All About Forex Trading

What are the benefits of forex trading

2009-09-07T03:18:00.000-07:00

# Two way opportunities, that means you can earn either from upward or downward price movement. Example if you buy and the price moves upward, you will gain some profit. On the other hand, if you sell and the price moves downward, you will get some profit.

# Extreme liquidity of the market. Forex is the most liquid market in the world, and that means you can buy or sell anytime you want.

# Long trading hours, Forex allows you to trade 24 hours a day and 5 days a week.

# Leverage to amplify your profit, you can use a relative small quantity to trade bigger amount (usually from 1:50 up to 1:500) for example you have $100, without leverage your profit is only $0.01 but with 1:100 leverage your profit will be $1. (leverage makes your profit 100 times bigger, this also applies to loss).

# Free of comission, Relative Low Spread Cost, usually online forex brokers offer you comission free trading, no brokerage fee, no exchange fee, and smaller trading transaction cost.

# Flexible Trading Lots, you can trade rather standard lot (100K), mini lot (10K), or even micro lot (1K)

# Automated / Robot Trading, some trading platform such as Metatrader enables automated trading

What are commonly traded currency pairs (Majors) in forex trading ?

2009-09-07T03:08:00.000-07:00

The most liquid and widely traded currency pairs in the world are the following: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD and USD/CAD. These currencies are called the Majors. Trades involving majors make up about 90% of total Forex trading.

The Major Currencies:

Symbol Country Currency
USD United States Dollar
EUR Euro members Euro
GBP Great Britain Pound
JPY Japan Yen
CHF Switzerland Franc
CAD Canada Dollar
AUD Australia Dollar

GBP/USD known as "Cable" is the only currency pair with its own name, but there are also lots of abbreviations for other currency pairs such as

Symbol Known As
EUR/USD Euro
GBP/JPY Geppy
GBP/USD Cable
AUD/USD Aussie
NZD/USD Kiwi
USD/CHF Swissy
USD/CAD Loonie
USD/JPY Gopher

When is the time to trade forex ?

2009-09-07T03:04:00.000-07:00

Forex can be traded 24 hours a day and 5 days a week. The main trading centers are in London, New York, Tokyo, and Singapore, but banks throughout the world participate. The biggest foreign exchange trading centre is London, followed by New York and Tokyo. Currency trading happens continuously throughout the day; as the Asian trading session ends, the European session begins, followed by the US session and then back to the Asian session, excluding weekends

The following is the estimated market schedule based on New York local time: japan forex markets open at 19:00 followed by singapore and hong kong that open at 21:00. European markets open in frankfurt at 2:00, while london opens at 3:00. New york forex markets open at 8:00. European markets close at 12:00 and australian markets start again at 18:00.

What is traded in Forex Trading?

2009-09-07T03:01:00.000-07:00

Currency is the answer. Traded in pairs, Currencies such as EUR/USD, GBP/USD, etc makes up the Forex trading. When you trade forex, you are exchanging 1 currency to another currency simultaneously. You will gain from differences of traded currency price rates.

What is Forex Trading

2009-09-07T02:43:00.000-07:00

The foreign exchange (currency or forex or FX) trading occurs one currency is traded for another. It is the largest financial market in the world, and includes trading between currency speculators, central banks, governments, multinational corporations, and other financial markets and institutions.

The average daily trade in the global forex markets currently exceeds US$ 2 trillion. Retail traders also participate indirectly through brokers or banks

Getting Profits from the changing currency exchange rates

2009-05-07T06:47:00.000-07:00

The easiest means to show the ability to gain from Forex trading as the exchange rate changes is to observe several examples. Let's begin by looking at how you may gain when exchange rates rise.

Let's presume that you believe that the European Dollar is going to rise against the US Dollar and that you can buy EUR/USD at 1.3296. We'll also assume that you are trading a standard InterBank lot of 100,000 so that 100,000 European Dollar will cost 132,960 US Dollars.

To open a trade you begin by borrowing 132,960 US Dollars, which you will have to pay back once you close out your position.

Assuming that you are right and that the European Dollar rises against the US Dollar and that the price moves 200 pips to a rate of 1.3496, the 100,000 UK Pounds which you purchased are now worth 134,960 US Dollars and you can close out your position and repay the original borrowing, leaving you with a profit of 2,000 US Dollars.

In the real world for sure it is not quite as easy as this because there will be transaction costs to pay. However, this does show the principle of profiting when exchange rate increase.

Now let's change our attention to profiting when the exchange rate falls.

Assume this time that you believe that the European Dollar will fall against the US Dollar from its current rate of EUR/USD = 1.3296. In plain language, you believe that the UK Pound is going to buy fewer US Dollars.

This time you will have to to put a sell order for 100,000 European Dollar at a cost of 132,960 US Dollars. In other words, you make use of 100,000 European Dollar and sell them for 132,960 US Dollars.

Assuming again that you are correct and that the rate falls by 200 pips to EUR/USD = 1.3096, you can now close your position by buying back and repaying the 100,000 European Dollars which you originally sold. In this instance this will now cost you 130,960 US Dollars and you will once more reach a gain of 2,000 US Dollars.

Again we have disregarded any transaction costs to plainly show the principle of profiting from a fall in exchange rates.

Forex Quotes

2009-05-05T04:41:00.000-07:00

Reading Forex quotes is simple though it looks slightly puzzling at the start.

Foreign Currency Quotes
Quoting currencies are always done in pairs. Each pair of currencies represents a single product and conventionally noted MMM/NNN, where NNN is the currency's ISO 4217 international three-letter code which express the price of one unit of currency NNN.

The 'base currency' is the first currency in the quotes.

For instance EUR/USD, GBP/AUD, and USD/JPY, in such cases, Euro Dollar, Britain Pound and USD are acting as the base currency. Base currency in a Forex quote will constantly has a value of 1. EUR/USD indicates how much United States Dollar you can buy with 1 Euro Dollar; likewise USD/GBP indicates the exchange rate of Great Britain Pound with 1 US Dollar.

Bid/Ask and Spread
Sometimes there is only observe a single price but frequently exchange rates are shown in pairs with 'bid and ask’ price.

For instance GBP/AUD 2.0265/2.0270, 2.0265 is called the bid price, while 2.0270 is the ask price. Bid price is the price that you sell the base currency which is GBP in our case here; ask price is the price that you can buy the base currency. 'Spread' is difference between the bidding and the asking price.

You may observe that ask price is always higher than the bid price. The difference of the bid-ask price makes the income of currency brokers without charging commissions to their clients.

The pip

The pip is the smallest value in a Forex quote. In our preceeding example for GBP/AUD. If the exchange rate increases to 2.0266 from 2.0265, that's a one pip difference. In other words, a pip is the last decimal place of the quotation.

Every currency has its own pip value. For example, USD/JPY rate at 121.65, a pip would be 0.01, while for EUR/USD 1.2465, a pip would be 0.0001.

Example of Forex Quotes

GBP/USD 1.7500/1.7520
• Base currency= GBP
• Bid price= 1.7500; Ask price= 1.7520
• When selling Pound, 1 Pound = USD$1.7500; when buying Pound, USD$1.7520 = 1 Pound.
• Spread = | 1.7500 - 1.7520 | = 0.0020
• Pip value= 0.0001

EUR/JPY 128.00/128.15
• Base currency= Eur
• Bid price= 128.00; Ask price= 128.15
• When selling Euros, 1 Euro = JPY128.00; when buying Euros, JPY128.15 = 1 Euro.
• Spread = | 128.00 - 128.15 | = 0.15
• Pip value= 0.01

EUR/USD 1.2370/1.2380
• Base currency= Eur
• Bid price= 1.2370; Ask price= 1.2380
• When selling Euros, 1 Euro = USD$1.2370; when buying Euros, USD$1.2380 = 1 Euro.
• Spread = | 1.2370 - 1.2380 | = 0.0010
• Pip value= 0.0001

Forex Traders' Best Enemy

2009-05-04T01:54:00.000-07:00

Successful Forex traders understand that their achievement comes from establishing a collection of trading rules and then following these to the end. It is possibly not surprising therefore to discover that the most frequently seen Forex trading mistake is that of traders violating their own trading rules.

The highest risk any foreign currency trader faces is that of emotion and trading rules are established to simply eliminate emotion from the trading equation.

Another risk for most traders is posed by greed. None of us like to think of ourselves as being greedy but this is a certain deadly sin that is always nearby and has a tendency of creeping up on us once we are not focused.

A successful trader can simply locate himself in a best track of trades earning perhaps $3,000 a day and consider to himself that, if he can obtain this kind of profit everyday, it has to be feasible to make $3,500 or $4,000 daily. However, in order to try out this concept the trader needs to drive himself by relaxing his trading rules so that they can attain up a few more trades each day.

With a bit of luck profits might well add over the next days, but how long is this going to last? The answer in most cases is not long enough and once again traders discover that any short term gains disappear. The consequence is all too frequently that they shift from being one of the indeed successful traders to being one of the 90% of traders who habitually lose money.

It is extremely easy to permit greed to entice you into violating your own trading rules and once afterward this strategy will demonstrate successful. However, you are now starting to trade on emotion and, as with a lot of things in life, having done it once it is much easier to do it again and again.

In the world of foreign currency trading your trading rules are your best friends and violating them will take you along a very slippery descent.

Forex Market Analysis

2009-05-03T07:27:00.000-07:00

The Forex market is run by means of supply and demand. When the demand for a currency rises, its price also increase and once there are more supply of a certain currency its value falls. This might be easy enough to understand but unluckily predicting fluctuations in currency prices can be very challenging.

There are two key approaches used to forecast currency price movements in the Forex market:

The Fundamental Analysis

Fundamental analysis was the most popular forecasting tool used in the Forex market until the mid 1980s, though it has subsequently becoming unpopular. Fundamental analysis puts its focus on the economic,social and political factors which propel supply and demand and is greatly based on elements like economic growth rates,inflation and unemployment . All of these diverse indicators evaluates a currency's current performance and then to forecast its upcoming movement.

The drawback with fundamental analysis is that the trader needs to track events and to evaluate a vast amount of information. Also, there are much discussions about what information needs to be counted in any fundamental analysis and how much importance should be put on each of these indicators.

On point in which there is common understanding is that a country's balance of payments is a mechanism to fundamental analysis because it shows the movement of for a certain country. In principle, a zero balance of payments will create a steady price while a deficit or excess will trigger the currency to drop or rise.

Technical Analysis

Technical analysis is based plainly upon movements in currency prices and uses past price information to forecast upcoming prices.

The core notion with technical analysis is that history repeats itself and that price movements at the moment simply follow some patterns. Secondly, it is not essential to examine present market data to forecast movements in the market since this is reflected already in current currency prices. It is merely the changes in prices that needs to be considered in order to forecast the future prices of currencies.

Technical analysis uses the charts of past currency performance to present a graphical interpretation of the forex market with time and allows the trader to easily grasps trends of price changes. There are many charting techniques used nowadays including oscillators, moving averages, Fibonacci retracement levels,candlestick charts and others.

Introduction to Forex Trading

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Before you continue, there is a common advice from the experts of this business that only about 3 out of 10 forex traders earns out of this business while a significant fraction 7 out of 10 lose money in the Forex market.

What makes the distinction is that the top 30% are those with knowledge.

The foreign currency exchange (FOREX) market is a market full of risk that you could lose your hard-earned money in an instant. If you would like to earn with Forex trading, you have to educate yourself sufficiently well.

If you would like to enter into forex trading, you should learn Forex trading before you begin trading Forex. Forex market is certainly not a game intended for newbies and you require to gather some skills before getting your hands wet.

Trades are always made in pairs, traders are basically buying and selling money in the same time. Beside of trading in pairs, Forex is also very special as it has no centralized market location.

Unlike any other financial market, investors can react to money-value fluctuations caused by economic, social and political events at the time they occur - day or night.

A world-wide market established to facilitate the buying and selling of currency, the Forex market involves big organizations, such as governments, companies and global banks as well as smaller players such as brokerage houses and individual brokers.

The Forex market is undoubtedly the biggest and most popular financial market in the world, traded internationally by a huge number of individuals and organizations. In the OTC market, participants decide who they would like to trade with depending on trading conditions, attractiveness of prices and reputation of the trading counterpart.

To suppport the global trade, the main element is the exchange of currencies as the key currencies such as the US dollar (USD), Japanes yen (JPY) , European Dollar (EUR), British pound (GBP),and others flactuate against each other with the exchange rate for any particular pair of currencies changes, there is the chance to earn profits from the exchanges.

The key players in the market manipulate this by buying and selling in deals which frequently run into lots of millions of dollars, but the smaller players are also very active and often trade in deals of as low as one hundred thousand dollars. And, by trading on the back on the smaller players, individuals can get into the market with very much less than that.

The fact that even small players can enter this market means that, as long as you are prepared to take the time to be familiar with the currency markets and to acquire the skills of Forex trading, then, with a little bit of money to invest, it is possible to enjoy an very fair profits from online currency trading.

The Forex market is a technical market and it takes time before you understand the vital principles underlying the currency markets, to develop the essential skills in the use of some of the basic analysis tools and to learn Forex currency trading online.

Despite this, you do not have to be an expert in the currency markets to profit from them. As long as you take the time to learn foreign exchange currency trading and put in a bit of effort it is quite easy to gain enough of an understanding to begin making money through Forex trading online.

Foreign currency trading gives an excellent opportunity for the small investor to make money but learning to trade Forex is essential before heading out into the market.

Forex Trading Techniques

2009-03-12T00:46:00.000-07:00

Successful forex traders has been using their time-tested forex trading techniques.

Forex trading techniques or strategies are systematic processes designed to generate higher revenue. It would be advantageous for a forex trader to have a handful of these forex trading techniques.

The most basic among the techniques is buying low and selling high. With this, the trader should always try to buy currencies that have lower values and currently increasing so that when the currency moves to a higher value, the trader could sell and have a gain.

Advance forex traders also use technical indicators to see the trend of performance for a certain currency. Among the indicators are moving average (MA), exponential moving average(EMA) and median price. There are also a lot of other indicators.

Trading currency should also be based on the current market and economic conditions. Thus, it would be helpful to check news affecting currency rates, before and while you trade so that you could forecast if the currency you are currently trading would rise or fall. That would be a significant factor to adjust your trading decisions.

Forex Beginner

2009-03-11T18:41:00.000-07:00

I'm just a beginner in foreign exchange trading (forex) but I find it very interesting.
I used this blog to save the trading skills I learned as I studied on the net regarding forex trading.

Also, I'm planning to develop a software based on neural network to be used as my tool aside from the forex trading station.

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2009-03-01T16:07:00.000-08:00

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