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The Big Business Of Forex Online Trading

August 18th, 2010 No Comments

The daily transactions on the Forex, or foreign exchange markets, are so vast that they dwarf the total amount of money invested in stock markets across the globe. With over two trillion dollars in daily volume, the Forex is the most significant of the global monetary marketplaces

Since the introduction of the Euro to the world currency mix, the Forex has seen exponential growth. Add the rise of the Internet, and what had been the exclusive domain of the worlds great banks, financial institutions and super wealthy with at least a million dollars to invest became available to small investors who had PCs, Internet connections, and a few thousands of dollars in risk capital.

There is a very wide mix of entities, from individual brokers to corporations to governments, engaged in currency dealing through Forex online trading. And the currency market, because it does not operate form a single physical exchange like the NYSE, is ideal for Forex online trading. There are, of course, cites around the globe with large numbers of Forex brokers, and the advent of Forex online trading has connected all of them electronically. Forex online trading is now conducted around the clock every day of the year.

Forex Pre-Internet

In pre-Internet days, Forex business was conducted over the telephone and the only way in which individual investors could participate was to go to their bank and have a banker place their currency trade, or phone the bank to request that it be placed. For most of its history, the currency market saw very little individual involvement.

But Forex online trading has changed all that. Hundreds of thousands, if not millions, of individual investors have taken advantage of their around-the-clock online access and, just like larger institutions, are now engaging in Forex online trading twenty-four hours a day. Geography no longer matters, because business hours are always ongoing somewhere in the world.

Forex Trading Today

Forex traders can now have a hands-on role in their investments by continually observing market trends so that they can close their Forex online trading positions when the market turns against them. Forex online trading has also benefited from improvements in encryption technology, making investors feel more secure about having money online. For more info see http://www.e-forextradingsystem.com/Articles/Forex_Online_Trading.php on Forex Online Trading.

Forex online trading, in short, has become big business. And every big business will eventually spawn cottage business; Forex online trading is not different. There are now hundreds of websites offering advice and software designed to improve an investors chance of success in the Forex online trading game.

But you should make sure, before you decide to give your money to any Forex online trading site, that its software is compatible with your PCs operating system. And take the time to comparison shop for commission fees. Youd be surprised to know how widely they can vary among brokers. And above all else, find out how the broker intends to let withdraw your Forex online trading earnings.

Tags: Banks Financial Institutions, Currency Market, Currency Mix, Currency Trade, Daily Volume, Exponential Growth, Foreign Exchange Markets, Forex Brokers, Forex Traders, Great Banks, Individual Investors, Internet Days, Introduction Of The Euro, Nyse, Pcs Internet, Rise Of The Internet, Risk Capital, Stock Markets, Twenty Four Hours, World Currency

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

Forex Trading Tips – Part 1

May 9th, 2010 No Comments

The retail forex markets are certainly in a boom time. Forex dealers are popping up like rabbits. Hundreds of thousands of people like you and me are trading the markets for a nice profit everyday. Brokers are making a killing from their spreads in these deals. Forex markets are volatile and hence present great profit opportunities as well as great risks to your capital. And if you arent careful your capital will quickly be lost by the markets. So what is the key? What is the secret to trading the forex markets successfully? We look at some forex trading tips in the following series of reports.

Some of the facts and measures we go through may be simple to some but may be new concepts altogether for other people. All in all every piece of information is critical to your understanding and succeeding in the forex markets, and hopefully our articles about forex trading tips will help you on your way.

When you trade currencies you are trading currency pairs. You always trade a currency in reference to another. Therefore, when you are looking to trade currencies, make sure you are aware which currency pair you are looking at trading with and understand how both currencies impact on one another.

Understand the bigger picture. Understand how the foreign exchange markets are influenced, and what makes them move. The forex market movements are different to stock markets in their leverage and in their volatility and nature. They are open 24 hours and because they are global, are easily influenced by news and data releases at any time of day. Any news affecting any countrys economic progress or anything about interest rates are bound to have some effect on the forex markets in their relevant currency pairs.

Be ambitious yet humble. Your trading goals need to be reasonable, not too greedy, but not too small. Some traders aim to profit from small moves – placing tight orders to take their small profits. But think about it is this sustainable? Is your risk/return ratio worth the effort? Remember that you have to wait until the price clears the spread your dealer placed on the currency pair. If your trading system it aiming small, it would mean, more trades and more chance the trade will go sour, since a large portion (the spread) of your trade will be going to to your dealers pockets and you arent allowing for much movement before you take your profits (or loss). If you are new, this concept may be a little confusing, but for those of you in the know – you should definitely have a think about it if you havent already considered it.

Thats enough forex trading tips for now, come back for the next part soon.

Tags: Boom Time, Currencies, Currency Pairs, Economic Progress, Foreign Exchange Markets, Forex Dealers, Forex Market, Forex Markets, Forex Trading, Hundreds Of Thousands, Leverage, Open 24 Hours, Profit Opportunities, Rabbits, Return Ratio, Risk Return, Small Moves, Stock Markets, Time Of Day, Volatility

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