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Tips For Good Forex Trading

September 2nd, 2010 No Comments

Do you want a very good career that has a potential to make you earn a lot of money? Do you want to enter a particular financial market but dont know which one to choose?

If you answered yes to either of these questions, then the Forex market is right for you. If you want to make a lot of money, the Forex market can provide for you.

You have to realize that the Forex market is the largest and the most liquid financial institution in the world. With trades that go on for 24 hours a day, you will have an opportunity to make money any time of day you wish to. It is also a fact that the Forex market generates currency exchanges that amounts up to trillions of dollars each day.

With these kinds of feature, who wouldnt want to trade in this very large financial market?

Forex trading is not as complicated as it may sound. With the right knowledge and skills, you can instantly trade Forex for a minimum of 500 dollars in a mini-Forex account. The Forex trading system is very simple.

Basically, Forex is the exchange of currencies of the world. You should realize that all the currency of the world is involved in the Forex market. It may be confusing to choose which one to trade but all you need is to know the major currencies that are frequently traded. Here are the major currencies that you can choose from to trade:

US Dollar (USD)
Japanese Yen (JPY)
British Pound (GBP)
Swiss Franc (CHF)
European Union Euro (EUR)
Australian Dollar (AUD)
New Zealand Dollar (NZD)
Canadian Dollar (CAD)

These are the major currencies that you should consider trading. With these trades, you can be sure that you can maximize your money making potential.

The basic thing that you need to know when trading in the Forex market is that you should buy low and sell high. And, since you will be trading with different countries currency, the economy and the government stability of a particular country can literally affect the value of the particular currency.

The next thing you need to know is that Forex trades are done by trading currency pairs. Currency pairs are the simultaneous buying one currency and selling the currency of another. So, basically, Forex is in fact trading.

Aside from knowing how to trade currencies of the world or at least the major currencies, you also have to know about the different strategies used when trading in the Forex market. You have to realize the fact that knowing how to trade in the Forex market isnt enough to get you that money. You also need to know the different strategies that are used in the Forex market.

An example of a Forex trading strategy that is used in this market is the leverage strategy. This will enable you to trade 100 times the amount of money you deposited in your Forex account. This means that you can earn a potential of 100 times more. With this kind of strategy, you can really maximize your income opportunity.

You should also consider the stop loss order strategy. This strategy minimizes the risk of losing money. The stop loss order works when you choose to stop trading at a specific price. If the currency reaches that point, you will automatically stop trading.

There are other strategies that you can use in the Forex market that you should be aware of. If you want to be successful in the Forex market, you also have to realize and accept the fact that you will lose money in the first few months when you trade in Forex. This is why it is also important to remember that you should invest what you can afford to lose in the Forex market. If you cant afford to lose the money you plan on investing in the Forex market, then it is recommended that you should never trade in this very large and very risky market.

Now that you know how to trade in the Forex market, all you need to do now is decide whether you really want to trade in this trillion dollar industry. If you do decide that you want to trade, then all you have to do is open an account with Forex brokerage companies and start using their Forex trading software to trade.

Tags: Australian Dollar, British Pound, Canadian Dollar, Career, Currencies Of The World, Currency Exchanges, Economy, European Union, Financial Institution, Forex Market, Forex Trading System, Government Stability, Japanese Yen, Money Market, New Zealand Dollar, Right Knowledge, Swiss Franc, Time Of Day, Trades, Trillions

The Basics Of Forex Trading

August 9th, 2010 No Comments

Forex Trading, also known as FX Trading or Foreign Exchange Trading, is what happens when you trade one nation’s currency for another. For example, if I go to the bank and exchange ten United States dollars for 15 Australian dollars, I have completed a simple Forex trade.

The forex trading market is the largest trading market in the world. According to a study done in 2004, approximately two trillion dollars are traded each day in markets across the globe.

The forex trading market is very unique in several aspects, one of which is its international presence. Unlike the stock exchange, which is largely located in New York and has set hours, the foreign exchange market is open twenty four hours a day. In between the united states, European, Asian, and other markets, there is always at least one market open.

Other factors that make the forex market unique are the high liquidity of the market, the wide variety of traders and institutions involved, and the wide variety of factors which affect prices.

In the forex market, there is the ask price (the price at which currency is sold) and the bid price (the price at which the currency is bought. Usually, these prices are very close together, often about one-hundredth of a cent apart.

The United States dollar is by far the most traded currency. Approximately eighty nine percent of transactions involve the United States Dollar. Other highly traded currencies include the Euro, Yen (Japanese), Sterling (British), Franc (Swiss), and the Australian Dollar.

The forex market includes many types of traders. The largest traders are banks. Actually, about fifty-three percent of forex transactions are in between two banks. Other traders include non-bank financial institutions, other corporations, retail exchange brokers, investment firms, hedge funds, and speculators.

The forex marketing is the largest, and arguably most complex market in the world.

Tags: Australian Dollar, Australian Dollars, Bid Price, Exchange Brokers, Financial Institutions, Foreign Exchange Market, Foreign Exchange Trading, Forex Market, Forex Transactions, Franc Swiss, Hedge Funds, International Presence, Investment Firms, Retail Exchange, Speculators, Stock Exchange, Trading Forex, Twenty Four Hours, United States Dollar, United States Dollars

Learning Some Good Forex Trading Stragegies

July 5th, 2010 No Comments

If youre a potential investment player whod like to make it big in the business and financial world, then you go for forex trading. The FOREX, also known as the foreign exchange market is one of the largest financial markets in the world with and estimate of $1.5 trillion turn-overs every day. Here are a few strategies on how to make it big in the forex market.

Strategy One: Know your market. The best way to get advantage, earn profit and minimize losses is to familiarize yourself with the market and how the whole system works. In the forex market, the players are usually commercial banks, central banks and firms involved in foreign trade, investment funds, broker companies and other private individuals with large capital. With the speed and high liquidity of asset, most companies engage in this business than in any other trading venture. Transactions are done in a jiffy; there are no membership fees and there is always the allure and promise of big, big profit.

Trading is done in pairs. The most commonly traded currencies are usually the US Dollar, Japanese Yen, Euro, British Pound, Canadian Dollar, Australian Dollar and the Swiss Franc. The more commonly traded currency pairs are the US Dollar and the Japanese Yen, the Euro and the US Dollar, the Swiss Franc and the US Dollar. In Forex trading, everything is speculative and virtual. There is no actual product being sold or bought. The activity mostly consists of computed entries made on the value of one currency against another. Say for example, you can buy Euros with US Dollar, hoping that the Euro will increase it value. Once its value rises, you can sell the Euro again, thus earning you profit.

Strategy Two: Learn the language. There are three concepts you need to know in the currency market. Pips refer to the increase of one hundredth of a percent of the value of the currency pair you are trading. Usually each pip has a value of $10 or $1. Volume is the quantity or amount of money being traded at one particular time in the market. Buying is the acquisition of a particular currency. A trader buys with the hopes that the price of the currency will increase. Selling is putting a currency up for grabs in the market because of a potential or possibility of a decrease in its value. There are also two techniques of analysis usually used in this business the fundamental and the technical analysis. Technical analysis is usually used by small and medium players. Here, the primary point of analysis revolves on the price.

Fundamental analysis, on the other hand, is used by bigger companies and players with higher capital as it involves looking at the other factors affecting the value of a particular currency. In this type of analysis, the player also looks at the situation of the country, particularly issues like political stability, inflation rate, unemployment rate, and tax policies as these are seen to have an effect on the currencys value.

Strategy Three: Develop a sound trading strategy. Your trading strategy would depend on what kind of trader you are. The basic thing with developing a trading strategy is to identify what kind of forex trader you are. A good trading strategy should lessen, if not, eliminate losses.

Plan also the size of your transactions. It is better to conduct many different trades than one huge transaction. Not only does it develop discipline, but it also lessens any possible loss as only a fraction of the capital is affected. Part of a trading strategy is developing the values of discipline and proper money management.

Strategy Four: Practice. Try paper trading, a great way to practice your skills, see how the market works and get acquainted with the software and tools being used. There are online brokers who allow free paper trades, which allows practice and experience before doing it with real money.

Strategy Five: Choose the right forex dealer. Make sure that they are regulated by the law. Take not of dealers with investment schemes that give out too-good-to-be-true-just-false-hopes promises. Look at investment offers before getting started.

Forex trading may seem easy and manageable. But the emotional stress, the demands and challenges of being a forex trader requires more than just the knowledge of the market. It requires more than just a keen and sensible head for business. Its all about a gameplan, a strategy.

Tags: Australian Dollar, Canadian Dollar, Central Banks, Commercial Banks, Currency Market, Currency Pairs, Dollar And The Japanese Yen, Foreign Exchange Market, Forex Market, Forex Trading, Investment Funds, Jiffy, Market Strategy, Membership Fees, Private Individuals, Profit Strategy, Profit Trading, Swiss Franc, Trade Investment, Yen Euro

Forex Currency Trading – The Basics

June 25th, 2010 1 Comment

Forex is the name given to the foreign exchange market, where international currencies are bought and sold. Due to the development of free exchange rates, the market began in the 1970s and has become the world’s largest financial market with a daily turnover of US$1.9 trillion. To put that into perspective, that’s over thirty times the daily turnover of the rest of the US equity markets combined.

Unlike normal stock markets which are traded on exchanges that are located in a specific place, Forex currency exchange takes place via an Over The Counter (OTC) or interbank market. This means that transactions are conducted electronically between brokers.

Thanks to this and global time zones, Forex is a genuine 24 hour financial market. The day begins in Australia and moves around the globe as each of the leading financial markets open in Tokyo, London and New York. So it’s always possible to find someone who is willing to buy or sell international currencies. This gives investors the chance to respond to price changes caused by a variety of economic, social and political events at any time of the day or night.

There are two main reasons for trading currency on Forex. Approximately 5% of Forex trades are undertaken by multinational companies and governments who buy or sell products and services in a foreign country and have to convert their profits into their domestic currency. Forex allows them to hedge (or protect) their profits so that in the even of a dramatic currency fluctuation, their profits won’t be reduced.

However, the other 95% of Forex activity is due to people or organizations trading for short term profit. Forex allows you to trade virtually any currency, although in practice most activity (85% of total turnover) relates to the major currencies which include the US Dollar, the Euro, the Japanese Yen, the Swiss Franc, the British Pound, the Australian Dollar and the Canadian Dollar.

Trading on the Forex exchange involves simultaneously buying one currency and selling another. For example, if you buy USD/EUR, that means you buy the US Dollar and sell an equivalent value of the Euro. Closing you position involves buying the Euro and selling the US Dollar.

The price of all currencies traded on Forex are influenced by the laws of supply and demand. If the demand for a currency outstrips the supply, the price rises. Alternatively, if supply is greater than demand, the price of a currency will fall.

Forex trading has a number of significant advantages that make it an extremely attractive form of speculation.

First, due to its size and lack of exchange controls, it’s almost impossible for any person or organization (including central banks and governments) to significantly influence prices for an extended period of time. This means that you can enter the market secure in the knowledge that your investment is competing on a level playing field with every other investor around the world.

Second, due to the vast size of the market, the liquidity is excellent. So unlike the position with many stocks and shares where you might find it hard to sell certain investments, you can open and close Forex trades almost instantly as there are always scores of international buyers and sellers.

Third, it’s relatively easy and cheap to get started trading Forex. All you need is an internet connection, a broker and perhaps $500 – $1000 to open a trading account. Once you’ve got these things you can trade 24 hours a day from Sunday afternoon through to Friday evening. And thanks to the availability of information on the internet it’s possible to find all the data that you need for the purposes of analysis and decision making.

Fourth, it’s possible to make substantial short term gains with relatively little capital thanks to the number of daily fluctuations in currency prices and the ability to leverage your capital (often up to 100 times) thanks to margin trading.

However, due to rapid fluctuation of currency prices and marginal trading, Forex trading carries significant risks, so caution must be required when deciding which trades to make.

When it comes to decision making, there are two basic Forex trading strategies, technical analysis and fundamental analysis.

Technical analysis relys upon using price charts, trend lines, support/resistance levels, highest price, lowest price, transaction volumes and various other mathematical formulae to identify trading opportunities. This is based upon the belief that everything that may influence the price of a currency has been considered by the market and factored into the current price.

Crucially, technical analysts don’t try to defeat the market. The are content to predict short term, minor fluctuations using patterns from the recent past and the belief that history will repeat itself. The main disadvantage of the method is that all the results are purely historic and cannot always be relied upon as an accurate guide to the future.

Fundamental analysis looks at wider factors such as the national economy of the currency, the political stability, employment figures, industry figures, interest rates, tax policy and a wide range of other economic indicators. However, before basing your investment decisions on these factors alone, it’s important to consider both technical analysis and the fact that market expectations can influence the price of a currency as much as reality.

Tags: Australian Dollar, Canadian Dollar, Currency Exchange, Currency Fluctuation, Domestic Currency, Financial Markets, Foreign Exchange Market, Forex Exchange, Free Exchange, Global Time Zones, Interbank Market, International Currencies, Japanese Yen, Multinational Companies, Price Changes, Specific Place, Stock Markets, Swiss Franc, Term Profit, Time Of The Day

Impress Your Date with Forex Trading Lingo

June 13th, 2010 No Comments

Major and Minor Currencies
The seven most frequently traded currencies (USD, EUR, JPY, GBP, CHF, CAD, and AUD) are called the major currencies. All other currencies are referred to as minor currencies. Do not worry about the minor currencies, they are for professionals only. Actually, on this site we will only be covering what we call the Fab Five (USD, EUR, JPY, GBP, and CHF). These pairs are the most liquid and are the only currencies we actually trade.

Cross Currency
A cross currency is any pair in which neither currency is the U.S. dollar. These pairs exhibit erratic price behavior since the trader has, in effect, initiated two USD trades. For example, initiating a long (buy) EUR/GBP is equivalent to buying a EUR/USD currency pair and selling a GBP/USD. Cross currency pairs frequently carry a higher transaction cost. The three most frequently traded cross rates are EUR/JPY, GBP/EUR, and GBP/JPY.

Base Currency
The base currency is the first currency in any currency pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USD/CHF rate equals 1.6350, then one USD is worth CHF 1.6350. In the Forex markets, the U.S. dollar is normally considered the base currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British pound, the Euro, and the Australian dollar.

Quote Currency
The quote currency is the second currency in any currency pair. This is frequently called the pip currency and any unrealized profit or loss is expressed in this currency.

Bid Price
The bid is the price at which the market is prepared to buy a specific currency pair in the Forex market. At this price, the trader can sell the base currency. It is shown on the left side of the quotation.

For example, in the quote EUR/USD 1.2812/15, the bid price is 1.2812. This means you can sell on U.S. dollar for 1.2812 Euros.

Ask Price
The ask is the price at which the market is prepared to sell a specific currency pair in the Forex market. At this price, you can buy the base currency. It is shown on the right side of the quotation.

For example, in the quote EUR/USD 1.2812/15, the ask price is 1.2815. This means you can buy one U.S. dollar for 1.2815 Euros. The ask price is also called the offer price.

Bid/Ask Spread
The spread is the difference between the bid and ask price. The big figure quote is the dealer expression referring to the first few digits of an exchange rate. These digits are often omitted in dealer quotes. For example, the USD/JPY rate might be 118.30/118.34, but would be quoted verbally without the first three digits as 30/34.

Quote Convention
Exchange rates in the Forex market are expressed using the following format:

Base currency / Quote currency Bid / Ask

Transaction Cost
The critical characteristic of the bid/ask spread is that it is also the transaction cost for a round-turn trade. Round-turn means both a buy (or sell) trade and offsetting sell (or buy) trade of the same size in the same currency pair. In the case of the EUR/USD rate of 1.2812/15, the transaction cost is three pips.

The formula for calculating the transaction cost is:

Transaction cost = Ask Price Bid Price

Pip
A pip is the smallest unit of price for any currency. Nearly all currency pairs consist of five significant digits and most pairs have the decimal point immediately after the first digit, that is, EUR/USD equals 1.2538. In this instance, a single pip equals the smallest change in the fourth decimal place, that is, 0.0001. Therefore, if the quote currency in any pair is USD, then one pip always equal 1/100 of a cent.

One notable exception is the USD/JPY pair where a pip equals $0.01.

Margin
When you open a new margin account with a Forex broker, you must deposit a minimum amount with that broker. This minimum varies from broker to broker and can be as low as $100 to as high as $100,000.

Each time you execute a new trade, a certain percentage of the account balance in the margin account will be earmarked as the initial margin requirement for the new trade based upon the underlying currency pair, its current price, and the number of units traded (called a lot). The lot size always refer to the base currency.

For example, let’s say you open a mini-account which provides a 200:1 margin or .5% margin. Mini-accounts usually trade mini-lots which are $10,000. So if you were to open one mini-lot, instead of having to provide the full $10,000, you would only need $50 ($10,000 x .5 = $50).

Leverage
Leverage is the ratio of the amount used in a transaction to the required security deposit (margin). It is the ability to control large dollar amounts of a security with a relatively small amount of capital. Leveraging varies dramatically with different brokers, ranging from 10:1 to 400:1.

Margin + Leverage = Possible Deadly Combination
Trading currencies on margin lets you increase your buying power. If you have $5,000 cash in a margin account that allows 100:1 leverage, you could purchase up to $500,000 worth of currency because you only have to post one percent of the purchase price as collateral. Another way of saying this is that you have $500,000 in buying power.

With more buying power, you can increase your total return on investment with less cash outlay. But be careful, trading on margin magnifies your profits AND losses.

Margin Call
All traders fear the dreaded margin call. This occurs when your broker notifies you that your margin deposits have fallen below the required minimum level because an open position has moved against you.

Trading on margin can be a profitable investment strategy, but it is important that you take the time to understand the risks. You should make sure you fully understand how your margin account works. Be sure to read the margin agreement between you and your broker. Talk to your broker if you have any questions.

The positions in your account could be partially or totally liquidated should the available margin in your account fall below a predetermined threshold. You may not receive a margin call before your positions are liquidated (the ultimate unexpected birthday gift).

Margin calls can be effectively avoided by monitoring your account balance on a very regular basis and by utilizing stop-loss orders (discussed later) on every open position to limit risk. For ease of use, most online trading platforms automatically calculate the profit and loss your open positions.

Tags: Aud, Australian Dollar, Base Currency, Bid Price, British Pound, Cross Rates, Currency Pairs, Exceptions, Fab Five, Forex Market, Forex Markets, Gbp Usd, Jpy, Lingo, Minor Currencies, Pip, Price Behavior, Quotation, Transaction Cost, Unrealized Profit

How Does Forex News Trading Work?

May 24th, 2010 No Comments

The Forex market is quickly becoming one of the most popular investment vehicles because of its huge volume and liquidity. However, it is also one of the most volatile investment vehicles because of its sudden price fluctuations and the fact that most of the market is heavily leveraged. For these reasons, fortunes can be made or lost in short order making the need for a reliable investment system very urgent indeed. While many Forex investors rely upon charts that track price movements and other forms of technical analysis to help determine entry and exit points, there are some investors who like enter and exit positions based upon news releases.

In theory, the smaller Forex retail traders should have a slight advantage when it comes to capitalizing on how the news affects the markets. With immediate Internet access and a never ending stream of brokers willing to execute trades at any hour of the day, small investors should be able to buy or sell a position quicker than some large conglomerate, mutual fund, or hedge fund. The market can literally adjust in minutes to relevant news releases so investors who move quickest will be able to capitalizein theory.

Of course, it does boil down to knowing what news is relevant and then to determine how that will affect the currency exchange rates. Even news from countries other than those in your currency pair can play a significant role in short term price corrections. For those wishing to trade in the Forex based upon news releases, there are 8 major currencies currently playing significant roles in the market, including:

1. U.S. Dollar(USD)
2. Euro(EUR)
3. British Pound(GBP)
4. Japanese Yen(JPY)
5. Canadian Dollar (CAN)
6. Australian Dollar(AUD)
7. Swiss Franc(CHF)
8. New Zealand Dollar(NZD)

Because the USD is a backer in nearly 90% of all transactions on the Forex, the release of key economic indicators from the U.S. are always important to the currency exchange rates. These data are released at regular intervals which supposedly levels the playing field between the large and small investors. In theory, they should be able to capitalize upon short term price fluctuations caused by the release of these key indicators:

1. Interest Rate Decisions by Central Banks/Financial Policy Makers
2. GDP rates
3. Balance of trade
4. Unemployment data
5. Inflation
6. Retail sales/manufacturing output
7. Business Confidence as determined by Outlook Surveys
8. Consumer Confidence Surveys
9. Manufacturing Confidence as determined by Outlook surveys

Trading on the Forex based upon news releases means capitalizing upon short term fluctuations in the market as it corrects itself. Because these corrections can happen in a matter of minutes, it is vital for this type of investor to capitalize quickly or risk jumping after the market has already adjusted for the new information. While this is theoretically possible, it is very possible that the big investors had access to the information prior to its release. If these investors have already shifted their investments accordingly, then the market will have already corrected for the news before it was releasedat least partially. If that is the case, then the small investor will jump in too late and likely face a loss.

Indeed, trading upon news releases is very dangerous because it also encourages over tradinga factor known to lead to lossesespecially on the Forex. This is why most Forex investors rely upon technical analysis and their trusty charts when making decisions about entry and exit points on the market!

Tags: Australian Dollar, Backer, Canadian Dollar, Conglomerate, Currency Exchange Rates, Exit Points, Forex Market, Fortunes, Hedge Fund, Investment System, Investment Vehicles, Japanese Yen, Key Economic Indicators, Liquidity, New Zealand Dollar, Nzd, Price Fluctuations, Relevant News, Retail Traders, Swiss Franc

Getting Started into Forex Trading

May 21st, 2010 2 Comments

Forex, also known simply as the “FX,” is the commonly accepted abbreviation for the over-the-counter foreign exchange market. The forex market is the largest financial market on earth. Forex exists on a 24-hour-a-day global network that spans corporate, banking, and individual interests. There is no central trading floor. Currency is traded around the world and around the clock, with fluctuations responding to speculation on the latest news as it happens. The currency volume on forex is huge, with a daily turnover of in excess of $200 trillion. Most of the world’s forex trading is done via the internet.

The forex was traditionally a playground for the monolithic international banks and substantial corporations. Times have changed, however, and it’s now possible for the small investor to enter the speculative waters of currency trading. Forex trading has become a bit of a craze of late, especially since it is something available to anyone who owns a computer. And anyone who is willing to put in some training time can profit from forex trading. The forex market finds traders from all around the globe monitoring currency fluctuations, not unlike the way a day trader may monitor a stock’s fluctuation on the Dow Jones.

The lion’s share of forex trades involve the major currencies: the Australian Dollar, British Pound, Canadian Dollar, Euro, Japanese Yen, Swiss Franc, and US Dollar. In forex trading, a trader will pair two types of currency. Currencies are bought and sold simultaneously, for example the US Dollar and the British Pound. As it requires more of one currency to purchase another, that currency loses value. Not unlike stock trading, forex traders try to accumulate currency when it weakens in hopes of selling it when it goes up in value. Forex trading is not unlike the buy low, sell high approach found in stock trading.

The way a trader on the forex market exchange goes about acquiring currency is by giving a bid/ask quote, saying he is willing to buy, for example 1.6 marks per dollar and sell them at 1.625 per dollar. One must be a market trader to have access to this process. So most people who are forex trading on line buy the currency through a bank, where they’ll pay a commission, then have to figure the commission paid to the bank into the calculation of their spread, or profit margin, when they sell it.

Forex trading is not an easy path to riches. And some people have lost considerable money in miscalculating the market. With its increased popularity, on some days the forex market exchange can see more than one trillion dollars exchanged. Packages for teaching a new forex trader how to invest in the market can range in price.

Last but not least, trading successfully is no easy task. It is a process and could take years to achieve the desired results. There are a few things though every trader should take in consideration that could accelerate the process: having a trading system, using money management, education, being aware of psychological issues, discipline to follow your trading system and your trading plan, and others.

Tags: Australian Dollar, Canadian Dollar, Corporate Banking, Currency Currencies, Currency Fluctuations, Currency Trading, Day Trader, Dollar Euro, Dow Jones, Fluctuation, Foreign Exchange Market, Forex Market, Forex Traders, Global Network, International Banks, Japanese Yen, Market Exchange, Small Investor, Stock Trading, Swiss Franc

Forex trading an overlooked but very lucrative market.

April 11th, 2010 No Comments

One of the most appealing ways to attain wealth is to play the stock market. With the advent of the Internet and on line brokers traders have seemingly unrestricted access to various trading products that just 10 years ago were reserved for big financial institutions. A trading product that has been overlooked by many traders is forex.

Forex is derived from the words FOReign EXchange and involves the trading of currencies. Until relatively recently trading forex has been the preserve of banks and other large financial institutions. In the last 5 years forex trading has literally exploded among ordinary traders. When the advantages of forex trading become apparent this is not surprising. The forex market is the largest financial market in the world with an estimated daily turnover of $1.5 trillion dollars. This is 30 times larger than all the US stock markets combined. Further more the forex market is open 24 hours a day 5 days a week.

The size of the forex market is one of its first benefits. The forex market is very liquid and has high volume. Liquidity is a great asset many traders look for because it means a deal can always be done. Forex is a continuous 24-hour market. This is very desirable if you wish to trade part-time as you can choose what time you trade unlike stock markets that are open only 8 hours a day. This 24-hour market almost removes the problem of gapping. Because most stock markets are only open 8 hours a day often-overnight events can cause stocks to gap up or down. Large gaps can especially cause large losses for people who trade derivative products like futures or options. In the forex market the problem of gapping is very much reduced.

Currencies are always traded in pairs. Usually currencies are traded in pairs against the US dollar. The main pairs are US dollar Vs EURO ( EUR), British Pound (GDP), Swiss Franc (CHF), Japanese yen (JPY), Australian Dollar (AUS), New Zealand Dollar (NZD) and the Canadian dollar(CAD). There are other currencies pairs but most traders prefer to trade the pairs above. These currency pairs are known as the majors. Currency traders have plenty of trading opportunities from these 7 major currency pairs. Compare this against the stock market where more than 8,000 stocks trade on the three primary US stock exchanges and currency traders can focus just on these 7 pairs and still make plenty of money.

Unlike the stock market there is never bullish or bearish market conditions. Currencies go up or down against each other according to how the world financial markets perceive the value of the currencies. You can sell a currency (go short) just as easy as you can buy a currency( go long). Currencies go up and down and you can trade either direction just as easily ensuring there is always plenty of trading opportunities.

Forex brokers dont charge commission or brokerage. This can be quite a large overhead in other financial markets. Forex brokers make their money on the difference between the bid/ask spread of a currency pair. As the forex market is very liquid the spread between the bid/ask is very small. As many stock traders know brokerage can be a significant transaction cost.

You can start trading forex for as little as $300 dollars. There are two types of accounts a mini forex account and regular forex account. Most forex brokers offer 100: 1 leverage which means a in a mini account you can control $10,000 currency position with $100. In a regular account $1000 controls a $100,000 currency position. This provides great leverage and an extremely efficient use of trading capitol.

Trading a mini account is a great way on how to learn to how to trade forex. When you paper trade you are having a comfortable armchair ride. You are trading without the emotions of putting real money on the table. When you trade a 1 mini currency lot you can set your stop loss so the most you lose is $100. This is a great way to learn how to trade effectively without risking much money. In most other trading products even when trading with the smallest trading lot possible you would have to risk much more. Forex provides trading opportunities for people without much trading capitol.

Many traders have overlooked forex trading. It has many benefits that all
traders can use to their advantage. It offers the benefit of trading 24 hours a day in any country in the world. The forex market is a very lucrative market no trader can overlook it.

Tags: Advent Of The Internet, Australian Dollar, Canadian Dollar, Derivative Products, Financial Institutions, Foreign Exchange, Forex Market, Gap, Gapping, Japanese Yen, Liquidity, Lucrative Market, New Zealand Dollar, Nzd, Open 24 Hours, Overnight Events, Stock Market, Stock Markets, Swiss Franc, Trading Forex

Forex Currency Trading – The Basics

March 8th, 2010 No Comments