Forex trading for the beginning Trader

Jan31
2012 Leave a Comment Written by Freddie Forex

Forex trading for the beginning Trader

Forex Trading refers to buying or selling of the currencies with an intention to earn profit. The manner to earn money in a Forex Market is quite simple to understand. It works similar to the function of any other markets as Stocks or other such commodity markets. Therefore, an experience or knowledge about the functionality of stock markets or such will help one to learn to earn money quickly in a Forex Trading.

The main intention of a Forex trading is to buy the currency of another country with an expectation for a change in the money value of the currency so that the Forex trader can sell the currency and thereby earning profit from the transaction. For example, if a trader purchases 10,000 Euros @ 1.1800 USD/ Euro, then he would have to pay 11,800 USD. But then later when he re-exchanges the 10,000 Euros @ 1.2500USD/Euro, He would earn a profit of 700 USD as he would get 12,500 USD in return. Therefore, an exchange rate indicates the relation of two currencies when they are valued against each other. This again with an example would be, USD/EUR exchange rate would mean, the number of USDs that can be purchased with one Euro.

When currencies are quoted, they are done so in pairs, e.g. USD/INR. It is quoted so because a currency is sold while the other is bought. The currency before the slash is called a “Base currency” and the other is known as “Quote currency”. Here USD is the base currency and INR is the quote currency. In a Forex trading, buying would mean, buying the base currency by selling the quote currency. In the example above, it would be to buy USD by selling INR where the base currency is expected to rise in money value to sell it for a higher price. Forex traders would call this process as “going long”. And selling means to sell the base currency and buy the quote currency. In the example above, it would be, selling USD and buying INR, where it would be expected that the base currency would fall in value to buy it for a lower price. This, in Forex trading is called “going short”.

In a Forex transaction, there are two prices known as Bid and Ask. Bid is a price at which the dealer wants to buy the base currency in exchange of the quote currency. Ask is the price at which the dealer wants to sell the base currency for the quote currency. Therefore, Bid is the best price for the Forex trader to sell to the market and Ask is the best price to buy from the market.

In Forex trading the trading is done in ‘lots’ of 1000 units of the currency. Therefore, just incase there is a short in capital to perform the trade, the Forex trader would still have an option called ‘Margin Trading’ to help them trade in Forex market without huge initial capital.

These are a few basics in Forex trading.

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Three types of Forex analysis

Jan31
2012 Leave a Comment Written by Freddie Forex

Three types of Forex analysis

‘Forex Trading’ is a sort of investment that is risky as any other markets as stock markets as such. Blindly investing without knowing anything about Forex market will probably create losses for the trader than earning profits. Any investment needs to be scrutinizes thoroughly, compared and studied. There are different methods adapted by professionals to analyze such markets and let their traders know the market conditions with the help of which each trader can draw a probability of the future performance of the commodity they trade with. This probability is the base of almost all the decisions taken by each trader. In Forex trading, there are basically three methods to analyze the Forex market. They would be:

  • Technical analysis
  • Fundamental analysis
  • Sentimental analysis

It is very important to thoroughly study all the three analysis of the market because if one is weak is enough for the Forex trader to misinterpret the market leading to a loss. All three analyses are inseparable part of Forex Market study.

Technical Analysis is the basic outline upon which the Forex traders determine the price movement. The main logic in a Technical analysis is that that, it is believed that by observing the price behavior in historical market, the movement of the price in the current market can be predicted. In this analysis, it is said that price reflects every Forex market related information therefore price is all one needs to study to know the entire Forex market. Technical analysts, study the market to identify different patterns made by the price on the basis of which future predictions would be made. They usually adopt charts which can visually be very clear about the patters.

Fundamental analysis is a study made of the Forex market including economic, social and political elements that influence the market. In this analysis the reason behind the rise and fall of the market is studied. The basic ideology of fundamental analysis is that if a country’s present economy or the future economy is good foreign investors will invest in the country, i.e. the money value of that country will shoot high.

A Sentimental Analysis is a study of the market on the basis of a trader’s thought and opinion. Unfortunately, no trader thinks exactly alike. Every Forex trader has their own explanation for the performance of the market and this analysis believes that each trader’s though influence the market as these traders act according to their thought to buy or sell currencies expecting their currency value to act in a way they expect so as to earn profit. Therefore, this analysis tries to predict the general behavior of the Forex traders which will later reflect in their action.

These three analyses together will help any Forex trader to invest and act accordingly in a Forex market. While technical analysis helps the Forex traders visualize the price flow, fundamental analysis shows the Forex traders the reasons to rise and fall of market and sentimental analysis helps the Forex trader get to know about the other Forex trader’s behavior in the market. Therefore, its important for any Forex trader to consider all three analysis before making a decision.

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Forex trading Styles

Jan31
2012 Leave a Comment Written by Freddie Forex

Forex trading Styles

Every Forex trader has their own unique style and thought to execute their Forex trading as well as develop their individual trading style.

Forex trading is a field that required a lot of time which in return can provide them with money. There are many Forex platforms that promise to make quick money which gives a false notion to the Newbie Forex traders and soon realizes this doesn’t happen as promised. The more study and observation of the Forex market performance is done, the more experience and knowledge about Forex trading is gained which can help the Forex trader built their own strategies and tactics to gain more money from the Forex market.

While a Forex trader studies the market, the following are certain points they need to note:

  • They need to give emphasis of the Top happenings in the market and their effects on the currency values.
  • A Forex trader must always be vigilant about the press releases about the market. This is because if any such press release ends up being very important, the market will be highly influenced by it.
  • Even though Forex Market deals with currencies and currency values, it has to be noted that other commodities as Oil etc affects the currency values of the related countries. Therefore, it is very important for a Forex trader to study the reasons for the rise or fall in the other markets and how can they influence the Forex market.
  • Also other major happenings around the glob as any political disturbance in a country or any sort of crisis etc can very much influence the Forex market. Therefore it is important for a Forex trader to have an eye on them too.
  • The most important of all is the Trader to study the charts of the Forex market. This is because it is these charts that can convey information as the support and resistance levels, trends and price points and such other crucial reports to the Forex trader.

There are basically three types of charts available, which would be:

  • Line chart: It, as the name suggests, is a simple line graph drawn between two closing prices. But when looked into it can show the movement of the currency values between two currencies for a given period of time.
  • Bar chart: This chart, unlike a line chart, includes more information into the graph. It includes the closing prices, opening prices and the highs and the lows of the currency values for a given period of time.
  • Candle stick chart: This chart is similar to the bar chart but the reason to the “candle stick” name is because the small bars in its chart appear like candles. In the chart the black body appears to be the “down day” while the white body implies the “up day”.

These are a few information a Forex trader must be aware of before getting into the Forex trading.

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Types of Forex Orders

Jan26
2012 Leave a Comment Written by Freddie Forex

Types of order

“Order” in Forex trading refers to the mode a Forex trader enters and exits a Forex trade. Different brokers of Forex market accept different orders. The following would be the different orders available in the Forex market.

  • Market order:  A Market order is where a Forex trader can buy and sell at the best available price. In this order, a trader can buy the currency for it’s ask price and a buy order is executed as and when the trades clicks to buy the currency at the ask price shown.
  • Limit entry order: In this order the Forex trader can either buy below the market or sell above the market at a convinced price. This is a type of order where the Forex Trader believes that after the target he expects to attain is reached, the money value would reverse causing loss for the trader. In this order, the Forex trader can set a limit, which when reached; the sell order will be automatically executed. Therefore, the Forex trader need not wait for the money value to reach so to manually sell.
  • Stop entry order:  This order is a type in which the Forex trader would either buy above the market or sell below the market at a decided price. This order is done when the Forex trader believes that the direction of the currency dealt with rises in one direction. In other words, when the Forex traders believes that the currency value can increase once it reaches a level, they can place a stop entry order where the Forex trader can buy them when it reaches the level set.
  • Stop loss order: This order, as the name suggests, controls the loss happening to the Forex trader. In this order, when the currency value reaches a loss limit set by the Forex trader, executes automatically to avoid the Forex trader from further losses. This is a very useful order to note.
  • Trailing stop: This order is a type of stop loss order but with a trade attached with it that moves with the price fluctuation. In this order when the trade remains open till the price doesn’t move against the Forex trader by the trailing stop set by the trader. Once the trailing stop is reached the stop loss order is made automatically.
  • Good till cancelled: It is an order which will not be closed by the broker until and unless the Forex trader decides to cancel it. It is a sole responsibility of the Forex trader.
  • Good for the day: This order is where the trade is active for a day. But as the Forex market is a 24 hours market, this implies the closing time of the market of the country dealt with.
  • One cancels the other order: It is a mixture of two entries and/or stop loss order. In this order two orders are place above and below the current price and when one is executed, the other is cancelled by itself.
  • One triggers the other: This order is the opposite of the ‘one cancel the other order’.
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Advantages and Risks involved in Forex trading

Jan26
2012 Leave a Comment Written by Freddie Forex

Advantages and Risks involved in Forex trading

When compared to the other markets as the stock market and other such markets, Forex market is very convenient and better area for investment. It is an investment where in the Forex traders can be flexible and can have ample returns earning profits as they desire. Some advantages of Forex trading would be listed below:

  • Commission: There is absolutely “no commission” existing in a Forex trading. There isn’t any aspect called, exchange fees, entry fees, broker fees, government fees etc. Even though there are brokers involved in Forex trading, their fees are paid through a system called “Bid Ask Spread”.
  • No middlemen involved: Forex trading is a direct opportunity of trade and does not include any middle men or agents.
  • No fixed bunch: Unlike futures markets, there is a minimum limit defined in Forex trading. In spot Forex, the Forex trader can decide on the amount they want to deal with.
  • Transaction cost: The transaction cost of a Forex trade is as low as 0.1% in normal market conditions and in certain other circumstances it can even go down up to 0.07%.
  • 24 hours market: A Forex market is a 24 hours market. This is basically because, the Forex market isn’t confined to any geographical boundaries which also indicates that there are people belonging to different time zones. Therefore, this Forex market is literally a 24 hours market. A Forex trader can make his trade at any time of the hour.
  • No ruling the market for long: Forex market includes billions of Forex traders around the world and so it is very huge that spreads around the entire globe. Due to this, no one can rule the market for long.
  • Leverage: Forex market is a sort of market where a Forex trader can earn a huge profit with a minimum of risky capital.
  • Liquidity:  The Forex market is so enormous and this is one reason to its high liquidity. There is always someone to trade with.

These were a few advantages of Forex Trading. But even though Forex trading seems very profitable and risk free, it of course involves risks. A Forex trader must be of full knowledge of the good and bad before they plunge in Forex trading. A few of the risks involved would be:

  • Money rate risk:  There are always chances for the money value to fall down dramatically, without any limitations. Even though a stop loss order can control this loss, it is a risk to remember.
  • Interest rate risk: This is a risk when the interest of the different currencies dealt with has a massive difference.
  • Credit risk: This is a risk that happens when the trader on the other end is not in a position to meet the credit requirements of the Forex trade involving situations as Bankruptcy etc.
  • Country risk: This risk arises when the government hinders the Forex transaction. In certain cases, the government of the currencies dealt in the Forex trade restricts the currency outflow or in some way obstacles the Forex transaction.

These were a few of the risks involved in Forex trading. Therefore, this implies that Forex is not an investment opportunity that does not have any flaws. It does have its own risks and disadvantages, but when compared to others, it wins the argument of being the best investment opportunity.

 

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Differences between Trading Stocks and Currencies | forex trading

Jan26
2012 Leave a Comment Written by Freddie Forex

 

The term ‘Forex’ is derived from the term “Foreign Exchange”. It is also known as FX. Forex trading represents the buying and selling of currencies belonging to different countries. The major concept of Forex trading is to earn profit from the rise or fall in the money value of the currencies dealt in a Forex trading.

A Forex market is very different from a stock or any such commodity market. A stock or any such market is centralized in nature and do have physical locations to trade, where as, Forex markets are decentralized and therefore doesn’t have a common location to perform the trading. Forex trading is an easy way to earn an income unlike the other such markets as stock market. This is because of various reasons as the absence of middle men, lesser chance of fraudulence, instant trading and such. Also another major difference of a Forex market and other commodity markets are that Forex markets are not confined to any geographical boundaries as the other markets.

A profit or loss in Forex Trading can be earned when there is a fluctuation in the money value of the currency involved in the trading. When a Forex trader exchanges his currency for a currency belonging to another country, is when a Forex trading begins. The Forex trader then waits for certain duration of time, till the money value of the exchanged currency rises or the money value of the base currency falls, to his expected level and thereby earning enough profit for the Forex trader. Forex trading is usually conducted on FOREX YARDS referring to the platforms where Forex trading is performed. These FOREX YARDS are usually available online, through phones or through other such electronic mediums. A Forex market is usually available 24 hours a day and 5 days a week, making it convenient for people around the globe irrespective of the time zone they belong to.

Forex trading is performed through different financial instruments of the Forex trader’s choice. Spot transaction, is one among the financial instruments available where in, the transaction is in the form of cash and it is usually for duration of two to three days. Another financial instrument for Forex trading would be Forward contract, through which the buyer and the seller decides on a future exchange rate without considering the actual exchange rate then. Foreign Exchange swap is also another financial instrument in which, the buyer and the seller conducts the exchange upon an agreement to swap back the transaction on a decided date. Currency futures and Foreign exchange options are the other financial instruments used to conduct a Forex trading.

A successful or a profitable Forex trading can be conducted by a thorough scrutiny of the Forex market and the performance of a particular currency on a long run. It is usually believed that the markets catch up a pattern in a long run giving a probability to the Forex traders about the future performance of the currency. Like any other trading, Forex trading also deals with its own risks and advantages. Therefore it is always advisory for a Forex trader to be vigilant about every action they make.

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Euro Crisis Having A Chilling Effect on British Economy‎ | debt crisis

Oct23
2011 Written by j. Mark Soveign

The British Prime Minister David Cameron attended a European Union Summit in Brussels recently to announce that the debt crisis hanging over Greece and much of Western Europe needs to be solved “once and for all”, and that the solution needs to involve all Western European countries and not just those that are in the European Union. At present the spreading debt crisis in the Eurozone is having a “chilling effect” on the British economy. Great Britain is not currently in the EU.

“The crisis in the euro zone is having an effect on all our economies, Britain included.” said the British Prime Minister. “It’s having a chilling effect. We need to deal with this issue and so it’s right to have a European council (summit) and for the European council to discuss this issue here in Brussels today.” At the time of this writing the European Union leaders were finishing up their third day of talks conducted to develop a resolution to the economic crisis which has gripped the global economy. The response crafted needs first calm market fears and provide investors with assurances that the Eurozone is likely to remain intact. If not, then there could be a dramatic sell-off to the Euro and a flight to U.S. dollars and strategic metals like gold. The lack of a final plan that deals with the region’s financial crisis is what is credited with the long, drawn out cycle of turmoil and recovery that keeps battering the European markets.

To continue to work, the euro zone needs to be a credible vehicle which can endure through the prevailing and yet-to-be felt economic shocks. The Brussels Summit is seen as the means to a solution which would involved the consent of the stronger EU members such as Germany and France, but discussions between France and Germany have became deadlocked up to this point thus far.

Part of the plan that the EU finance minsters met to work out would include a mandate to recapitalize the region’s commercial banks in order to bolster their balance sheets and make them stronger and more likely to withstand any losses brought about by default of sovereign government debt. According to the plan, those European banks will need to have on hand about 108 billion Euros of new capital over the next 6 to 9 months according to Financial Times newspaper reports.

Complicating the matter is the European banking lobby which is heavily influenced by French owned financial institutions having a high degree of exposure to Greek government debt issues. They have complained that any “haircut” over 40 percent would be too great to bear.

One thing that is very helpful to realize is that the European Union lacks any kind of internal money transfer system such as that which is in effect within the United States. In the U.S., the more wealthy states send money to Washington which is then transferred to the less wealthy states keeping the nation as a whole insulated from economic shocks. If they had one, the European Union could instantly benefit from having an internal money transfer system because the pending Greek debt crisis would simply go away. Of course, the German taxpayers would need to agree to it, and that is one of the sticking points that prevent the EU from implementing that kind of solution anytime soon.

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Japan Poised to Deploy 4 Trillion Yen To Halt The Decline In The Dollar

Oct23
2011 Written by j. Mark Soveign

Japan has a problem. The rapidly appreciating Yen is creating a drag on exports as foreign buyers of Japanese goods need an increasingly more expensive Yen to buy these goods. To that end Japan is planning on spending and additional 4 trillion yen (about 52 billion dollars) to help its domestic exporting manufacturers deal with a surge in the value of the Yen versus the dollar and the Euro. If successful this will help their economy by accelerating job growth.

While all this is going on, the Japanese government will add another two trillion Yen to the existing 8 trillion Yen that it has in foreign exchange reserves which are being shifted to the Japanese Bank for International Cooperation in order to aid their manufactures of exported goods, and ramp up acquisitions of other businesses abroad.

This aggressiveness on the part of the government and Bank of Japan reflects a growing concern that the global economy may slip into a double dip recession. Many analysts believe that Japan is still suffering from a “lost decade” of negative or flat economic growth that has lasted more than 20 years, and which was brought on by the bursting of a real estate bubble back in the early 1990′s.

Pursuant to a disclosure document obtained from two Japanese government officials, there is a further 2 trillion Yen that will be made available to encourage domestic investment into such things as new power plants and job training for newly hired workers. Japan is nation which has historically always run trade surpluses, and possesses an affluent population which tends to invest locally in Japanese government bonds. Such factors tend to put upward pressure on the local currency as it is traded against currency originating from a debtor nation which borrows heavily on the International market.

In 2011 alone, the Japanese Yen has appreciated more than of 6 percent, and has caused the government to consider a multi-pronged approach to halting the rapid rise in the local currency.

The Chief economist Takesh Minami of the Norinchukin Research Institute in Tokyo was quoted as saying that “The government realizes the need to alleviate the pain from the continuing strong Yen but the damage has already been done.”

He stated his view that the country should deal with the rapid appreciation of the local currency by making it a priority. In a prepared statement he said: “They should consider ways to stop the strong yen, and they would require more co-operation from Bank of Japan.” His views have garnered the attention of Japan’s Prime Minister Yoshihiko Noda who indicated that his cabinet will sanction strong measures concerning the Yen immediately. As with most everything else, it is good to get a second opinion:

“People have been buying the yen because of it’s healthy surpluses, and now it looks like they’re shrinking,” remarked a Senior HSBC currency analyst. “I’d be skeptical of buying the yen at these levels.”

The Yen is the 3rd most frequently traded currency in the Forex market behind only the United States dollar and the Eurozone currency.

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Dynamic Forex Trading with Predictable Results Is Possible

Oct13
2011 Written by j. Mark Soveign

trading withDynamic Forex Trading with Predictable Results Is Possible

Extremely active traders and high-level asset managers including hedge funds, retail mutual funds, and prop traders have as a common goal the desire to accurately forecast investment returns and work their systems so that they can profit from these forecasts. Trading with a the same method and using the same tools day in and day out can help the trader dial in their forecasts and assumptions which make up their system because it allows them to discard data that simply doesn’t work. In the business this is known as the “reductive” method. Trading Forex with systems that employ the reductive method is about trying to simplify a complex problem, condition, or experiment by minimizing the number of variables that go into it. When you can do this, you bring yourself closer to achieving predictable returns. READ MORE »

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Forex Trading With The Holy Grail Of Forex Indicators | Part Two | Forex Indicator

Oct07
2011 Written by j. Mark Soveign

Forex IndicatorForex Trading With The Holy Grail Of Forex Indicators

As discussed in Part One of this article traders always seem to be fixated on finding the next hot new forex indicator or method that can make them a fortune as a trader. They are looking for that “Holy Grail” of trading that they can use forever and for all time, and which will work in any kind of market. As we have pointed out this is not reality. There is no Holy Grail trading indicator to be sure, but we can point out to you the very next best thing. READ MORE »

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