Forex trading is the trading of different types of foreign currencies, sometimes just called currency trading.
While forex trading used to be limited to large banks and institutional traders, advancements in technology have allowed smaller traders to be able to benefit from forex trading as well, via the different online trading platforms now available.
About 85% of daily forex trading involves currency trading of the major currencies of the world, usually four major currency pairs. Currency trading usually involves the US dollar against the Japanese Yen, the British pound against the US dollar, the US dollar against the Swiss franc and the Euro against the US dollar.
Here's how those look in the forex trading market: USD/JPY, GBP/USD, USD/CHF, EUR/USD.
The idea behind profiting from forex trading is taking a position in a currency that you believe will appreciate against the currency it is paired against.
The FOREX is a world wid market, meaning it is basically open 24 hours a day. This eliminates the gaps you see almost every morning with tradional stocks. The FOREX market trades approximately $1.2 trillion every day, making it very easy to get in and out of your positions quickly.
Although the large majority of the focus in the investing world is on stocks and bonds, the currenty market is the oldest and largest financial market in the world.
So why trade the FOREX market?
* The FOREX market is open 24 hours a day
* The FOREX market is extremely liquid making it very easy to get in and out of various trading positions quickly
* The FOREX market is highly leveraged. While a margin account for trading stocks has a leverage of 2 (50% margin requirement) the FOREX market can have a leverage ratio of 400. Keep in mind that while this makes your upside potential a lot greater it also makes your downside risk a lot greater as well.
* The FOREX market is always a bull market because currencies are paired off against one another, which means there is always currency that is going up.
FOREX trading is a fantastic alternative to trading commodities and futures. Remember, though, that there is still a lot of risk and you need to educate yourself before starting to trade the FOREX market.
Learn more about forex trading tips and tactics for more profitable currency trades at http://www.forextradingtactics.com where Richard Pfaeltzer, an investor and freelance investing and success writer, contributes articles on forex and currency trading
Article Source: http://EzineArticles.com/?expert=Richard_Pfaeltzer
Thursday, December 13, 2007
Major Forex Indicators
Certain financial indicators have a history of moving the financial markets when the actual numbers don't match consensus. This article explain what some of the better financial indicators are and the ones traders should pay close attention to when trading the forex market.
APICS Survey - The APICS survey provides detailed information of the manufacturing sector. This survey is less well known than the ISM, but can also suggest trends in production. The diffusion index does not move in tandem with the ISM index each month, but sometimes the two do move in the same direction. Since manufacturing is a major sector of economy, investors can get a feel for the general economic backdrop for several investments. These surveys also play an important role in learning forex trading.
Business Inventories - The degree of inventories in relation to sales is an important signal of the near-term direction of production activity. Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. Growing inventories can be an indication of business optimism that sales will be growing in the coming months. By looking at the proportion of inventories to sales, investors can see whether production demands will expand or contract in the near future. The business inventory data provide a valuable forward-looking tool for traversing the economy and it is greatly used while making forex trading strategies.
Chain Stores Sales - It is monthly sales volumes from department, chain, discount and apparel stores. Sales are reported by the individual retailers. Chain store sales are an indicator of retail sales and consumer spending results. Consumer spending accounts for two-thirds of the economy, so if you know what consumers are up to, you will have a pretty good grip on where the economy is headed. Sales are reported as a change from the same month a year ago. It is significant to know how strong sales actually were a year ago to make sense of this year's sales. In addition, sales are normally reported for "comparable stores" in case of company mergers.
Construction Spending - Data are available in nominal and real (inflation-adjusted) dollars. Because of their forex trading strategies, businesses only put money into construction of new factories or offices when they are sure that demand is strong enough to justify the expansion. The same goes for individuals making the investment in a home. That's why construction spending is a good indicator of the economy's momentum.
Consumer Confidence - It is study of consumer attitudes concerning both the present position as well as expectations regarding economic conditions conducted by The Conference Board. The level of consumer confidence is directly related to the intensity of consumer spending. Consumer spending accounts for two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might act in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the way of the economy. Changes in consumer confidence and retail sales don't move in tandem month by month.
Consumer Price Index (CPI) - It is measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the inflation rate. The CPI is the most followed indicator of inflation in the United States, some forex training institutes also keeps record of it for training purpose. Inflation is a general increase in the cost of goods and services. The relationship between inflation and interest rates is the key to understanding how data like the CPI influence the markets. By tracking the trends in inflation, whether high or low, ascending or descending, investors can anticipate how different types of investments will perform.
Current account - It is a measure of the country's international trade balance in goods, services and unilateral transfers. The level of the current account, as well as the trends in exports and imports, are followed as indicators of trends in foreign trade. U.S. trade with foreign countries hold significant clues to economic trends here and abroad. According to forex training experts this data can directly affect all the financial markets, and particularly the foreign exchange value of the dollar.
Andrew Daigle is the owner, creator and author of many successful websites including ForexBoost, a free Forex educational site to learn Forex trading strategies and a ForexBoost Squidoo for keeping online Forex trading records.
Article Source: http://EzineArticles.com/?expert=Andrew_Daigle
APICS Survey - The APICS survey provides detailed information of the manufacturing sector. This survey is less well known than the ISM, but can also suggest trends in production. The diffusion index does not move in tandem with the ISM index each month, but sometimes the two do move in the same direction. Since manufacturing is a major sector of economy, investors can get a feel for the general economic backdrop for several investments. These surveys also play an important role in learning forex trading.
Business Inventories - The degree of inventories in relation to sales is an important signal of the near-term direction of production activity. Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. Growing inventories can be an indication of business optimism that sales will be growing in the coming months. By looking at the proportion of inventories to sales, investors can see whether production demands will expand or contract in the near future. The business inventory data provide a valuable forward-looking tool for traversing the economy and it is greatly used while making forex trading strategies.
Chain Stores Sales - It is monthly sales volumes from department, chain, discount and apparel stores. Sales are reported by the individual retailers. Chain store sales are an indicator of retail sales and consumer spending results. Consumer spending accounts for two-thirds of the economy, so if you know what consumers are up to, you will have a pretty good grip on where the economy is headed. Sales are reported as a change from the same month a year ago. It is significant to know how strong sales actually were a year ago to make sense of this year's sales. In addition, sales are normally reported for "comparable stores" in case of company mergers.
Construction Spending - Data are available in nominal and real (inflation-adjusted) dollars. Because of their forex trading strategies, businesses only put money into construction of new factories or offices when they are sure that demand is strong enough to justify the expansion. The same goes for individuals making the investment in a home. That's why construction spending is a good indicator of the economy's momentum.
Consumer Confidence - It is study of consumer attitudes concerning both the present position as well as expectations regarding economic conditions conducted by The Conference Board. The level of consumer confidence is directly related to the intensity of consumer spending. Consumer spending accounts for two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might act in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the way of the economy. Changes in consumer confidence and retail sales don't move in tandem month by month.
Consumer Price Index (CPI) - It is measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the inflation rate. The CPI is the most followed indicator of inflation in the United States, some forex training institutes also keeps record of it for training purpose. Inflation is a general increase in the cost of goods and services. The relationship between inflation and interest rates is the key to understanding how data like the CPI influence the markets. By tracking the trends in inflation, whether high or low, ascending or descending, investors can anticipate how different types of investments will perform.
Current account - It is a measure of the country's international trade balance in goods, services and unilateral transfers. The level of the current account, as well as the trends in exports and imports, are followed as indicators of trends in foreign trade. U.S. trade with foreign countries hold significant clues to economic trends here and abroad. According to forex training experts this data can directly affect all the financial markets, and particularly the foreign exchange value of the dollar.
Andrew Daigle is the owner, creator and author of many successful websites including ForexBoost, a free Forex educational site to learn Forex trading strategies and a ForexBoost Squidoo for keeping online Forex trading records.
Article Source: http://EzineArticles.com/?expert=Andrew_Daigle
Sunday, December 9, 2007
Forex Traders, Currency Exchange Interest Rates and Market Inefficiency - The Carry Trade
Forex Traders, Currency Exchange Interest Rates and Market Inefficiency: The Carry Trade
Forex traders have multiple - it could almost be said infinite - strategies to trade the forex market and to take advantage of market The "carry trade" is a forex strategy that plays on the fact that different nations, being able to attract a higher flux of capital, and having different level of economical and industrial development, offer different interest rates, some higher than others. As we saw in Currency Trading and The Forex Capital Markets, this fact, representing market inefficiency, is in turn a trading advantage that can be exploited by forex traders.
The carry trade involve buying a currency of a Country that has a high interest rate and selling a currency of another Country that, on the other hand, has a lower interest rate. Forex traders are thus able to profit in two ways: -- Earn the difference in the spread (the difference between the two interest rates) of the two currencies, and -- Earn form capital appreciation
Usually the spread in interest rates is not very large and can be expected to be in the order of 3% to 4%; however, it should be regarded from the broader perspective of the leverage offered by forex and by the lower risk that, at least compared to other forex trading strategies, this system entails. In fact, when factoring in 20:1 or even higher leverage ratios (some forex traders can trade these currency exchange rate inefficiencies with up to 200:1 leverage).
As we noted below, the carry trade can profit from two sources; however, capital appreciation can work against the forex trader; in fact, if capital depreciate, the forex trader will be losing money on this part of the trade, and at the end of the day it is the sum of the two streams (difference in interest rate spread and capital appreciation/depreciation) that will give the verdict as to whether the overall forex trade was successful or not. Forex traders performing this type of strategy are obviously looking to earn both yield from the interest rates spread and the appreciation of the currency pairs: it is thus crucial to determine in which Countries (that is, which markets) carry trades will Produce the higher returns with a level of risk in line with the returns expected by the currency trader. This is indeed very difficult to answer; certainly, the forex market is driven by fundamental for a large extent, but it is the psychology of people and their swings in mood that most drives the forex markets. Investing in a Country that pays high interest rates is riskier that investing in a country that pays lower interest rates because a developing country, thirsty for capitals and money will want to attract the resources it needs by encouraging investors and forex traders with higher returns for their money. However, such a country has intrinsically a higher risk profile and ultimately it is the forex trader that must be willing to take its chances after carefully evaluating the multiple factors coming into the picture.
If you have a genuine interest in currency trading, or you are a forex trader willing to know what resources are available to you to start trading in the currency exchange market, you may want to visit http://www.onlineforextradingsite.com
Article Source: http://EzineArticles.com/?expert=Gui_Tru
Forex traders have multiple - it could almost be said infinite - strategies to trade the forex market and to take advantage of market The "carry trade" is a forex strategy that plays on the fact that different nations, being able to attract a higher flux of capital, and having different level of economical and industrial development, offer different interest rates, some higher than others. As we saw in Currency Trading and The Forex Capital Markets, this fact, representing market inefficiency, is in turn a trading advantage that can be exploited by forex traders.
The carry trade involve buying a currency of a Country that has a high interest rate and selling a currency of another Country that, on the other hand, has a lower interest rate. Forex traders are thus able to profit in two ways: -- Earn the difference in the spread (the difference between the two interest rates) of the two currencies, and -- Earn form capital appreciation
Usually the spread in interest rates is not very large and can be expected to be in the order of 3% to 4%; however, it should be regarded from the broader perspective of the leverage offered by forex and by the lower risk that, at least compared to other forex trading strategies, this system entails. In fact, when factoring in 20:1 or even higher leverage ratios (some forex traders can trade these currency exchange rate inefficiencies with up to 200:1 leverage).
As we noted below, the carry trade can profit from two sources; however, capital appreciation can work against the forex trader; in fact, if capital depreciate, the forex trader will be losing money on this part of the trade, and at the end of the day it is the sum of the two streams (difference in interest rate spread and capital appreciation/depreciation) that will give the verdict as to whether the overall forex trade was successful or not. Forex traders performing this type of strategy are obviously looking to earn both yield from the interest rates spread and the appreciation of the currency pairs: it is thus crucial to determine in which Countries (that is, which markets) carry trades will Produce the higher returns with a level of risk in line with the returns expected by the currency trader. This is indeed very difficult to answer; certainly, the forex market is driven by fundamental for a large extent, but it is the psychology of people and their swings in mood that most drives the forex markets. Investing in a Country that pays high interest rates is riskier that investing in a country that pays lower interest rates because a developing country, thirsty for capitals and money will want to attract the resources it needs by encouraging investors and forex traders with higher returns for their money. However, such a country has intrinsically a higher risk profile and ultimately it is the forex trader that must be willing to take its chances after carefully evaluating the multiple factors coming into the picture.
If you have a genuine interest in currency trading, or you are a forex trader willing to know what resources are available to you to start trading in the currency exchange market, you may want to visit http://www.onlineforextradingsite.com
Article Source: http://EzineArticles.com/?expert=Gui_Tru
All About Forex Trading
Forex trading, short for foreign exchange trading, involves the buying and selling of the many currencies of the world. It does not operate via a central exchange site, like traditional stock market trading, and may, thus, fully function a 24-hour basis.
When compared to other exchanges, the trading market is the largest in the world, even beating the New York Stock Exchange (NYSE) by over a hundredfold, in terms of daily trading volume, most of which are conducted by private entities and individuals.
Because of the absence of a central exchange, trading happens between two parties directly. Buyers and sellers communicate and trade via the phone, the Internet or other communications networks worldwide.
In addition, trading forex is also speculative, meaning, they are based on expectations on whether a certain currency would rise or fall, depending on current market conditions. It is risky business, but the returns have often proved themselves worth the risk.
Basic forex trading
Forex trading involves the buying and selling of two currencies at the same time. This combination is often dubbed a cross, because it occurs between two moneys; for instance, the US dollar/Japanese Yen. The highest traded currencies in forex are the US dollar, the euro, the Japanese yen and the UK pound - the "majors".
Trading normally occurs in the spot market, which is the largest because of its volume. Here, trades are made and completed directly and on the spot. You don't have to wait too long to settle.
Advantages of forex trading
1. No 4pm trade closing time.
When you're trading forex, you have 24-hours to do so from Sunday night to Friday night. This opportunity allows you to retract your moves and react immediately when a currency suddenly goes up or down. Breaking news are vital to trading.
2. Very liquid.
It is easy to convert your trades to cash in the market, especially if yours involves one of the majors. The high liquidity helps ensure that spreads are narrow and prices are stable throughout the period.
3. Strong potential for profits
This is particularly true with falling currencies. Because trading involves two currencies, when one rises, the other naturally falls. When a currency depreciates, it could be the perfect time to buy into it so that you can sell it for a hefty profit when it's its turn to appreciate.
4. The higher the currency's liquidity level, the cheaper it is to trade it.
This is why most forex trading patrons opt to trade majors, because they have the highest liquidity. In addition, trading is also more attractive to some money movers because of the absence of a commission. Thus, currencies are actually traded for their real merits and not because they come with misleading incentives.
There's a lot more to learn about trading and the above merely scratches the surface. To be able to further understand what forex trading is and how it can help you grow your coffers, it is advised that you speak to an expert who more likely has all the answers to your questions. Or, yet, ask somebody who's already had experience with forex trading.
Our mission at the Options University is to provide investors around the world with the very best in options education and tools, empowering them to use options for greater profit protection and less risk. To learn more on the options trading strategies for safer investing and bigger profits, please visit our blog at http://www.options-university.biz/blog/ for free trading tips and video e-Course.
Article Source: http://EzineArticles.com/?expert=Cornel_C.T._Tanady
When compared to other exchanges, the trading market is the largest in the world, even beating the New York Stock Exchange (NYSE) by over a hundredfold, in terms of daily trading volume, most of which are conducted by private entities and individuals.
Because of the absence of a central exchange, trading happens between two parties directly. Buyers and sellers communicate and trade via the phone, the Internet or other communications networks worldwide.
In addition, trading forex is also speculative, meaning, they are based on expectations on whether a certain currency would rise or fall, depending on current market conditions. It is risky business, but the returns have often proved themselves worth the risk.
Basic forex trading
Forex trading involves the buying and selling of two currencies at the same time. This combination is often dubbed a cross, because it occurs between two moneys; for instance, the US dollar/Japanese Yen. The highest traded currencies in forex are the US dollar, the euro, the Japanese yen and the UK pound - the "majors".
Trading normally occurs in the spot market, which is the largest because of its volume. Here, trades are made and completed directly and on the spot. You don't have to wait too long to settle.
Advantages of forex trading
1. No 4pm trade closing time.
When you're trading forex, you have 24-hours to do so from Sunday night to Friday night. This opportunity allows you to retract your moves and react immediately when a currency suddenly goes up or down. Breaking news are vital to trading.
2. Very liquid.
It is easy to convert your trades to cash in the market, especially if yours involves one of the majors. The high liquidity helps ensure that spreads are narrow and prices are stable throughout the period.
3. Strong potential for profits
This is particularly true with falling currencies. Because trading involves two currencies, when one rises, the other naturally falls. When a currency depreciates, it could be the perfect time to buy into it so that you can sell it for a hefty profit when it's its turn to appreciate.
4. The higher the currency's liquidity level, the cheaper it is to trade it.
This is why most forex trading patrons opt to trade majors, because they have the highest liquidity. In addition, trading is also more attractive to some money movers because of the absence of a commission. Thus, currencies are actually traded for their real merits and not because they come with misleading incentives.
There's a lot more to learn about trading and the above merely scratches the surface. To be able to further understand what forex trading is and how it can help you grow your coffers, it is advised that you speak to an expert who more likely has all the answers to your questions. Or, yet, ask somebody who's already had experience with forex trading.
Our mission at the Options University is to provide investors around the world with the very best in options education and tools, empowering them to use options for greater profit protection and less risk. To learn more on the options trading strategies for safer investing and bigger profits, please visit our blog at http://www.options-university.biz/blog/ for free trading tips and video e-Course.
Article Source: http://EzineArticles.com/?expert=Cornel_C.T._Tanady
Friday, December 7, 2007
A Simple Forex Trading System Can Protect Your Investment
Forex Trading Systems are very popular as a method of investing money to make more money. They work like momentum players in the market. It is software that implements a method of trading that uses objective entry and exit criteria based on parameters that have been validated by historical testing on quantifiable data. Simple systems are actually similar to that of stock market trading systems in any country, but on a huge scale, that involves currency trading all over the world, in practically any country.
There are hundreds of simple forex trading systems out there on the internet willing to sell you an eBook or a forex strategy to make you 1000's of pips profit per month. Forex Trading Systems that are based on logical, scientifically-sound, and well-tested concepts have been working extremely well and will continue to do so for many, many years to come. They will teach you money management strategies that can skyrocket your profits.
Software is available to help you manage every aspect of the trades. You can purchase currency and set a price at which to sell and it should give you exact buy and sell signals. Simple Forex trading system software is easier to understand, apply and have confidence in which leads to the discipline to follow your currency trading system to long term currency trading success.
These are the best way for anyone to invest in the foreign exchange market. There are trading systems that are ideal for every type of forex trader. Easy to use, informative and beneficial are the key factors to consider before putting your foot into the trading pool. Simple Forex trading systems are big business. Invest in the right one and you can make big currency profits and get the cost you paid back many times over.
Author is an investor who has discovered a source of secrets to successful forex trading. Go now to http://forex-helper.blogspot.com/ for more information.
Article Source: http://EzineArticles.com/?expert=Brent_Kokenge
There are hundreds of simple forex trading systems out there on the internet willing to sell you an eBook or a forex strategy to make you 1000's of pips profit per month. Forex Trading Systems that are based on logical, scientifically-sound, and well-tested concepts have been working extremely well and will continue to do so for many, many years to come. They will teach you money management strategies that can skyrocket your profits.
Software is available to help you manage every aspect of the trades. You can purchase currency and set a price at which to sell and it should give you exact buy and sell signals. Simple Forex trading system software is easier to understand, apply and have confidence in which leads to the discipline to follow your currency trading system to long term currency trading success.
These are the best way for anyone to invest in the foreign exchange market. There are trading systems that are ideal for every type of forex trader. Easy to use, informative and beneficial are the key factors to consider before putting your foot into the trading pool. Simple Forex trading systems are big business. Invest in the right one and you can make big currency profits and get the cost you paid back many times over.
Author is an investor who has discovered a source of secrets to successful forex trading. Go now to http://forex-helper.blogspot.com/ for more information.
Article Source: http://EzineArticles.com/?expert=Brent_Kokenge
Wednesday, December 5, 2007
Forex Trading Strategy
The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is by far the largest financial market in the world, and includes trading between large banks, central banks, currency speculators, multinationals, governments, and other financial markets and institutions. The average daily trade in the global forex and related markets currently is over US$ 3 trillion. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks, and are subject to forex scams.
The foreign exchange market is unique because of:
ª its trading volumes,
ª the extreme liquidity of the market,
ª the large number of, and variety of, traders in the market,
ª its geographical dispersion,
ª its long trading hours: 24 hours a day (except on weekends),
ª the variety of factors that affect exchange rates.
ª the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
While forex has been traded since the beginning of financial markets, on-line retail trading has only been active since about 1996 . From the 1970s, larger retail traders could trade FX contracts at the Chicago Mercantile Exchange.
By 1996 on-line retail forex trading became practical. Internet-based market makers would take the opposite side of retail trader's trades. These companies also created online trading platforms that provided a quick way for individuals to buy and sell on the forex spot market.
In online currency exchange, few or no transactions actually lead to physical delivery to the client; all positions will eventually be closed. The market makers offer high amounts of leverage. While up to 4:1 leverage is available in equities and 20:1 in Futures, it is common to have 100:1 leverage in currencies.]. In the typical 100:1 scenario, the client absorbs all risks associated with controlling a position worth 100 times his capital.
Currencies are quoted in pairs i.e. EUR/USD (euro vs. United States dollar). Currency prices can only fluctuate relative to another currency, so they are traded in pairs. Take two of the most common currency pairs, the EUR/USD (the price for euros in US dollars) and the GBP/USD (the price for the British pound in US dollars).
The idea of margin (leverage) and floating loss is another important trading concept and is perhaps best understood using an example. Most retail Forex market makers permit 100:1 leverage, but also, crucially, require you to have a certain amount of money in your account to protect against a critical loss point.
For example, if a $100,000 position is held in Eur/USD on 100:1 leverage, the trader has to put up $1,000 to control the position. However, in the event of a declining value of your positions, Forex market makers, mindful of the fast nature of forex price swings and the amplifying effect of leverage, typically do not allow their traders to go negative and make up the difference at a later date. In order to make sure the trader does not lose more money than is held in the account, forex market makers typically employ automatic systems to close out positions when clients run out of margin (the amount of money in their account not tied to a position). If the trader has $2,000 in his account, and he is buying a $100,000 lot of EUR/USD, he has $1,000 of his $2,000 tied up in margin, with $1,000 left to allow his position to fluctuate downward without being closed out. A good Forex Trading Strategy is useful if one want to succeed in the market.
To review one strategy, see my blog http://www.forex-trading-strategy-ronald.blogspot.com
Article Source: http://EzineArticles.com/?expert=Ronald_Hopman
The foreign exchange market is unique because of:
ª its trading volumes,
ª the extreme liquidity of the market,
ª the large number of, and variety of, traders in the market,
ª its geographical dispersion,
ª its long trading hours: 24 hours a day (except on weekends),
ª the variety of factors that affect exchange rates.
ª the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
While forex has been traded since the beginning of financial markets, on-line retail trading has only been active since about 1996 . From the 1970s, larger retail traders could trade FX contracts at the Chicago Mercantile Exchange.
By 1996 on-line retail forex trading became practical. Internet-based market makers would take the opposite side of retail trader's trades. These companies also created online trading platforms that provided a quick way for individuals to buy and sell on the forex spot market.
In online currency exchange, few or no transactions actually lead to physical delivery to the client; all positions will eventually be closed. The market makers offer high amounts of leverage. While up to 4:1 leverage is available in equities and 20:1 in Futures, it is common to have 100:1 leverage in currencies.]. In the typical 100:1 scenario, the client absorbs all risks associated with controlling a position worth 100 times his capital.
Currencies are quoted in pairs i.e. EUR/USD (euro vs. United States dollar). Currency prices can only fluctuate relative to another currency, so they are traded in pairs. Take two of the most common currency pairs, the EUR/USD (the price for euros in US dollars) and the GBP/USD (the price for the British pound in US dollars).
The idea of margin (leverage) and floating loss is another important trading concept and is perhaps best understood using an example. Most retail Forex market makers permit 100:1 leverage, but also, crucially, require you to have a certain amount of money in your account to protect against a critical loss point.
For example, if a $100,000 position is held in Eur/USD on 100:1 leverage, the trader has to put up $1,000 to control the position. However, in the event of a declining value of your positions, Forex market makers, mindful of the fast nature of forex price swings and the amplifying effect of leverage, typically do not allow their traders to go negative and make up the difference at a later date. In order to make sure the trader does not lose more money than is held in the account, forex market makers typically employ automatic systems to close out positions when clients run out of margin (the amount of money in their account not tied to a position). If the trader has $2,000 in his account, and he is buying a $100,000 lot of EUR/USD, he has $1,000 of his $2,000 tied up in margin, with $1,000 left to allow his position to fluctuate downward without being closed out. A good Forex Trading Strategy is useful if one want to succeed in the market.
To review one strategy, see my blog http://www.forex-trading-strategy-ronald.blogspot.com
Article Source: http://EzineArticles.com/?expert=Ronald_Hopman
Forex News - Why Most Traders Use It In The Wrong Way and Lose!
It's a fact that today is forex news sources are better than ever and its delivered quicker yet the ratio of losers to winners in forex trading remains the same as it did 50 years ago 95% lose and only 5% lose. The news can be useful but you need to know how to use it.
First let's look at a simple equation:
Forex Fundamentals (supply and demand news) + Investor Psychology = Price
The facts are there for all of us to see but assessing the impact of the news is hard because humans (millions of them) all motivated differently see the facts but they all draw their own personal conclusions from them and that's the price.
If it were easy to trade by following the news then there would be a lot more winners than there actually are. Will Rogers once said:
"I only believe what I see in the papers"
Of course he was making a joke but I am amazed by how many traders think that because a story appears on Reuters or another newswire, they can trade it - you can't.
The fact is that humans always push prices top far up or down, as their emotions come into play and most major tops are formed when the news is most bullish and vice versa in a bear market.
It's a fact that prices generally move in line with the long term fundamentals but prices spike to far from fair value up or down along the way and history shows us these spikes don't last.
You can spot them easily on a forex chart and trade them for profit.
There is a well know saying:
"If you can hold onto your head when everyone around you is losing theirs, you probably haven't heard the news"
In forex trading this means you sit back in a detached fashion and look at your forex charts and when you see a price spike you start to question the news.
For example - the euro spiked to 1.50 recently and everyone said that the dollar was finished - yet its rallied and will probably rally further.
Why?
Because all the news stories have been discounted: Interest rate cuts, the sub prime mortgage crisis, the US will slip into recession etc and things can only get better and people also didn't pay attention to GDP which is robust.
The dollar was simply oversold and rallied, when the news was at its most bearish.
This doesn't just happen in forex, it happens in any market.
I read a great story about oil going to $160.00 dollars a barrel and that $100.00 a barrel was sustainable.
Well - there is no shortage of oil.
Global demand is actually falling and the true value of oil is in the $70 - 80 region. When people said $100 a barrel was a forgone conclusion - it was time to sell.
The fact is we are not creatures of logic, we are creatures of emotion.
Humans are also pack animals, we like to be with the crowd and the news reflects this.
The facts are the crowd never wins.
If you look at a forex chart and you see a piece of bullish news that fails to rally a market or a bearish piece of news that doesn't cause a market to fall - that is telling you to look at your charts and look for a contrary trade.
Forex news can be useful - but not in the way that many traders think.
The above are just a couple of examples, of how you can use forex news (or any market news) to generate contrary trades, enjoy currency trading success and join the elite winning minority.
NEW! 2 X FREE ESSENTIAL TRADER PDFSAND - PROFESSIONAL TRADING COURSE
For 2 free trading Pdf's with essential trading info and an exclusive Forex Trading Course visit our website at: http://www.learncurrencytradingonline.com/index.html
Article Source: http://EzineArticles.com/?expert=Kelly_Price
First let's look at a simple equation:
Forex Fundamentals (supply and demand news) + Investor Psychology = Price
The facts are there for all of us to see but assessing the impact of the news is hard because humans (millions of them) all motivated differently see the facts but they all draw their own personal conclusions from them and that's the price.
If it were easy to trade by following the news then there would be a lot more winners than there actually are. Will Rogers once said:
"I only believe what I see in the papers"
Of course he was making a joke but I am amazed by how many traders think that because a story appears on Reuters or another newswire, they can trade it - you can't.
The fact is that humans always push prices top far up or down, as their emotions come into play and most major tops are formed when the news is most bullish and vice versa in a bear market.
It's a fact that prices generally move in line with the long term fundamentals but prices spike to far from fair value up or down along the way and history shows us these spikes don't last.
You can spot them easily on a forex chart and trade them for profit.
There is a well know saying:
"If you can hold onto your head when everyone around you is losing theirs, you probably haven't heard the news"
In forex trading this means you sit back in a detached fashion and look at your forex charts and when you see a price spike you start to question the news.
For example - the euro spiked to 1.50 recently and everyone said that the dollar was finished - yet its rallied and will probably rally further.
Why?
Because all the news stories have been discounted: Interest rate cuts, the sub prime mortgage crisis, the US will slip into recession etc and things can only get better and people also didn't pay attention to GDP which is robust.
The dollar was simply oversold and rallied, when the news was at its most bearish.
This doesn't just happen in forex, it happens in any market.
I read a great story about oil going to $160.00 dollars a barrel and that $100.00 a barrel was sustainable.
Well - there is no shortage of oil.
Global demand is actually falling and the true value of oil is in the $70 - 80 region. When people said $100 a barrel was a forgone conclusion - it was time to sell.
The fact is we are not creatures of logic, we are creatures of emotion.
Humans are also pack animals, we like to be with the crowd and the news reflects this.
The facts are the crowd never wins.
If you look at a forex chart and you see a piece of bullish news that fails to rally a market or a bearish piece of news that doesn't cause a market to fall - that is telling you to look at your charts and look for a contrary trade.
Forex news can be useful - but not in the way that many traders think.
The above are just a couple of examples, of how you can use forex news (or any market news) to generate contrary trades, enjoy currency trading success and join the elite winning minority.
NEW! 2 X FREE ESSENTIAL TRADER PDFSAND - PROFESSIONAL TRADING COURSE
For 2 free trading Pdf's with essential trading info and an exclusive Forex Trading Course visit our website at: http://www.learncurrencytradingonline.com/index.html
Article Source: http://EzineArticles.com/?expert=Kelly_Price
Subscribe to:
Posts (Atom)
