amount
of basic knowledge, as well as the understanding and
acceptance of the high risk factor. The more you know in
advance regarding the functionality of the system, the less
likely it is that you will take a heavy hit, ending in
devastating loss.
First of all and probably most important in the trading
business, you should understand what stocks actually are.
When you buy or sell a stock on the open market, you
should keep in mind that you are dealing with real objects,
not pieces of paper; you are buying and selling real parts of
a particular company, its product, or some other various
commodity.
Owning a “share” means that you have actually bought into
the company or product involved and become a partial
owner of that commodity. Of course, you could be one of
millions of shareholders, as most companies and products
are broken into minute pieces of the whole, but you are still
considered an investor in that company or product until you
sell your shares.
Think of it as paying for a tank of gas in the car that your
parents bought for you to drive. You may have even bought
the oil filter that has been put on the car, and you may feel
that this investment makes you part owner. However, when
you look at the overall cost of the car, you have really
contributed very little to that amount. However, as long as
you continue to invest in the gas for the car and take care of
the maintenance needs, you can claim part ownership of the
car.
Because the value of a company and its products or services
can fluctuate continuously, the value of the stocks you hold
will not be the same from day to day and can sometimes
even change hourly. When the price per share drops and is
considered low, it is an ideal time to purchase. This is the
least expensive way to begin your trading venture, and
working with a stock broker will allow you to gain more
information as to what stocks are ripe for the purchase at
any given time.
In doing so, you become a stockholder, and the value of
your holdings will fluctuate from day to day. Your gamble
(and hope!) is that the value of the company or product in
which you have invested will increase or rebound from the low price at which you made your purchase. This is the goal of all traders and means that your stock will become more
valuable.
As the value of your securities increases, so does your net
worth. When the price of the stock in your possession
reaches a high point, it is time to sell, making a profit on
your original investment. Ideally, you will always sell your
holdings for a reasonably higher price than the purchase
amount and should never sell when the current value of the
stock is below your initial purchase price. It is important to
make sure that you do not purposely take a net loss because
there are plenty of occasions when you could be forced to
take a loss.
For example, if you purchase shares of a company at twenty
dollars each, you should never sell them for eighteen dollars
apiece. If possible, you want to hold off until they are each
worth perhaps forty dollars, in essence doubling your
money. Of course, this is just an example, and not all
stocks will ever double in value, but the illustration is
meaningful.
There are other, more complex ways to invest in the stock
market. However, much like learning to ride a bicycle, you
do not want to make your first attempt without training
wheels.
fund; it is a good idea to start by understanding what you
are buying into. The stock market is a complicated entity,
and doing minimal business in trading requires a fair amount
of basic knowledge, as well as the understanding and
acceptance of the high risk factor. The more you know in
advance regarding the functionality of the system, the less
likely it is that you will take a heavy hit, ending in
devastating loss.
First of all and probably most important in the trading
business, you should understand what stocks actually are.
When you buy or sell a stock on the open market, you
should keep in mind that you are dealing with real objects,
not pieces of paper; you are buying and selling real parts of
a particular company, its product, or some other various
commodity.
Owning a “share” means that you have actually bought into
the company or product involved and become a partial
owner of that commodity. Of course, you could be one of
millions of shareholders, as most companies and products
are broken into minute pieces of the whole, but you are still
considered an investor in that company or product until you
sell your shares.
Think of it as paying for a tank of gas in the car that your
parents bought for you to drive. You may have even bought
the oil filter that has been put on the car, and you may feel
that this investment makes you part owner. However, when
you look at the overall cost of the car, you have really
contributed very little to that amount. However, as long as
you continue to invest in the gas for the car and take care of
the maintenance needs, you can claim part ownership of the
car.
Because the value of a company and its products or services
can fluctuate continuously, the value of the stocks you hold
will not be the same from day to day and can sometimes
even change hourly. When the price per share drops and is
considered low, it is an ideal time to purchase. This is the
least expensive way to begin your trading venture, and
working with a stock broker will allow you to gain more
information as to what stocks are ripe for the purchase at
any given time.
In doing so, you become a stockholder, and the value of
your holdings will fluctuate from day to day. Your gamble
(and hope!) is that the value of the company or product in
which you have invested will increase or rebound from the low price at which you made your purchase. This is the goal of all traders and means that your stock will become more
valuable.
As the value of your securities increases, so does your net
worth. When the price of the stock in your possession
reaches a high point, it is time to sell, making a profit on
your original investment. Ideally, you will always sell your
holdings for a reasonably higher price than the purchase
amount and should never sell when the current value of the
stock is below your initial purchase price. It is important to
make sure that you do not purposely take a net loss because
there are plenty of occasions when you could be forced to
take a loss.
For example, if you purchase shares of a company at twenty
dollars each, you should never sell them for eighteen dollars
apiece. If possible, you want to hold off until they are each
worth perhaps forty dollars, in essence doubling your
money. Of course, this is just an example, and not all
stocks will ever double in value, but the illustration is
meaningful.
There are other, more complex ways to invest in the stock
market. However, much like learning to ride a bicycle, you
do not want to make your first attempt without training
wheels.
What the Stock Market is All About?
In any business or moneymaking venture, preparation and foreknowledge are the keys to success. Without this sort of insight, the attempt to make a profitable financial decision can only end in disaster and failure, regardless of your level of motivation and determination or the amount of money you plan to invest.
In the stock market, this rule applies to the nth degree, as you are investing your own money in what could be considered a high risk wager, and you are playing with fire if you do not have at least a general background knowledge of how it functions. Since having a background in any area is helpful in guiding you down a path in that particular region,the more solid your basis of investment knowledge is, the more likely you are to profit from any attempt to trade on the open market.
In many ways, trading on the stock market can be compared to driving – you do not have to be an expert to get behind the wheel of a car, though you are expected to have some previous knowledge about basic traffic laws, including moving violations, safety regulations, and other legal vehicular infractions, which are learned through either specific study and coursework or even through some form of simple exposure (such as the years you have spent riding with your parents and others who have driven for years).
You should be able to comprehend the basic tools used to
navigate a car (where the break pedal is located versus the gas, and how to use the rearview mirror, for example), even if you have never touched a steering wheel.
The same is true in entering the world of the stock market. While you do not have to know all the terminology (you will not be short selling or determining your own long and short positions at first, so you do not have to understand these references completely, though you should be aware of them), you should certainly be versed in the basic functionality of trading stocks, bonds, securities, and other commodities. And just like someone who is behind the wheel of a car and getting ready to touch the gas pedal for the first time, you should start out with caution and work your way in slowly. A first time driver will first set the mirrors to his or her own liking, then put the car in gear,look for any interfering traffic, and ease onto the gas pedal, never flooring it and testing the engine coming out of the gate on the first attempt. Likewise, when you select your first investment, you should choose something stable with little fluctuation and not invest a large sum of money on this first venture.
In the stock market, this rule applies to the nth degree, as you are investing your own money in what could be considered a high risk wager, and you are playing with fire if you do not have at least a general background knowledge of how it functions. Since having a background in any area is helpful in guiding you down a path in that particular region,the more solid your basis of investment knowledge is, the more likely you are to profit from any attempt to trade on the open market.
In many ways, trading on the stock market can be compared to driving – you do not have to be an expert to get behind the wheel of a car, though you are expected to have some previous knowledge about basic traffic laws, including moving violations, safety regulations, and other legal vehicular infractions, which are learned through either specific study and coursework or even through some form of simple exposure (such as the years you have spent riding with your parents and others who have driven for years).
You should be able to comprehend the basic tools used to
navigate a car (where the break pedal is located versus the gas, and how to use the rearview mirror, for example), even if you have never touched a steering wheel.
The same is true in entering the world of the stock market. While you do not have to know all the terminology (you will not be short selling or determining your own long and short positions at first, so you do not have to understand these references completely, though you should be aware of them), you should certainly be versed in the basic functionality of trading stocks, bonds, securities, and other commodities. And just like someone who is behind the wheel of a car and getting ready to touch the gas pedal for the first time, you should start out with caution and work your way in slowly. A first time driver will first set the mirrors to his or her own liking, then put the car in gear,look for any interfering traffic, and ease onto the gas pedal, never flooring it and testing the engine coming out of the gate on the first attempt. Likewise, when you select your first investment, you should choose something stable with little fluctuation and not invest a large sum of money on this first venture.
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