TIP 1 Read both the books by Mark Douglas which cover trading psychology BEFORE you read or do anything else. If you don’t, I’ll say I told you so when you hit a failure barrier and don’t know why.
TIP 2 Stop loss policy - you MUST have one and practice, more practice and even more practice at sticking to it. It will not be easy but it is an essential discipline to profitable trading.
TIP 3 Trading plan / system. Again, you MUST have one! Then you must practice sticking to it. Do not try and second guess or trade against your indicators - wait until they give you a concise signal before acting on it.
TIP 4 TRADE WITH THE TREND. DO NOT trade against the hourly trend of the market unless you are VERY certain the market has turned. Check this by watching a long term moving average (say 80 SMA on 15 minute chart)
TIP 5 Learn to sit on your hands and not trade! It’s better to wait for good quality trades than take a mediocre one and loose money. A day of no trades is better than a day with one loosing one. If you don’t like the market, just walk away. It will always be there later.
TIP 6 Don’t set yourself false targets and expectations. Trading is not an EXACT science and if you do you will only become frustrated by your failure to meet them. Take what the market gives and be satisfied. Greed will kill you as a trader, both mentally and monetarily. .
TIP 7 The market is rarely your friend in a trade that goes against you. Cut your losses quickly and accept them as an inherent part of trading. You will not be able to trade without some loosing positions. Manage them well!
TIP 8 Try hard not to get out of profitable trades too early. Try operating a trailing stoploss of say 15 to 20 pips behind the trade (on 5 minute timeframe) and maximise your good trades by letting them run. Be patient!
TIP 9 Ensure you fully understand how to generate and use pivot points and camarilla points on your trading platform. These are crucial decision points for daily trading and you will struggle without them.
TIP 10 DO NOT overtrade your account. Read up on money management in trading to make sure you fully understand why this is important and develop a strategy which fits with your personal trading capital. NEVER risk wiping out your account because believe me, it can happen. I’ve done it twice myself!
TIP 11 Learn about FIBONACCI levels and how to apply them to your charts.
TIP 12 Keep your trading system simple. Do not have too much information on your trading screen. It is unnecessary and will only cause you to be confused and delay you making your trading decisions.
TIP 13 Always think in terms of probabilities. Trading is all about thinking in probabilities NOT certainties. You can make all the “right” decisions and the trade still goes against you. This does not make it a “wrong” trade, just one of the many trades you will take which, through probability, are on the “loosing” side of your trading plan. Don’t expect not to have negative trades - they are a necessary part of the plan and cannot be avoided.
TIP 14 Ensure that the candle is fully formed on the timeframe you are trading BEFORE you enter your trade. Trade what you see, not what you would like to see.
Thursday, August 30, 2007
How can I start trading FOREX?
How can I start trading FOREX?
You'll need to register a trading account with a Forex broker, such as Marketiva. Then you can begin using their Forex client program to buy and sell currencies. This will take less than 5 minutes of your time!
Who owns FOREX and where is it located?
It's not owned by anyone in particular. Forex is an Interbank market, meaning that it's transactions are conducted only between two participants - seller and the buyer. So as long as existing banking system will exist, Forex will be here. It's not connected to any specific country or government organization.
What the working hours of Forex market?
Forex market is open from 22:00 GMT Sunday (opening of Australia trading session) till 22:00 GMT Friday (closing of USA trading session).
What is margin?
Margin is money you need to have in your broker account to secure your open position. Different brokers require different amount of margin money to keep your positions open.
What are the "long" and "short" positions?
Long position is a "buy" position, meaning that this position will be in profit if price goes up.
Short position is a "sell" position, meaning that this position will be in profit if price goes down.
What is the best Forex trading strategy?
There is none. You should constantly develop your own strategies for every possible market situation, if you want to be in profit. Specific strategies can only be good for a certain period of time and for certain currency pairs.
How much money I need to start trading Forex?
With Marketiva you can start trading Forex with as little as $1. Usually, the minimum amount varies from $100 to $10,000 ($100,000 and more for Interbank trading).
I can't (or don't want to) install any Forex trading software on my computer. Can I still trade Forex?
If you don't want (or it is not possible) to install new software to start trading Forex then a good option for you would be using web based trading platform. You can browse our Forex brokers list to find those which support such platform. Here are those brokers which have web based trading options: ForexYard, Easy Forex, Oanda, Saxo Bank, ACM, Interactive Brokers.
You'll need to register a trading account with a Forex broker, such as Marketiva. Then you can begin using their Forex client program to buy and sell currencies. This will take less than 5 minutes of your time!
Who owns FOREX and where is it located?
It's not owned by anyone in particular. Forex is an Interbank market, meaning that it's transactions are conducted only between two participants - seller and the buyer. So as long as existing banking system will exist, Forex will be here. It's not connected to any specific country or government organization.
What the working hours of Forex market?
Forex market is open from 22:00 GMT Sunday (opening of Australia trading session) till 22:00 GMT Friday (closing of USA trading session).
What is margin?
Margin is money you need to have in your broker account to secure your open position. Different brokers require different amount of margin money to keep your positions open.
What are the "long" and "short" positions?
Long position is a "buy" position, meaning that this position will be in profit if price goes up.
Short position is a "sell" position, meaning that this position will be in profit if price goes down.
What is the best Forex trading strategy?
There is none. You should constantly develop your own strategies for every possible market situation, if you want to be in profit. Specific strategies can only be good for a certain period of time and for certain currency pairs.
How much money I need to start trading Forex?
With Marketiva you can start trading Forex with as little as $1. Usually, the minimum amount varies from $100 to $10,000 ($100,000 and more for Interbank trading).
I can't (or don't want to) install any Forex trading software on my computer. Can I still trade Forex?
If you don't want (or it is not possible) to install new software to start trading Forex then a good option for you would be using web based trading platform. You can browse our Forex brokers list to find those which support such platform. Here are those brokers which have web based trading options: ForexYard, Easy Forex, Oanda, Saxo Bank, ACM, Interactive Brokers.
Wednesday, August 29, 2007
Forex Glossary
Base currency: The base currency is the first currency in a currency pair, and the currency that remains constant when determining a currency pair's price. Knowing the base currency is important as it determines the values of currencies (notional or real) exchanged when a foreign exchange deal is transacted.
The Euro is the dominant base currency against all other global currencies. As a result, currency pairs against the EUR will be identified as EUR/USD, EUR/GBP, EUR/CHF, EUR/JPY, EUR/CAD, etc. The British Pound is next in the hierarchy of currency names. The major currency pairs versus the GBP would therefore be identified as GBP/USD, GBP/CHF, GBP/JPY, GBP/CAD. The USD is the next dominant base currency. USD/CAD, USD/JPY, USD/CHF would be the normal currency pair convention for the major currencies, the dollar quoted as EUR/USD and GBP/USD.
Basis: The difference between the spot price and the futures price.
Basis point: One hundredth of a percentage point.
Bid /Ask Spread: The difference between the bid and offer (ask) prices; used to measure market liquidity. Narrower spreads normally signify higher liquidity.
Cable: Trader jargon for the British Pound Sterling referring to the Sterling/US Dollar exchange rate. Term began due to the fact that the rate was originally transmitted via a transatlantic cable starting in the mid 1800's.
Central bank: The principal monetary authority of a nation, controlled by the national government. It is responsible for issuing currency, setting monetary policy, interest rates, exchange rate policy and the regulation and supervision of the private banking sector. The Federal Reserve is the central bank of the United States. Others include the European Central Bank, Bank of England, and the Bank of Japan.
Conversion: The process by which an asset or liability denominated in one currency is exchanged for an asset or liability denominated in another currency.
Cross rates: An exchange rate between two currencies. The cross rate is said to be non-standard in the country where the currency pair is quoted. For example, in the US , a GBP/CHF quote would be considered a cross rate, whereas in the UK or Switzerland it would be one of the primary currency pairs traded.
Currency: A country's unit of exchange issued by their government or central bank whose value is the basis for trade.
Currency (exchange rate) risk: The risk of incurring losses resulting from an adverse change in exchange rates.
Devaluation: Lowering of the value of a country's currency relative to the currencies of other nations. When a nation devalues its currency, the goods it imports become more expensive, while its exports become less expensive abroad and thus more competitive.
Drawdown: The magnitude of a decline in account value, either in percentage or dollar terms, as measured from peak to subsequent trough. For example, if a trader's account increased in value from $10,000 to $20,000, then dropped to $15,000, then increased again to $25,000, that trader would have had a maximum drawdown of $5000 (incurred when the account declined from $20,000 to $15,000) even though that trader's account was never in a loss position from inception.
End of day (mark to market): Traders account for their positions in two ways: accrual or mark-to-market. An accrual system accounts only for cash flows when they occur, hence, it only shows a profit or loss when realized. The mark-to-market method values the trader`s book at the end of each working day using the closing market rates or revaluation rates. Any profit or loss is booked and the trader will start the next day with a net position.
Euro: The currency of the European Monetary Union (EMU), which replaced the European Currency Unit (ECU). The countries currently participating in the EMU are Germany , France , Belgium , Luxembourg , Austria , Finland , Ireland , the Netherlands , Greece , Italy , Spain and Turkey .
Exchange rate: The price of one currency stated in terms of another currency. Example: $1 Canadian Dollar (CDN) = $0.7700 US Dollar (USD)
Fixed exchange rate: A country's decision to tie the value of its currency to another country's currency, gold (or another commodity) , or a basket of currencies . In practice, even fixed exchange rates fluctuate between definite upper and lower bands, leading to intervention.
Foreign exchange (Forex): The simultaneous buying of one currency and selling of another in an over-the-counter market.
G-7: The seven leading industrial countries, being US, Germany, Japan, France, UK, Canada, and Italy.
G-10: G7 plus Belgium , Netherlands and Sweden , a group associated with the IMF discussions. Switzerland is sometimes peripherally involved.
G-20: A group composed of the Finance Ministers and central bankers of the following 20 countries: Argentina , Australia , Brazil , Canada , China , France , Germany , India , Indonesia , Italy , Japan , Mexico , Russia , Saudi Arabia , South Africa , South Korea , Turkey , the United Kingdom , the United States and the European Union. The IMF and the World Bank also participate. The G-20 was set up to respond to the financial turmoil of 1997-99 through the development of policies that “promote international financial stability”.
Hedge fund: This is a private, unregulated investment fund for wealthy investors (minimum investments typically begin at US$1 million) specializing in high risk, short-term speculation on bonds, currencies, stock options and derivatives.
Hedging: A strategy designed to reduce investment risk using call options, put options, short-selling, or futures contracts. A hedge can help lock in profits. Its purpose is to reduce the volatility of a portfolio by reducing the risk of loss.
London Inter-Bank Offer Rate or LIBOR: The standard for the interest rate that banks charge each other for loans (usually in Eurodollars ). This rate is applicable to the short-term international interbank deposit market, and applies to very large loans borrowed from one day to five years. This market allows banks with liquidity requirements to borrow quickly from other banks with surpluses, enabling banks to avoid holding excessively large amounts of their asset base as liquid assets. The LIBOR is officially fixed once a day by a small group of large London banks, but the rate changes throughout the day.
Leverage: The degree to which an investor or business is utilizing borrowed money. The amount, expressed as a multiple, by which the notional amount traded exceeds the margin required to trade. For example, if the notional amount traded (also referred to as “lot size” or “contract value”) is $100,000 dollars and the required margin is $2000, the trader can trade with 50 times leverage ($100,000/$2000). For investors, leverage means buying on margin to enhance return on value without increasing investment. Leveraged investing can be extremely risky because you can lose not only your money, but the money you borrowed as well.
Liquidity: The ability of a market to accept large transactions. A function of volume and activity in a market. It is the efficiency and cost effectiveness with which positions can be traded and orders executed. A more liquid market will provide more frequent price quotes at a smaller bid/ask spread.
Long: Position to purchase a greater amount of currency than is sold, therefore, an appreciation in value if market price increases.
Margin: Funds that customers must deposit as collateral to cover any potential losses from adverse movements in prices.
Margin Call: A requirement for additional funds or other collateral, from a broker or dealer, to increase margin to a necessary level to guarantee performance on a position that has moved against the customer.
Market Maker: A dealer that supplies prices, and is prepared to buy and sell at those bid and ask prices.
Mil: An absolute one tenth of one penny; $0.001. There are typically ten Pips to one Mil.
Pip (tick): The term used in currency markets to represent the smallest incremental move an exchange rate can make. Depending on context, normally one basis point (0.0001 in the case of EUR/USD, GBD/USD, USD/CHF and .01 in the case of USD/JPY).
Position: A view expressed by a trader through the buying or selling of currencies, and can also refer to the amount of currency either owned or owed by an investor.
Premium (cost of carry): The cost or benefit associated with carrying an open position from one day to the next calculated by using the differential in short-term interest rates between the two currencies in the currency pair.
Revaluation: An increase in the foreign exchange value of a currency that is pegged to other currencies or gold.
Revaluation rates: The rate for any period or currency, which is used to revalue a position or book. The revaluation rates are the market rates used when a trader runs an end-of-day to establish profit and loss for the day.
Rollover: The settlement of a deal is rolled forward to another value date with the cost of this process based on the interest rate differential of the two currencies. An overnight swap, specifically the next business day against the following business day.
Short: To sell a currency without actually owning it, and to hold a short position with expectations that the price will decrease so that it can be bought back at a later time at a profit.
Spread: The difference between the bid and offer (ask) prices of a currency; used to measure market liquidity. Narrower spreads usually signify high liquidity.
Spot Price: Current market price. Settlement of spot transactions normally occurs within two business days.
Swaps: A foreign exchange swap is a trade that combines both a spot and a forward transaction into one deal, or two forward trades with different maturity dates.
Uptick: A new price quote that is higher than the preceding quote for the same currency.
The Euro is the dominant base currency against all other global currencies. As a result, currency pairs against the EUR will be identified as EUR/USD, EUR/GBP, EUR/CHF, EUR/JPY, EUR/CAD, etc. The British Pound is next in the hierarchy of currency names. The major currency pairs versus the GBP would therefore be identified as GBP/USD, GBP/CHF, GBP/JPY, GBP/CAD. The USD is the next dominant base currency. USD/CAD, USD/JPY, USD/CHF would be the normal currency pair convention for the major currencies, the dollar quoted as EUR/USD and GBP/USD.
Basis: The difference between the spot price and the futures price.
Basis point: One hundredth of a percentage point.
Bid /Ask Spread: The difference between the bid and offer (ask) prices; used to measure market liquidity. Narrower spreads normally signify higher liquidity.
Cable: Trader jargon for the British Pound Sterling referring to the Sterling/US Dollar exchange rate. Term began due to the fact that the rate was originally transmitted via a transatlantic cable starting in the mid 1800's.
Central bank: The principal monetary authority of a nation, controlled by the national government. It is responsible for issuing currency, setting monetary policy, interest rates, exchange rate policy and the regulation and supervision of the private banking sector. The Federal Reserve is the central bank of the United States. Others include the European Central Bank, Bank of England, and the Bank of Japan.
Conversion: The process by which an asset or liability denominated in one currency is exchanged for an asset or liability denominated in another currency.
Cross rates: An exchange rate between two currencies. The cross rate is said to be non-standard in the country where the currency pair is quoted. For example, in the US , a GBP/CHF quote would be considered a cross rate, whereas in the UK or Switzerland it would be one of the primary currency pairs traded.
Currency: A country's unit of exchange issued by their government or central bank whose value is the basis for trade.
Currency (exchange rate) risk: The risk of incurring losses resulting from an adverse change in exchange rates.
Devaluation: Lowering of the value of a country's currency relative to the currencies of other nations. When a nation devalues its currency, the goods it imports become more expensive, while its exports become less expensive abroad and thus more competitive.
Drawdown: The magnitude of a decline in account value, either in percentage or dollar terms, as measured from peak to subsequent trough. For example, if a trader's account increased in value from $10,000 to $20,000, then dropped to $15,000, then increased again to $25,000, that trader would have had a maximum drawdown of $5000 (incurred when the account declined from $20,000 to $15,000) even though that trader's account was never in a loss position from inception.
End of day (mark to market): Traders account for their positions in two ways: accrual or mark-to-market. An accrual system accounts only for cash flows when they occur, hence, it only shows a profit or loss when realized. The mark-to-market method values the trader`s book at the end of each working day using the closing market rates or revaluation rates. Any profit or loss is booked and the trader will start the next day with a net position.
Euro: The currency of the European Monetary Union (EMU), which replaced the European Currency Unit (ECU). The countries currently participating in the EMU are Germany , France , Belgium , Luxembourg , Austria , Finland , Ireland , the Netherlands , Greece , Italy , Spain and Turkey .
Exchange rate: The price of one currency stated in terms of another currency. Example: $1 Canadian Dollar (CDN) = $0.7700 US Dollar (USD)
Fixed exchange rate: A country's decision to tie the value of its currency to another country's currency, gold (or another commodity) , or a basket of currencies . In practice, even fixed exchange rates fluctuate between definite upper and lower bands, leading to intervention.
Foreign exchange (Forex): The simultaneous buying of one currency and selling of another in an over-the-counter market.
G-7: The seven leading industrial countries, being US, Germany, Japan, France, UK, Canada, and Italy.
G-10: G7 plus Belgium , Netherlands and Sweden , a group associated with the IMF discussions. Switzerland is sometimes peripherally involved.
G-20: A group composed of the Finance Ministers and central bankers of the following 20 countries: Argentina , Australia , Brazil , Canada , China , France , Germany , India , Indonesia , Italy , Japan , Mexico , Russia , Saudi Arabia , South Africa , South Korea , Turkey , the United Kingdom , the United States and the European Union. The IMF and the World Bank also participate. The G-20 was set up to respond to the financial turmoil of 1997-99 through the development of policies that “promote international financial stability”.
Hedge fund: This is a private, unregulated investment fund for wealthy investors (minimum investments typically begin at US$1 million) specializing in high risk, short-term speculation on bonds, currencies, stock options and derivatives.
Hedging: A strategy designed to reduce investment risk using call options, put options, short-selling, or futures contracts. A hedge can help lock in profits. Its purpose is to reduce the volatility of a portfolio by reducing the risk of loss.
London Inter-Bank Offer Rate or LIBOR: The standard for the interest rate that banks charge each other for loans (usually in Eurodollars ). This rate is applicable to the short-term international interbank deposit market, and applies to very large loans borrowed from one day to five years. This market allows banks with liquidity requirements to borrow quickly from other banks with surpluses, enabling banks to avoid holding excessively large amounts of their asset base as liquid assets. The LIBOR is officially fixed once a day by a small group of large London banks, but the rate changes throughout the day.
Leverage: The degree to which an investor or business is utilizing borrowed money. The amount, expressed as a multiple, by which the notional amount traded exceeds the margin required to trade. For example, if the notional amount traded (also referred to as “lot size” or “contract value”) is $100,000 dollars and the required margin is $2000, the trader can trade with 50 times leverage ($100,000/$2000). For investors, leverage means buying on margin to enhance return on value without increasing investment. Leveraged investing can be extremely risky because you can lose not only your money, but the money you borrowed as well.
Liquidity: The ability of a market to accept large transactions. A function of volume and activity in a market. It is the efficiency and cost effectiveness with which positions can be traded and orders executed. A more liquid market will provide more frequent price quotes at a smaller bid/ask spread.
Long: Position to purchase a greater amount of currency than is sold, therefore, an appreciation in value if market price increases.
Margin: Funds that customers must deposit as collateral to cover any potential losses from adverse movements in prices.
Margin Call: A requirement for additional funds or other collateral, from a broker or dealer, to increase margin to a necessary level to guarantee performance on a position that has moved against the customer.
Market Maker: A dealer that supplies prices, and is prepared to buy and sell at those bid and ask prices.
Mil: An absolute one tenth of one penny; $0.001. There are typically ten Pips to one Mil.
Pip (tick): The term used in currency markets to represent the smallest incremental move an exchange rate can make. Depending on context, normally one basis point (0.0001 in the case of EUR/USD, GBD/USD, USD/CHF and .01 in the case of USD/JPY).
Position: A view expressed by a trader through the buying or selling of currencies, and can also refer to the amount of currency either owned or owed by an investor.
Premium (cost of carry): The cost or benefit associated with carrying an open position from one day to the next calculated by using the differential in short-term interest rates between the two currencies in the currency pair.
Revaluation: An increase in the foreign exchange value of a currency that is pegged to other currencies or gold.
Revaluation rates: The rate for any period or currency, which is used to revalue a position or book. The revaluation rates are the market rates used when a trader runs an end-of-day to establish profit and loss for the day.
Rollover: The settlement of a deal is rolled forward to another value date with the cost of this process based on the interest rate differential of the two currencies. An overnight swap, specifically the next business day against the following business day.
Short: To sell a currency without actually owning it, and to hold a short position with expectations that the price will decrease so that it can be bought back at a later time at a profit.
Spread: The difference between the bid and offer (ask) prices of a currency; used to measure market liquidity. Narrower spreads usually signify high liquidity.
Spot Price: Current market price. Settlement of spot transactions normally occurs within two business days.
Swaps: A foreign exchange swap is a trade that combines both a spot and a forward transaction into one deal, or two forward trades with different maturity dates.
Uptick: A new price quote that is higher than the preceding quote for the same currency.
7 Reasons To Start Trading On The Forex Currency Market
If you have time or money, there are lots of ways to earn additional income like from active involvement in multi-level marketing, website development, property investment, residential construction security, etc. Trading in Forex (foreign exchange) is also another way of making that extra income.In the Forex currency market, you have the flexibility of trading from any location (home, hotel, etc.) and at any time as long as you have a laptop and internet connection for your portable computer.There are no specific requirements or experience necessary in this particular online income generating trading business. Just by attending a Forex training course should be adequate enough for you commence trading in Forex. Why trade in Forex?Below are 7 reasons why people should trade in Forex:1. Forex trading offers monetary leverage. Meaning that you can trade with a low capital outlay to control a large currency position. You can trade a standard of $100,000 currency lot by investing with a small capital of only $1000. However, some Forex brokerage firms permit even less that that by giving you up to 200 times the leverage. That is, with only $100 capital outlay you can control a 200,000 unit currency position.2. Online Forex trading has low transaction charges even though if you have a mini account or trade in small volumes.3. Forex market transparency is an advantage since there are no hidden figures. You get what you see and thus there is no unexpected surprise. Therefore, it enables you to manage your risk and you can execute your order within seconds if you want to stop further losses in a particular trade.4. You can trade by buying or selling in the Forex market in either direction, i.e. when it is going up or down.5. Flexible time is one of the advantages in Forex trading. The Forex market never shuts as it is an incessant electronic currency exchange taking place globally. Since it is worldwide, involving in diversity of currencies of various nations that float their currencies in the world Forex market, it operates 24 hours daily, allowing you to enter or exit a trade whenever you like. In this regards, you can trade whenever you have the free time and as long as there is an internet available anywhere.6. As you accumulate your personal experience you can earn you extra income by profiting from this sort of online trading in foreign currency. If you trade smartly with the use of technical analyzing tools, you can profit from a trade by predicting the outcome of a trade based on observing the changing trend of a currency which normally repeatedly shows up in predictable cycles.7. There is unlimited earning potential when you participate in Forex trading for it has a daily trading volume in excess of 1.5 trillion. That makes it the largest financial market worldwide when compared with the equity and futures markets of 50 billion and 30 billion respectively.
5 Useful Tips For Your Success In Forex Trading
1. Implement a trading plan.
A trading plan is especially crucial in Forex trading to stay in-control against the emotional stress in speculative situation. Often, your emotions will blind and lead you to the negative sides: greed causes you to over-ride on a win while fear causes you to cut short in your profits. Hence, a well organized operation has to be predetermined and strictly followed. Always remember: If you fail to plan, you plan to fail.
2. Trade within your means
If you cannot afford to lose, you cannot afford to win. Losing is a not a must but it is the natural in any trading market. Trading should be always done using excess money in your savings. Before you start to trade in Forex, we suggest you to put aside some of your income to set up your own investment funds and trade only using that funds.
3. Trade along side with the majorities
Trade on popular currency pairs and avoid thin market in Forex. The lack of public participation will cause difficulties in liquidate your positions. If you are beginners, we suggest the big five: USD/EUR, USD/JPY, USD/GBD, USD/CHF, and EUR/JPY. Avoid trading in too many markets as you may end up confusing yourself by all sorts of currency studies. Go for the major currency pairs and drill down your research in it.
4. Avoid emotion trading
If you do not have a trading plan, make one. If you have a trading plan, follows it strictly! Never ever attempt to hold your weakened position and hope the market will turn back in your favor direction. You might end up losing all
your capital if you keep holding. Move on, stay within your trading plan, and admit your mistakes if things do not turn as you want.
5. Love the trends
Trends are your friends. Although currency values fluctuate but from the big picture it normally goes in a steady direction. If you are not sure on certain moves, the long term trend is always your primary reference. In long run, trading with the trends improves your odds in the Forex market.
Forex trading is getting more and more popular among small investors nowadays. Main reasons are mostly because of its high money liquidity, high leverage value with Forex brokers, and 24-7 trading time. However, being as a popular market does not mean that Forex trading is easy. In fact, trading in Forex involves high risks and the market is much volatile compare to other conventional trading markets.
Without a doubt, Forex trading needs much more than just a few guidelines or tips to be successful. Experience, knowledge, capital, fortitude, and even some help of luck are all crucial in ones success in the FX market. if you lose in a trade, do not lose the experience in it. Learn from your mistakes and regain your position in the next trade.
A trading plan is especially crucial in Forex trading to stay in-control against the emotional stress in speculative situation. Often, your emotions will blind and lead you to the negative sides: greed causes you to over-ride on a win while fear causes you to cut short in your profits. Hence, a well organized operation has to be predetermined and strictly followed. Always remember: If you fail to plan, you plan to fail.
2. Trade within your means
If you cannot afford to lose, you cannot afford to win. Losing is a not a must but it is the natural in any trading market. Trading should be always done using excess money in your savings. Before you start to trade in Forex, we suggest you to put aside some of your income to set up your own investment funds and trade only using that funds.
3. Trade along side with the majorities
Trade on popular currency pairs and avoid thin market in Forex. The lack of public participation will cause difficulties in liquidate your positions. If you are beginners, we suggest the big five: USD/EUR, USD/JPY, USD/GBD, USD/CHF, and EUR/JPY. Avoid trading in too many markets as you may end up confusing yourself by all sorts of currency studies. Go for the major currency pairs and drill down your research in it.
4. Avoid emotion trading
If you do not have a trading plan, make one. If you have a trading plan, follows it strictly! Never ever attempt to hold your weakened position and hope the market will turn back in your favor direction. You might end up losing all
your capital if you keep holding. Move on, stay within your trading plan, and admit your mistakes if things do not turn as you want.
5. Love the trends
Trends are your friends. Although currency values fluctuate but from the big picture it normally goes in a steady direction. If you are not sure on certain moves, the long term trend is always your primary reference. In long run, trading with the trends improves your odds in the Forex market.
Forex trading is getting more and more popular among small investors nowadays. Main reasons are mostly because of its high money liquidity, high leverage value with Forex brokers, and 24-7 trading time. However, being as a popular market does not mean that Forex trading is easy. In fact, trading in Forex involves high risks and the market is much volatile compare to other conventional trading markets.
Without a doubt, Forex trading needs much more than just a few guidelines or tips to be successful. Experience, knowledge, capital, fortitude, and even some help of luck are all crucial in ones success in the FX market. if you lose in a trade, do not lose the experience in it. Learn from your mistakes and regain your position in the next trade.
Forex Trading Tips
Forex trading is buying and selling the foreign currencies of different countries. It has a similarity with stock trading in that the foreign currencies behave like shares of the currency institutions of the countries. Like stock prices, these also move up and down with time-dependent volatility.It is possible to buy a currency low, buy long and sell short another high currency. It needs meticulous pursuit of the exchange rates of currencies you want to trade. One needs to keep up a continuous scrutiny of the trajectory every particular currency vis-à-vis the other currencies, pair-wise.It often has leverage enough to induce highly profitable arbitrage and hedging. Each internationally accepted currency has a market and the Forex market is the superset of all these markets taken together. Traders make their own basket or inventory of Forex and trade according to their anticipation of movements.For example, the primary Forex statistics for the euro in relation to the German mark prior to 1999 reveals a lot of interesting features and profit potential of dollar or German Mark in relation the euro.From the evidence it appears somewhat surprisingly that the euro lost ground against the US dollar in Forex spot trading, and in quite a few dimensions did not match the international transaction role of the German mark.The euro changed the structure of the Forex market and increased market transparency through currency elimination. This exposed the dealers to higher inventory risks as their respective inventory imbalances became exposed easily to other dealers.The increased inventory costs were recovered by the dealers in the euro markets through higher spreads. This made the euro a less attractive transaction medium than the German mark. This shows how trading in Forex involves both risk and profit potentials.Earlier, the fore market was the trading ground of millionaires and billionaires only. Now with the introduction of online Forex trading, the average person is able to create amazingly large amounts of wealth from safe online investments in foreign currencies. Online forex trading is nothing but Forex trading transacted through internet links and email through a competent broker.No technical know how, big “risk”, or large investment, hard work is needed. Online forex trading investment lets you use your dollar to control an investment two hundred times as high, $1 to control an investment worth $200, $1000 to control $200,000 and so on and on worth of investment.Through online forex trading, you are now able to invest your money to fetch more money for you like the millionaires and billionaires, instead of you laboring hard for your money.Online Forex trading is real fun. It is often the most striking and profitable internet investing opportunity because you can do it from your PC or connected laptop from any place in any country in the world.You don’t need any stocks or big inventory in this trading. In online Forex trading, all you do is, just open an account with one of the brokers with as little as $300 or so. Of course, the larger your initial investment, the faster you stand to gain wealth.Then you simply have to follow simple instructions to purchase and sell the currencies. You buy when the price of the currency is low. Within a few seconds or minutes, the price may go up, and you may sell it and make a profit. This way, by just buying, selling and trading these foreign currencies for about 3 or 4 hrs in a day, you can easily make $500-$1000!Forex trading is easy money. Especially with the introduction of online trading, it is virtually a continuous upward money spiral for any alert person with a competent broker.
Forex Market Secrets Can Help Increase Profits
You don't need a crystal ball to make money on the foreign currency exchange. Experts skilled in the art of investing are quite willing to share their Forex secrets with interested investors preparing to enter the currency trading market. Like most other areas of investment, there are aspects of foreign currency exchange trading that only elite traders know inside and out. These investment gurus have learned what it takes to make big profits in short amounts of time and know the secrets behind foreign currency investing and parlaying even small investment amounts into sizable yields.
What are the indicators that reveal whether a particular foreign currency is going to go up or down? Learning the Forex secrets of leading and successful traders can help you make the most of your investment dollars. It's important to understand that there are many things that affect the rise and fall of foreign currency. Not the least of which is the ever changing face of global politics. One of contributing factors isn't so much a secret as a the main cause of many a fluctuation and that is political stability or unrest. Having a good grasp on the current socioeconomic state of the countries and currencies that you plan on investing in can do a lot toward improving your chances of success in the Forex market.
Learning Forex Secrets Can Improve Investment Decisions
Learning a few Forex Secrets can help you to make the right decisions when it comes to leveraging, choosing competitive pip spreads and taking advantage of knowledge of trading signals in the foreign currency exchange market. It's knowledge like this that can make the difference between making poor investment choices and making educated decisions that can lead to success and profits. Books and e-books are a good place to start learning a great deal of foreign currency exchange tips and strategies.
What are the indicators that reveal whether a particular foreign currency is going to go up or down? Learning the Forex secrets of leading and successful traders can help you make the most of your investment dollars. It's important to understand that there are many things that affect the rise and fall of foreign currency. Not the least of which is the ever changing face of global politics. One of contributing factors isn't so much a secret as a the main cause of many a fluctuation and that is political stability or unrest. Having a good grasp on the current socioeconomic state of the countries and currencies that you plan on investing in can do a lot toward improving your chances of success in the Forex market.
Learning Forex Secrets Can Improve Investment Decisions
Learning a few Forex Secrets can help you to make the right decisions when it comes to leveraging, choosing competitive pip spreads and taking advantage of knowledge of trading signals in the foreign currency exchange market. It's knowledge like this that can make the difference between making poor investment choices and making educated decisions that can lead to success and profits. Books and e-books are a good place to start learning a great deal of foreign currency exchange tips and strategies.
Tuesday, August 28, 2007
Top 10 Currency Traders
Top 10 Currency Traders
1 Deutsche Bank 19.26
2 UBS AG 11.86
3 Citigroup 10.39
4 Barclays Capital 6.61
5 Royal Bank of Scotland 6.43
6 Goldman Sachs 5.25
7 HSBC 5.04
8 Bank of America 3.97
9 JPMorgan Chase 3.89
10 Merrill Lynch 3.68
2 UBS AG 11.86
3 Citigroup 10.39
4 Barclays Capital 6.61
5 Royal Bank of Scotland 6.43
6 Goldman Sachs 5.25
7 HSBC 5.04
8 Bank of America 3.97
9 JPMorgan Chase 3.89
10 Merrill Lynch 3.68
Unlike a stock market, where all participants have access to the same prices, the forex market is divided into levels of access. At the top is the inter-bank market, which is made up of the largest investment banking firms. Within the inter-bank market, spreads, which are the difference between the bid and ask prices, are razor sharp and usually unavailable, and not known to players outside the inner circle. As you descend the levels of access, the difference between the bid and ask prices widens. This is due to volume. If a trader can guarantee large numbers of transactions for large amounts, they can demand a smaller difference between the bid and ask price, which is referred to as a better spread. The levels of access that make up the forex market are determined by the size of the “line” (the amount of money with which they are trading). The top-tier inter-bank market accounts for 53% of all transactions. After that there are usually smaller investment banks, followed by large multi-national corporations (which need to hedge risk and pay employees in different countries), large hedge funds, and even some of the retail forex market makers. According to Galati and Melvin, “Pension funds, insurance companies, mutual funds, and other institutional investors have played an increasingly important role in financial markets in general, and in FX markets in particular, since the early 2000s.” (2004) In addition, he notes, “Hedge funds have grown markedly over the 2001-2004 period in terms of both number and overall size” Central banks also participate in the forex market to align currencies to their economic needs.
Market size and liquidity
The foreign exchange market is unique because of:
· its trading volume,
· the extreme liquidity of the market,
· the large number of, and variety of, traders in the market,
· its geographical dispersion,
· its long trading hours - 24 hours a day (except on weekends).
· the variety of factors that affect exchange rates,
According to the BIS,[1] average daily turnover in traditional foreign exchange markets was estimated at $1,880 billion. Daily averages in April for different years, in billions of US dollars, are presented on the chart below:
This $1.88 trillion in global foreign exchange market "traditional" turnover was broken down as follows:
· $621 billion in spot transactions
· $208 billion in outright forwards
· $944 billion in forex swaps
· $107 billion estimated gaps in reporting
In addition to "traditional" turnover, $1.26 trillion was traded in derivatives.
Exchange-traded forex futures contracts were introduced in 1972 at the Chicago Mercantile Exchange and are actively traded relative to most other futures contracts.
Monday, August 27, 2007
The Main Principles of Trading
In contrast to exchange transactions with real supply or real currency the participants of FOREX use trading with a margin deposit; i.e. marginal or leverage trading. In marginal trading, each transaction has two obligatory stages (they can be divided by period of time, which can be as long as you like): buying (selling) of currency at one price, and then selling (buying) it at another (or at the same) price. The first transaction is called opening the position, the second one, closing the position.
Opening a position, a trader furnishes a deposit sum from 0.5 to 4 per cent of the credit line, granted for the transaction. So, in order to buy or sell 100,000 US dollars for Japanese yens, you will not need the whole sum, but only from 500 to 2000 US dollars depending on your policy of controlling risks. When the position is closed, the deposit sum returns, and calculation of profits or losses is done. All the profit or losses caused by the change of currency rates is credited on your account.
Let's take a concrete example of getting a profit from the changing the rate of the Euro, from 0,9162 to 0,9292. If you have anticipated this change by using technical or fundamental analysis, you can buy the Euro cheaper for dollars, and then sell it back at a higher price. For example, if you choose leverage 1:100, then 99,000 dollars of the credit line, granted by the Internet broker, is added to 1000 dollars, and you buy the Euro at the price of 0.9162. As a result of this transaction we get: $ 100,000 / 0.9162 = Euro 109.146, 47.
When the rate changes (an average daily change of Euro is about 70 to 100 pips), you close the position and sell the Euro for dollars, but at the rate of 0.9292. You get 109,146. 47*0.9292 =101,418.89 dollars. Your profit is $ 1,418.89. The same transaction with leverage 1:200 would give you $2, 837.78 of profit, with leverage 1:50 the profit would be 709.45, with leverage 1:25 - 354.72.
We'd like to remind you that the higher the credit leverage, the higher is your profit if the fluctuation of the currency rate was anticipated correctly. However, if your anticipation was wrong, your losses will be bigger.
One cannot feel confident in the FOREX market without a thorough knowledge of the terms used there.
Foreign exchange quotes are a relation between currencies.
- USDCHF - the cost of $1 in Swiss Francs.
- USDJPY - the cost of $1 in Japanese yens.
- EURUSD - the cost of Euro 1 in US dollars.
- GBPUSD - the cost of 1 GBP in US dollars.
The last figure in the quote is called "pip". The cost of the pip is different for every currency, and depends on the leverage and current quote.
The formula for calculating 1 pip is: 
100,000/current quote without commas * K
where К=1 at leverage 1:100,
К=2 at leverage 1:200,
К=0,5 at leverage 1:50,
K=0,25 at leverage 1:25.
Examples:
USDJPY = 108.91 leverage 1:100
100.000 / 10891 х 1 = 9,18 USD
EURUSD = 0.9561 leverage1:200
100.000 / 9561 х 2 =20,92 USD
GBPUSD and EURUSD are direct quotes, i.e. when the chart goes up, GBP and EUR become more expensive, and when it goes down, the currencies become cheaper. USDCHF and USDJPY are backward quotes, and when the chart grows, prices on CHF and JPY fall, and when the chart goes down, the prices grow.
On direct quotes you buy according to ASK and sell according to BID. With backward quotes, you buy according to BID and sell according to ASK .
Trading in the FOREX market is realized in lots. When you open a position, you can choose the number of lots you want from 1 to 10. One lot equals $ 100,000. The deposit sum for one lot will vary from $500 to $2000, depending on the credit leverage you choose. Leverage is a financial mechanism that allows crediting speculative transactions with a small deposit. We give you an opportunity to choose a credit leverage in the range of 1:200 to 1:25.
In the course of trading you can fix your profit or cut off your losses according to the commands LIMIT and STOP that have been set up.
LIMIT is set up higher than the current meaning of the price.
STOP is set up lower than the current meaning of the price.
With these commands the positions is closed without additional orders when the price reaches the agreed level.
In the process of trading you can create pending positions, that will be activated when the price reaches the agreed level (open price). When creating and closing orders, a temporary delay occurs, and lasts for about 30 to 40 seconds. When you make an inquiry, you are given a real market price, which is the current price at the moment of proposal, not at the moment of inquiry.
The process of trading is described in detail in section Description of the Trade Terminal.
The main terms that characterize the account:
- Deal, realization of 2 trade transactions, when currency is bought (sold), and then the reverse conversion is realized.
- Balance, the sum on the account of a client after the last transaction is conducted.
- Floating Profit, the current profit on open positions.
- Floating storage, fee for postponement of an opened position over midnight GMT.
- Equity = Balance + Floating + Floating storage.
- Margin requirement, a necessary deposit sum calculated according to the formula
- 100,000 / K + 100,000 / K,
- where K = leverage, and the number of items equals the number of open positions.
- Percentage, index of an account.
- Percentage = Equity / Margin Requirement. At Percentage lower than 50 % it's impossible to open new positions.
- Margin call, condition of an account when all opened positions are closed by the Internet broker according to current quotes. It occurs at a Percentage lower than 10%.
Foreign Exchange Markets
Participants of a foreign exchange market
The main participants of a foreign exchange market are:
The main participants of a foreign exchange market are:
- Commercial banks
- Exchange markets
- Central banks
- Firms that conduct foreign trade transactions
- Investment funds
- Broker companies
- Private persons
Exchange markets Contrary to stock markets and markets for terminal exchange dealings, exchange markets do not work in a definite building and they do not have definite business hours. Thanks to the development of telecommunications most of the leading financial institutions of the world use services of exchange markets directly and via mediators 24 hours a day. The biggest international exchange markets are the London, New York and Tokyo exchange markets. In some countries with transitional economies there are exchange markets for currency exchange by juristic persons and for forming a market exchange rate. The state usually regulates the exchange rate in an active manner, using the compactness of the exchange market.
Central banks control currency reserves, realize interventions that influence the exchange rate, and regulate the interest investment rate in the national currency. The central bank of the United States, the US Federal Reserve Bank, or "FED", has the greatest influence in the international exchange markets. It is followed by the central banks of Germany, (the Deutsche Bundesbank or BUBA) and of Great Britain (the Bank of England, nicknamed the "Old Lady").
Firms that conduct foreign trade transactions. Companies participating in international trade have a stable demand for foreign currency (importers) and supply (exporters). As a rule, these organizations do not have direct access to exchange markets, and they conduct their conversion and deposit transactions via commercial banks.
Investment funds. These companies, represented by various international investment, pension,and mutual funds, insurance companies, and trusts, realize the policy of diversified management of portfolio of assets by placing there money in securities of the governments and corporations of different countries. The world-know fund, Quantum, is owned by George Soros, and it executes successful exchange speculations. Big international corporations as Xerox, Nestle, General Motors a.o. that make foreign industrial investments (creating branches, joint ventures etc.), also are firms of this kind.
Broker companies bring together a buyer and a seller of foreign currency and conduct a conversion dealing between them. Broker companies take a broker's fee. As a rule, in the FOREX market there is no fee as a per cent from the sum of a transaction, or as a sum agreed in advance. Usually the dealers of broker companies quote currency with a spread, that includes their fee. A broker company, having the information about the asked rates, is a place where the real exchange rate is formed according to closed deals. Commersial banks get their information about the current exchange rate from broker companies. The biggest international broker companies are Lasser Marshall, Harlow Butler, Tullett and Tokio, Coutts, and Tradition.
Private persons. Natural persons realize a wide range of non-commercial transactions in the sphere of foreign tourism, transfers of salaries, pensions, royalties, buying and selling foreign currency. This is also the biggest group that realizes speculative exchange transactions.
What is a FX speculator?
In modern conditions practically all financial transactions in the market are speculative by their nature, and there's nothing abnormal or criminal in it. One of the most vivid indices of markets' globalization is their daily volume of exchange transactions. Only in 10 major financial centers it increased from 206 billion dollars in 1986 to 967 billion dollars in 1992. According to the IMF, on the whole the volume is over 1 trillion dollars a day, and on some days it reaches 3 trillions. It is enough to say that the volume of gold and foreign exchange reserves of all developed countries was only 555.2 billion dollars in 1992, which is two times less than a daily volume of market transactions. According to some calculations, the volume of exchange transactions is 40 times bigger that the daily volume of foreign trade transactions. Therefore, most of the deals are caused not by a commercial necessity, but by financial reasons. And a financial transaction is always caused by the fact that money is looking for some profitable usage.
The international exchange system functioning in the world at the moment develops among people dealing with exchange and financial transactions: the so-called speculative psychology. In the world where exchange rates fluctuate for some per cent every week, where currencies, that are considered to be stable can lose 20 to 30 per cent of their cost during a few months, it's absolutely clear that the manager of a fund, trying to compensate for inevitable losses, has to use speculative operations. For example, a reasonable owner of dollars has to get rid of them very quickly and exchange them for Euro every time the expected fall of the dollar against Euro surpasses the difference between the profit from American notes and the profit from the respective German notes. For instance, if in the coming months the dollar is expected to fall against the Euro by 6%, and the profit from American notes is 6 per cent bigger than the profit from German notes, a speculator will probably decide to keep dollars. If the gap in the interest rates is less than the expected fall of the rate, the "running away from the dollar" begins.
Who are these speculators? An analysis shows that the main speculators acting in the market are institutional investors. Among them one can single out, first of all, official state institutions, and, secondly, private financial and other institutions. Thus according to the report of the "Group of Ten", state investors in Europe and Japan keep about 20 per cent of their assets in the form of foreign securities (in the USA only 7.5 per cent). However, the main feature of the 1980s was the growing international activity of private financial institutions: pension funds, insurance companies, and mutual funds. The Globalization of international financial markets is an objective process, reflecting the growing degree of economic relations in the world. It promotes a more effective distribution of financial resources.
Major world exchange markets:
AMEX - American Stock Exchange
BOVESPA - Sao Paulo Stock Exchange
CBOT - Chicago Board of Trade
CHX - Chicago Stock Exchange
CME - Chicago Mercantile Exchange
Commodities on the Web - List of the commodities
LIFFE - London International Financial Futures and Options Exchange
London Stock Exchange -London Stock Exchange
Nasdaq
NYMEX - New York Mercantile Exchange
NYSE - New York Stock Exchange
SBF - la Bourse de Paris
SES - Singapore Exchange
SET - Stock Exchange of Thailand
TSE - Tokyo Stock Exchange
TSE - Toronto Stock Exchange
LSEX - London Stock Exchange
CBOE - Chicago Board Options Exchange CBOE
PHLX - Philadelphia Stock Exchange
The international exchange system functioning in the world at the moment develops among people dealing with exchange and financial transactions: the so-called speculative psychology. In the world where exchange rates fluctuate for some per cent every week, where currencies, that are considered to be stable can lose 20 to 30 per cent of their cost during a few months, it's absolutely clear that the manager of a fund, trying to compensate for inevitable losses, has to use speculative operations. For example, a reasonable owner of dollars has to get rid of them very quickly and exchange them for Euro every time the expected fall of the dollar against Euro surpasses the difference between the profit from American notes and the profit from the respective German notes. For instance, if in the coming months the dollar is expected to fall against the Euro by 6%, and the profit from American notes is 6 per cent bigger than the profit from German notes, a speculator will probably decide to keep dollars. If the gap in the interest rates is less than the expected fall of the rate, the "running away from the dollar" begins.
Who are these speculators? An analysis shows that the main speculators acting in the market are institutional investors. Among them one can single out, first of all, official state institutions, and, secondly, private financial and other institutions. Thus according to the report of the "Group of Ten", state investors in Europe and Japan keep about 20 per cent of their assets in the form of foreign securities (in the USA only 7.5 per cent). However, the main feature of the 1980s was the growing international activity of private financial institutions: pension funds, insurance companies, and mutual funds. The Globalization of international financial markets is an objective process, reflecting the growing degree of economic relations in the world. It promotes a more effective distribution of financial resources.
Major world exchange markets:
AMEX - American Stock Exchange
BOVESPA - Sao Paulo Stock Exchange
CBOT - Chicago Board of Trade
CHX - Chicago Stock Exchange
CME - Chicago Mercantile Exchange
Commodities on the Web - List of the commodities
LIFFE - London International Financial Futures and Options Exchange
London Stock Exchange -London Stock Exchange
Nasdaq
NYMEX - New York Mercantile Exchange
NYSE - New York Stock Exchange
SBF - la Bourse de Paris
SES - Singapore Exchange
SET - Stock Exchange of Thailand
TSE - Tokyo Stock Exchange
TSE - Toronto Stock Exchange
LSEX - London Stock Exchange
CBOE - Chicago Board Options Exchange CBOE
PHLX - Philadelphia Stock Exchange
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