The simple sense of Forex (Forex currency exchange, Foreign Exchange) is simultaneous purchase and sale of the currency or the exchange of one country's currency for the one of another country. The world currencies do not have a fixed exchange rate and are always fluctuating being traded in the currency pairs like Euro/Dollar, Dollar/Yen an others. 85% of daily trades are taken by major currencies trading.
Investments usually deal with 4 major pairs: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc or EUR/USD, USD/JPY, GBP/USD, and USD/CHF used to sign these pairs accordingly. These major pairs are considered as Forex market's "blue chips". You will not receive any dividends on the currencies. Well known "buy low - sell high" gives the profit for currency trades.
Monday, May 3, 2010
Wednesday, September 9, 2009
How Does The Forex Market Work?
The forex market is a huge international exchange where different currencies are traded, i.e. both bought and sold. It is estimated to be the largest financial market in the world, and is not governed by the rules of any one country. In addition to this, while it is open from Sunday to Friday, it is a 24 hour market and does not experience a daily closing like a traditional stock market. It is, thus, not regulated and there are no international panels to settle disputes nor are there any clearing houses to stand as guarantors of trades on the exchange. There is nothing more binding than a credit agreement between the buyer and seller in the forex market, and it works.
While this seems very nebulous to most stock market investors, forex traders are forced by competition and the need for cooperation to remain honest. There is no way for a trader to survive in the forex market unless he or she keeps up their end of the deal. Most countries will have their own body or association that serve to regulate the forex traders or brokers in that country and ensure that clients' rights are protected. This association will insist on its members accepting the decisions of their arbitration panel in case of disputes. In the United States, this organization is generally considered to be the National Futures Association or the NFA.
Another important aspect of the forex market to keep in mind is that on the market itself, there are no commissions, and thus it works on principal amount only. The so called forex brokers make money not by taking a commission from the trading parties, but by facilitating the trade itself and making their bit on the bid ask spread, i.e. the difference between the selling and buying prices. The implication is that they are not brokers in the traditional sense of the word, but more like forex traders themselves.
The single most attractive aspect of the forex market is that it is practically impossible for any investor, group of investors or financial institutions to misuse it. It is such a large market, with money flowing through it daily in estimated trillions of dollars, that no single entity, however large, can gain a statistically significant control over the forex market. This means that it is completely free of any influences, beyond the true fundamental driving forces that move it. The implication here is that this market offers every investor the same opportunity, regardless of size or influence, making it a free and fair market place, possibly the only one in the world. This aspect is very attractive to small investors in particular, since they are often the ones to suffer the most from stock market scams and fraudulent activity.
While these factors make the forex market more appealing to invest money on, it is also hard to make money on this market due to the fact that the forex trader has to always do better than the bid ask spread, which makes the opportunities for arbitrage profit limited. However, with no extra commissions and charges, the forex trader is left to enjoy every last bit of profit that he or she does make, once they are past the bid ask spread mark. Overall, the forex market is the place for a smart, vigilant and well trained investor.
While this seems very nebulous to most stock market investors, forex traders are forced by competition and the need for cooperation to remain honest. There is no way for a trader to survive in the forex market unless he or she keeps up their end of the deal. Most countries will have their own body or association that serve to regulate the forex traders or brokers in that country and ensure that clients' rights are protected. This association will insist on its members accepting the decisions of their arbitration panel in case of disputes. In the United States, this organization is generally considered to be the National Futures Association or the NFA.
Another important aspect of the forex market to keep in mind is that on the market itself, there are no commissions, and thus it works on principal amount only. The so called forex brokers make money not by taking a commission from the trading parties, but by facilitating the trade itself and making their bit on the bid ask spread, i.e. the difference between the selling and buying prices. The implication is that they are not brokers in the traditional sense of the word, but more like forex traders themselves.
The single most attractive aspect of the forex market is that it is practically impossible for any investor, group of investors or financial institutions to misuse it. It is such a large market, with money flowing through it daily in estimated trillions of dollars, that no single entity, however large, can gain a statistically significant control over the forex market. This means that it is completely free of any influences, beyond the true fundamental driving forces that move it. The implication here is that this market offers every investor the same opportunity, regardless of size or influence, making it a free and fair market place, possibly the only one in the world. This aspect is very attractive to small investors in particular, since they are often the ones to suffer the most from stock market scams and fraudulent activity.
While these factors make the forex market more appealing to invest money on, it is also hard to make money on this market due to the fact that the forex trader has to always do better than the bid ask spread, which makes the opportunities for arbitrage profit limited. However, with no extra commissions and charges, the forex trader is left to enjoy every last bit of profit that he or she does make, once they are past the bid ask spread mark. Overall, the forex market is the place for a smart, vigilant and well trained investor.
Monday, May 11, 2009
Forex Trading Tips
Here are some forex trading tips for beginners in the game. Forex trading is essentially a mind game, you play on a global stage. It is basically exchanging currencies and exploiting the currency volatility for profit.
Foreign exchange trading or forex trading, is an interesting and profitable pursuit. If you strip the whole thing down to the bare essentials, it is just exchange of a pair of currencies, one at a time. The maxim that applies to all profitable transactions applies here too, 'buy cheap, sell dear'. Only the difference is that you do not buy or sell any goods in this trade. It's a barter system of currency, in which you exchange currency of a type for another with the intention of profiting from the transaction sooner or later. You buy a currency that you think will appreciate in value and you sell it when it does. Here 'buying a currency', means exchanging it for another type.
To master foreign exchange trade, like any other subjects, you must find the best forex training program to master its fundamentals. The fundamental thing that you need to understand is how the exchange rates are affected by global market developments. When you focus on two currencies, that you are exchanging, you need to monitor the import-export trends between those two countries and the liquidity in both the markets. You also need to monitor the global effects on the two currencies. You have two options: either you can operate independently by opening your own trading account or you could operate through a broker. If you are a beginner in this field, here are some tips from acclaimed masters of foreign trade, put together for you :
Beware of Cheats!
Just like every financial field of endeavor, forex trading has its share of cheats and con artists who are out there to dupe honest people. Always be suspicious of forex brokerage companies that promise gargantuan profits with zero risk. They are surely con men, as every experienced forex trader will tell you, big profits always come, after big risks are taken. Also be wary of brokerage companies that promise investing your money in the interbank market as its not very transparent in its dealings. Make a thorough background check and verify the registration of the trading company before you set up your account with them.
Stay Connected with The Old Boys!
If you want to be master of a trade, you have to learn from the masters. Get to know and stay in touch with experienced traders from the field. They have been there and done that. Learn from them as much as you can.
Do Your Homework Well!
Stay connected with the latest happenings in the forex market but don't get lost in data. Analyze and understand the cause and effect cycle in the forex market. Get an in depth knowledge of how the currency market is regulated and what factors affect its functioning. Understand why the numbers rise and fall and what causes exchange rate fluctuations. If you get your fundamental theory of forex trading right and stick to the basics, things will more often turn out right.
Know Both Sides
When you are trading between two currencies, study them well. That is, follow developments on both sides and not just the high value side.
Too Many Cooks. . .You Know What!
If you are giving your trading account over to a broker and he is going to operate for you, then let him! Let the man do his job, you may inquire, but do not meddle too much. If you are confident of trading alone, then make your own decisions after giving your ear to all.
Think Long Term
It's always the best policy to think long term when you are trading and its also the mark of a good trader. Do not go for short term profits when your judgment tells you that things in long term will be better. Stick to your decisions and go for the kill, when you see a winner, and do not hesitate to sell out of a trade when you realize your mistake, out of stubbornness or hardheadedness.
It's All About Timing!
Remember that its all about timing, when it comes to trading. New developments in the market always start after the morning news is out, as credit policy changes by central banks and world business news influences the choices of investors world over. It is advisable that you avoid trading off peak hours. You do not need to trade 24x5. Fix your amount of working hours and get used to handling stress.
Keep it Simple and Be a Man!
Keep your procedure simple and remember, you cannot control all the variables. So things are bound to go wrong in spite of all your preparation as the market is very fickle and driven by speculation. So be ready to brave the rough weather and steady your ship in the storm. Forex trading or any kind of business is not for the weak of heart!
Hope these tips from the masters help you out in your forex trading career, and you too one day become one! All the best!
Foreign exchange trading or forex trading, is an interesting and profitable pursuit. If you strip the whole thing down to the bare essentials, it is just exchange of a pair of currencies, one at a time. The maxim that applies to all profitable transactions applies here too, 'buy cheap, sell dear'. Only the difference is that you do not buy or sell any goods in this trade. It's a barter system of currency, in which you exchange currency of a type for another with the intention of profiting from the transaction sooner or later. You buy a currency that you think will appreciate in value and you sell it when it does. Here 'buying a currency', means exchanging it for another type.
To master foreign exchange trade, like any other subjects, you must find the best forex training program to master its fundamentals. The fundamental thing that you need to understand is how the exchange rates are affected by global market developments. When you focus on two currencies, that you are exchanging, you need to monitor the import-export trends between those two countries and the liquidity in both the markets. You also need to monitor the global effects on the two currencies. You have two options: either you can operate independently by opening your own trading account or you could operate through a broker. If you are a beginner in this field, here are some tips from acclaimed masters of foreign trade, put together for you :
Beware of Cheats!
Just like every financial field of endeavor, forex trading has its share of cheats and con artists who are out there to dupe honest people. Always be suspicious of forex brokerage companies that promise gargantuan profits with zero risk. They are surely con men, as every experienced forex trader will tell you, big profits always come, after big risks are taken. Also be wary of brokerage companies that promise investing your money in the interbank market as its not very transparent in its dealings. Make a thorough background check and verify the registration of the trading company before you set up your account with them.
Stay Connected with The Old Boys!
If you want to be master of a trade, you have to learn from the masters. Get to know and stay in touch with experienced traders from the field. They have been there and done that. Learn from them as much as you can.
Do Your Homework Well!
Stay connected with the latest happenings in the forex market but don't get lost in data. Analyze and understand the cause and effect cycle in the forex market. Get an in depth knowledge of how the currency market is regulated and what factors affect its functioning. Understand why the numbers rise and fall and what causes exchange rate fluctuations. If you get your fundamental theory of forex trading right and stick to the basics, things will more often turn out right.
Know Both Sides
When you are trading between two currencies, study them well. That is, follow developments on both sides and not just the high value side.
Too Many Cooks. . .You Know What!
If you are giving your trading account over to a broker and he is going to operate for you, then let him! Let the man do his job, you may inquire, but do not meddle too much. If you are confident of trading alone, then make your own decisions after giving your ear to all.
Think Long Term
It's always the best policy to think long term when you are trading and its also the mark of a good trader. Do not go for short term profits when your judgment tells you that things in long term will be better. Stick to your decisions and go for the kill, when you see a winner, and do not hesitate to sell out of a trade when you realize your mistake, out of stubbornness or hardheadedness.
It's All About Timing!
Remember that its all about timing, when it comes to trading. New developments in the market always start after the morning news is out, as credit policy changes by central banks and world business news influences the choices of investors world over. It is advisable that you avoid trading off peak hours. You do not need to trade 24x5. Fix your amount of working hours and get used to handling stress.
Keep it Simple and Be a Man!
Keep your procedure simple and remember, you cannot control all the variables. So things are bound to go wrong in spite of all your preparation as the market is very fickle and driven by speculation. So be ready to brave the rough weather and steady your ship in the storm. Forex trading or any kind of business is not for the weak of heart!
Hope these tips from the masters help you out in your forex trading career, and you too one day become one! All the best!
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