Saturday, November 1, 2008
Wednesday, October 29, 2008
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http://www.goforex.net/Introduction-to-Forex-Trading.pdf
go to www.internetbusinesszone.blogspot.com for free information on how to start an internet business now
go to www.onlinetraffictips.blogspot.com to rake in massive traffic to your blog or site
Monday, October 6, 2008
An overview of the Forex market
The Forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.
The main enticements of currency dealing to private investors and attractions for short-term Forex trading are:
24-hour trading, 5 days a week with non-stop access to global Forex dealers.
An enormous liquid market making it easy to trade most currencies.
Volatile markets offering profit opportunities.
Standard instruments for controlling risk exposure.
The ability to profit in rising or falling markets.
Leveraged trading with low margin requirements.
Many options for zero commission trading.
Forex tradingThe investor's goal in Forex trading is to profit from foreign currency movements. Forex trading or currency trading is always done in currency pairs. For example, the exchange rate of EUR/USD on Aug 26th, 2003 was 1.0857. This number is also referred to as a "Forex rate" or just "rate" for short. If the investor had bought 1000 euros on that date, he would have paid 1085.70 U.S. dollars. One year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. dollar. The investor could now sell the 1000 euros in order to receive 1208.30 dollars. Therefore, the investor would have USD 122.60 more than what he had started one year earlier. However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a "risk-free" investment. One example of a risk-free investment is long-term U.S. government bonds since there is practically no chance for a default, i.e. the U.S. government going bankrupt or being unable or unwilling to pay its debt obligation.
When trading currencies, trade only when you expect the currency you are buying to increase in value relative to the currency you are selling. If the currency you are buying does increase in value, you must sell back the other currency in order to lock in a profit. An open trade (also called an open position) is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position.
However, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency.
http://au.biz.yahoo.com/forex-education/what-is-forex-trading.html
REASONS FOR TRADING FOREX
Reason 1: Commission Free
Forex brokers will not take any commission from you, unlike stock and options trading. They just ask for the differences between the bid and the asking prices
Reason 2;The second main reason for trading on this market is its liquidity. And what this means is the amount of trades that take place and also the volume that is traded. This will astound you! Based on figures for 2007, $3.2trn per day, that's 3.2 Trillion Dollars is traded on the Forex Market every day around the world.
Reason 3:- Forex Trading online offers great leverage!You can make the most of your investment resources with Forex trading online. Some brokers offer 200:1 margin ratios in your trading accounts. Mini-FX accounts, which can typically be opened with only $200-300, offer 0.5% margin, meaning that $50 in trading capital can control a 10,000 unit currency position. This is why people are flocking to Forex trading online as a way to highly leverage their investments.
Reason 4:- Forex never sleeps!You can execute forex trading online 24/7, from 7AM New Zealand time on Monday morning, to 5PM New York time on Friday evening. No waiting for markets to open: they're open all night! This makes Forex trading online a very attractive component that fits easily into your day (or night!
Reason 5:Forex trading online is instant!The FX market is astoundingly fast! Your orders are executed, filled and confirmed usually within 1-2 seconds. Since this is all done electronically with no humans involved, there is little to slow it down!
Reason 5:Most forex brokers offer demo account to practise trading, along with breaking forex news and charting servising.Demo account makes you trade the market with play money.You can also use it to feel the brokers servises before putting your real money
FOREX QUOTES
The currency to the left of the slash ("/") is called the base currency (in this example, the US dollar) and the one on the right is called the quote currency or counter currency (in this example, the Japanese Yen). This notation means that 1 unit of the base currency (that is, 1 dollar) is equal to 119.72 Japanese Yen. If buying, the exchange rate specifies how much you have to pay in units of the quote currency to buy one unit of the base currency; in the above example, you have to pay 119.72 yen to buy 1 US dollar. If selling, the foreign currency exchange rate specifies how much units of the quote currency you get for selling one unit of the base currency; in the above example, you will receive 119.72 Japanese Yen when you sell 1 US dollar.
As with stocks, a forex quote includes a bid price (or bid) and an ask price (or ask). This can be easily illustrated with an example of a currency quote taken from the forex trading software.In the above example, the bid price is 119.68 yen and the ask price is 119.75 yen [notice that when the ask price is displayed, only the last two decimal places are displayed to the right of the slash (75 instead of 119.75)]. The bid price is the price at which dealers are willing to buy the base currency (in units of the quote currency) and users of our software can sell. Thus, if a trader presses the button "Sell USD," he/she would sell dollars at 119.68 yen. The ask price, on the other hand, is the price at which dealers are willing to sell the base currency and users of our system could buy it. By clicking "Buy USD," an investor would be buying dollars at 119.75 yen.
Even though there are many currencies all over the world, 85% of all daily transactions involve trading a group of currencies known as the "Majors." These currencies include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. The four most actively traded currency pairs are the US Dollar / Japanese Yen (USD/JPY), Euro / US Dollar (EUR/USD), British Pound / US Dollar (GBP/USD), and the US Dollar / Swiss Franc (USD/CHF). The US Dollar / Canadian Dollar (USD/CAD) and the Australian Dollar / US Dollar (AUD/USD) are also actively traded pairs. For traders, the best trading opportunities are with the most commonly traded (and therefore most liquid) currencies; i.e., the "Majors."
The examples below were taken from the currency dealing system which provides forex real time quotes. From left to right are the euro-dollar exchange rate, the british pound-dollar exchange rate, and the dollar-swiss franc exchange rate. All of these currency quotes are of major currency pairs.Taking the example of the euro forex quote (first pair above), buying one euro would cost 1.0099 US dollars and selling would provide 1.0093 US dollars.
If you want to see more live currency quote examples, you can sign up for a free test drive of our forex trading software by clicking the appropriate link below. You will be able to obtain live forex quotes as well as place simulated trades in real time using different currency pairs.
FOREX TERMINOLOGIES
Ask Price – The price at which the broker will sell the base currenccy in exchange for the quote currencyThe price at which you can buy a currency. The price requested by the trader. This usually indicates the lowest price a seller will accept
Bid Price – The highest price a buyer is willing to pay for a curreny pair.The price at which the dealer is willing to buy the base currency in exchange for the quote currency.
Spread –The spread is the difference between the bid and ask price. For example if the quotation of EUR/USD is 1.2025/1.2028, then the spread is EUR 0.0003
Bear Market - A market distinguished by declining prices.
Bull Market – A market distinguished by increasing prices
Broker – A company trades in securities for customers as well as for its own account. When executing trade orders on behalf of a customer, the institution is said to be acting as a broker. When executing trades for its own account, the institution is said to be acting as a dealer.
Currency pair – Depicts a quotation of two different currencies. The first currency in the pair is the base currency. The second currency in the pair is labeled counter currency. Such a quotation depict how many units of the counter currency are needed to buy one unit of the base currency. e.g. the quotation EUR/USD 1.2500 means that one euro is exchanged for 1.25 US dollar. If the quote moves from EUR/USD 1.2500 to EUR/USD 1.2510, the euro is getting stronger and the dollar weaker. On the other had if the EUR/USD quote moves from 1.2500 to 1.2490 the euro is getting weaker while the dollar is getting stronger
Leverage – The Leverage allows traders to borrow money and use that money to invest in the foreign exchange market. Because of leverage, clients without a huge amount of capital are able to make large investments and maximize their profits, whereas in other markets such as the equities market, clients would have to pay the full amount for each share of stock they were investing in
Limit order - An order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 102.00/05, then a limit order to buy USD would be at a price below 102. (i.e., 101.50)
Margin – The deposit required when entering into a position as well as to hold an open position.
Margin call – A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the trader.
Pips – the smallest number in a quotation of a currency. For example if the quotation of EUR/USD is 1.2025, a pip is represented by EUR 0.0001. EUR/GBP has half pips, in that it is quoted to a fifth decimal place which can only be 0 or 5. This is because one pip in EUR/GBP is equal to four pips in its predecessor, GBP/DEM, and one pip in EUR/GBP would be too large an increment
Long position – buy the base currency and sell the quote currency
Short Position- sell the base curreny and buy the quote currency
Pips – the smallest number in a quotation of a currency. For example if the quotation of EUR/USD is 1.2025, a pip is represented by EUR 0.0001. EUR/GBP has half pips, in that it is quoted to a fifth decimal place which can only be 0 or 5. This is because one pip in EUR/GBP is equal to four pips in its predecessor, GBP/DEM, and one pip in EUR/GBP would be too large an increment.
What is a Forex lot? A Forex lot is used to measure the amount of a deal. The value of the deal consists of a certain number of lots.
Usually, a standard Forex lot is worth $100,000 USD. The standard leverage for a lot is a margin of 100 to 1.there is a mini lot size which is 10000 usd.
TYPES OF FOREX ORDERS
A trader has at his disposal different types of orders to make FOREX trades. A clear understanding of each type of order is necessary to be a successful FOREX trader.
Market Order – is an order to buy or sell at the current market price. They can be used to enter or exit a trade.
Market orders should be used with care because in fast-moving markets there may be a difference between the price seen at the time a market order is given and the actual price of the transaction. This is due to slippage – the amount the market moves in the few seconds between giving an order and having it executed. Slippage could result in a loss or gain of several pips.
Limit Order – is an order to buy or sell at a certain limit. They can be used to buy currency below the market price or sell currency above the market price. When buying, your order is executed when the market falls to your limit order price. When selling, your order is executed when the market rises to your limit order price. There is no slippage with limit orders.
Stop Order – is an order to buy above the market or to sell below the market. They are most commonly used as stop-loss orders to limit losses if the market moves contrary to what the trader expected. A stop-loss order will sell the currency if the market falls below the point set by the trader.
One Cancels the Other (OCO) – this order is used when placing a limit order and a stop-loss order at the same time. If either order is executed the other is cancelled, allowing the trader to make a transaction without monitoring the market. If the market falls, the stop-loss order will be executed, but if the market rises to the level of the limit order, the currency will be sold at a profit.
Example OCO Transaction:
Buy: 1 standard lot EUR/USD @ 1.3228 = $132,280Pip Value: 1 pip = $10Stop-Loss: 1.3203Limit: 1.3328
This is an order to buy US dollars at 1.3328 and to sell them if they fall to 1.3203 (resulting in a loss of 25 pips or $250) or to sell them if they rise to 1.3328 (resulting in a profit of 100 pips or $1,000).
Here's another example:
The current bid/ask price for US dollars and Canadian dollars is
USD/CDN 1.2152/57
...meaning you can buy $1 US for 1.2152 CDN or sell 1.2157 CDN for $1 US.
If you think that the US dollar (USD) is undervalued against the Canadian dollar (CDN) you would buy USD (simultaneously selling CDN) and wait for the US dollar to rise.
This is the transaction: Buy USD: 1 standard lot USD/CDN @ 1.2157 = $121,570 CDNPip Value: 1 pip = $10Stop-Loss: 1.2147Margin: $1,000 (1%)
You are buying US$100,000 and selling CDN$121,570. Your stop loss order will be executed if the dollar falls below 1.2147, in which case you will lose $100.
However, USD/CDN rises to 1.2192/87. You can now sell $1 US for 1.2192 CDN or sell 1.2187 CDN for $1 US.
Because you entered the transaction by buying US dollars (buying long), you must now sell US dollars and buy back CDN dollars to realize your profit.
You sell US$100,000 at the current USD/CDN rate of 1.2192, and receive 121,920 CDN for which you originally paid CDN$121,570. Your profit is $350 Canadian dollars or US$287.19 (350 divided by the current exchange rate of 1.2187).
HOW TO CHOOSE A GOOD FOREX BROKER
8 Basic Tips on Choosing Best Forex Broker
Author: Mostafa Soleimanzadeh Posted: 01-11-2007 Comments: 0 Views: 145 Rating: (161) (?)
There are some basic notices that you should consider when you want choosing online forex broker. #1- Spread Amount The spread, which is calculated in pips, is the difference between how much you can buy or sell a currency at a specific point in time. Forex currencies are not traded through a central exchange market, so the spread can be different depending on the forex broker you use. Some online forex brokers have variable spread; some of them have two spread amounts that depend to day and night. Some of them their spread depends to the position of market. When market is quiet the spread is small and when market is busy the spread is high. I prefer forex brokers that have fixed spread, because over the long term fixed can be safer.
#2- Execution - How fast is the broker's order execution? - Do they offer automatic execution? - How much can you trade before having to request a quote? - Do they trade against their clients? The best way to find out is to open a demo account and give them a test drive.
#3- Leverage Options Leverage is expressed as a ratio between the total capital that is available to be traded and your actual capital. For example, when you have a ratio of 100:1, your forex broker will lend you $100 for every $1 of actual capital you have. Leverage is a necessity in forex trading because the price deviations in the currencies are set at fractions of a cent. Before choosing an online forex broker notice that what is their leverage. Many brokerages offer a flexible margin that allows you to choose the leverage that's right for you.
#4- Account Types Notice the forex broker you choose has mini account or not. Mini account is designed for those new to online currency trading and those with limited investment capital. There is a smaller deposit required to start trade of just $300 or less.
#5- Trading Platform Good trading software will show live prices that you can actually trade at, not just indicative quotes. It will offer Limit and Stop orders, and ideally will let you attach these to your entry order. One-Cancels-Other orders are another useful feature - they mean you can set up your trade and then leave the software to get on with it.
#6- Dealing tools and value-added services Find out online forex broker that offers the best resources and information to help you make the smartest trading decisions. A good company should offer real-time charts, technical analysis tools, real-time news and data, and software or website support. Be weary of any company that refuses to share information or trial versions before opening up an account. You will want to try out their system before you choose to invest money in it.
#7- Support Forex is a 24 hour market, so your online forex broker should offer 24 hour support. You should also check if you can close positions over the phone - essential in case your PC or internet connection crash at a critical moment. You could contact to their Internet help desks to see how quickly they respond to enquiries.
#8- Get Referrals Ask around and read forex forums to find out which forex brokers other people use and why they selected a specific broker.
http://www.articlesbase.com/finance-articles/8-basic-tips-on-choosing-best-forex-broker-249346.html
FOREX TRADING STRATEGIES
Fundamental analysis:
fundamental analysis describes methods of present and future valuation determined by social, economic, and political variables. While technical analysis is praised for its effectiveness at predicting short-term trends (under 3 months), the fundamental analysis approach is better suited at forecasting long-term movement in the FX market.Employing fundamental analysis strategies requires a basic understanding of supply and demand, the underlying force behind all financial markets. In the case of the FX market, the commodity being exchanged is a particular currency. Because the value of a currency is derived from the economic health of its respective country, global (or local) macroeconomic changes can invariably have an impact on currency rates.
Technical analysis:The aim of technical analysis is to forecast price trends in future basing on the historical data along with the one of the volume. Technical analysts are sure that any fundamentals and even expectations have affection to exchange rates changing being the factors of the market. Any private investor can have an access to the technical analysis tools in order to compute his or her trading decisions. Though, we can not state that these tools figure out unreliable estimations.Forex Trader should consider technical analysis as a key factor for success. Technical analysis basic overview is historical market prices analysis for the purpose of predicting price trends or having an adequate picture of prices movement in future. The concept of Forex Technical Analysis is made up of mathematical equations along with other technical applied towards Forex prices. Deep knowledge of the Forex Technical Analysis techniques is required for profitable dealing with Online Forex Market. The traders using technical analysis invest their money thoughtfully and monitor the daily prices movement precisely that lets them reach the profit. You can choose some basic technical indicators offered at our Forex Technical indicators page among lots of other ones.
FOREX TRADING TIPS.
Jumping into Forex trading with both feet? Here are five must-know tips on forex trading and mini forex to help you stay afloat in the Foreign Exchange currency market.
Know your forex trading market.Educate yourself about the currencies that you trade. The more you know about the country whose currency you’re trading in the forex market, the more accurately you’ll be able to predict which way the money will move.
Pick a forex trading system – and stick with it.Savvy forex traders will tell you that system is everything. Forex trading by system lets you automate your trades based on history, following the traditional peaks and valleys. Set up a system and live with it to make the most of your forex trading.
Practice makes perfect – but it’s not the real world.Practice forex trading accounts are great for learning how a particular trading account works – but they’re not the real world. Many experienced traders recommend starting off with a mini forex account to minimize your losses while you get acclimated.
Keep your eye on the margin.Margin trading is a great way to lose a lot of money quickly. Stay away from forex margin trading until you’re sure you know what you’re doing.
The only win that counts in forex trading is the bottom line. In forex trading, the bottom line is how much money you made at the end of the day. Don’t count won or lost trades – only dollars and cents.
Tony owns the http://www.live-forex-easy.com/ website. Please visit the site for more information about Swiss Forex Broker Marketiva.Swiss Forex Broker Marketiva
Article Source: http://EzineArticles.com/?expert=Tony_Chan
Remember dont be greedy and dont be fearful.
VISIT THIS BLOG OFTEN AS MORE ARTICLE ON FOREX WILL BE ADDED WEEKLY
The Forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.
The main enticements of currency dealing to private investors and attractions for short-term Forex trading are:
24-hour trading, 5 days a week with non-stop access to global Forex dealers.
An enormous liquid market making it easy to trade most currencies.
Volatile markets offering profit opportunities.
Standard instruments for controlling risk exposure.
The ability to profit in rising or falling markets.
Leveraged trading with low margin requirements.
Many options for zero commission trading.
Forex tradingThe investor's goal in Forex trading is to profit from foreign currency movements. Forex trading or currency trading is always done in currency pairs. For example, the exchange rate of EUR/USD on Aug 26th, 2003 was 1.0857. This number is also referred to as a "Forex rate" or just "rate" for short. If the investor had bought 1000 euros on that date, he would have paid 1085.70 U.S. dollars. One year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. dollar. The investor could now sell the 1000 euros in order to receive 1208.30 dollars. Therefore, the investor would have USD 122.60 more than what he had started one year earlier. However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a "risk-free" investment. One example of a risk-free investment is long-term U.S. government bonds since there is practically no chance for a default, i.e. the U.S. government going bankrupt or being unable or unwilling to pay its debt obligation.
When trading currencies, trade only when you expect the currency you are buying to increase in value relative to the currency you are selling. If the currency you are buying does increase in value, you must sell back the other currency in order to lock in a profit. An open trade (also called an open position) is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position.
However, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency.
http://au.biz.yahoo.com/forex-education/what-is-forex-trading.html
REASONS FOR TRADING FOREX
Reason 1: Commission Free
Forex brokers will not take any commission from you, unlike stock and options trading. They just ask for the differences between the bid and the asking prices
Reason 2;The second main reason for trading on this market is its liquidity. And what this means is the amount of trades that take place and also the volume that is traded. This will astound you! Based on figures for 2007, $3.2trn per day, that's 3.2 Trillion Dollars is traded on the Forex Market every day around the world.
Reason 3:- Forex Trading online offers great leverage!You can make the most of your investment resources with Forex trading online. Some brokers offer 200:1 margin ratios in your trading accounts. Mini-FX accounts, which can typically be opened with only $200-300, offer 0.5% margin, meaning that $50 in trading capital can control a 10,000 unit currency position. This is why people are flocking to Forex trading online as a way to highly leverage their investments.
Reason 4:- Forex never sleeps!You can execute forex trading online 24/7, from 7AM New Zealand time on Monday morning, to 5PM New York time on Friday evening. No waiting for markets to open: they're open all night! This makes Forex trading online a very attractive component that fits easily into your day (or night!
Reason 5:Forex trading online is instant!The FX market is astoundingly fast! Your orders are executed, filled and confirmed usually within 1-2 seconds. Since this is all done electronically with no humans involved, there is little to slow it down!
Reason 5:Most forex brokers offer demo account to practise trading, along with breaking forex news and charting servising.Demo account makes you trade the market with play money.You can also use it to feel the brokers servises before putting your real money
FOREX QUOTES
The currency to the left of the slash ("/") is called the base currency (in this example, the US dollar) and the one on the right is called the quote currency or counter currency (in this example, the Japanese Yen). This notation means that 1 unit of the base currency (that is, 1 dollar) is equal to 119.72 Japanese Yen. If buying, the exchange rate specifies how much you have to pay in units of the quote currency to buy one unit of the base currency; in the above example, you have to pay 119.72 yen to buy 1 US dollar. If selling, the foreign currency exchange rate specifies how much units of the quote currency you get for selling one unit of the base currency; in the above example, you will receive 119.72 Japanese Yen when you sell 1 US dollar.
As with stocks, a forex quote includes a bid price (or bid) and an ask price (or ask). This can be easily illustrated with an example of a currency quote taken from the forex trading software.In the above example, the bid price is 119.68 yen and the ask price is 119.75 yen [notice that when the ask price is displayed, only the last two decimal places are displayed to the right of the slash (75 instead of 119.75)]. The bid price is the price at which dealers are willing to buy the base currency (in units of the quote currency) and users of our software can sell. Thus, if a trader presses the button "Sell USD," he/she would sell dollars at 119.68 yen. The ask price, on the other hand, is the price at which dealers are willing to sell the base currency and users of our system could buy it. By clicking "Buy USD," an investor would be buying dollars at 119.75 yen.
Even though there are many currencies all over the world, 85% of all daily transactions involve trading a group of currencies known as the "Majors." These currencies include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. The four most actively traded currency pairs are the US Dollar / Japanese Yen (USD/JPY), Euro / US Dollar (EUR/USD), British Pound / US Dollar (GBP/USD), and the US Dollar / Swiss Franc (USD/CHF). The US Dollar / Canadian Dollar (USD/CAD) and the Australian Dollar / US Dollar (AUD/USD) are also actively traded pairs. For traders, the best trading opportunities are with the most commonly traded (and therefore most liquid) currencies; i.e., the "Majors."
The examples below were taken from the currency dealing system which provides forex real time quotes. From left to right are the euro-dollar exchange rate, the british pound-dollar exchange rate, and the dollar-swiss franc exchange rate. All of these currency quotes are of major currency pairs.Taking the example of the euro forex quote (first pair above), buying one euro would cost 1.0099 US dollars and selling would provide 1.0093 US dollars.
If you want to see more live currency quote examples, you can sign up for a free test drive of our forex trading software by clicking the appropriate link below. You will be able to obtain live forex quotes as well as place simulated trades in real time using different currency pairs.
FOREX TERMINOLOGIES
Ask Price – The price at which the broker will sell the base currenccy in exchange for the quote currencyThe price at which you can buy a currency. The price requested by the trader. This usually indicates the lowest price a seller will accept
Bid Price – The highest price a buyer is willing to pay for a curreny pair.The price at which the dealer is willing to buy the base currency in exchange for the quote currency.
Spread –The spread is the difference between the bid and ask price. For example if the quotation of EUR/USD is 1.2025/1.2028, then the spread is EUR 0.0003
Bear Market - A market distinguished by declining prices.
Bull Market – A market distinguished by increasing prices
Broker – A company trades in securities for customers as well as for its own account. When executing trade orders on behalf of a customer, the institution is said to be acting as a broker. When executing trades for its own account, the institution is said to be acting as a dealer.
Currency pair – Depicts a quotation of two different currencies. The first currency in the pair is the base currency. The second currency in the pair is labeled counter currency. Such a quotation depict how many units of the counter currency are needed to buy one unit of the base currency. e.g. the quotation EUR/USD 1.2500 means that one euro is exchanged for 1.25 US dollar. If the quote moves from EUR/USD 1.2500 to EUR/USD 1.2510, the euro is getting stronger and the dollar weaker. On the other had if the EUR/USD quote moves from 1.2500 to 1.2490 the euro is getting weaker while the dollar is getting stronger
Leverage – The Leverage allows traders to borrow money and use that money to invest in the foreign exchange market. Because of leverage, clients without a huge amount of capital are able to make large investments and maximize their profits, whereas in other markets such as the equities market, clients would have to pay the full amount for each share of stock they were investing in
Limit order - An order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 102.00/05, then a limit order to buy USD would be at a price below 102. (i.e., 101.50)
Margin – The deposit required when entering into a position as well as to hold an open position.
Margin call – A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the trader.
Pips – the smallest number in a quotation of a currency. For example if the quotation of EUR/USD is 1.2025, a pip is represented by EUR 0.0001. EUR/GBP has half pips, in that it is quoted to a fifth decimal place which can only be 0 or 5. This is because one pip in EUR/GBP is equal to four pips in its predecessor, GBP/DEM, and one pip in EUR/GBP would be too large an increment
Long position – buy the base currency and sell the quote currency
Short Position- sell the base curreny and buy the quote currency
Pips – the smallest number in a quotation of a currency. For example if the quotation of EUR/USD is 1.2025, a pip is represented by EUR 0.0001. EUR/GBP has half pips, in that it is quoted to a fifth decimal place which can only be 0 or 5. This is because one pip in EUR/GBP is equal to four pips in its predecessor, GBP/DEM, and one pip in EUR/GBP would be too large an increment.
What is a Forex lot? A Forex lot is used to measure the amount of a deal. The value of the deal consists of a certain number of lots.
Usually, a standard Forex lot is worth $100,000 USD. The standard leverage for a lot is a margin of 100 to 1.there is a mini lot size which is 10000 usd.
TYPES OF FOREX ORDERS
A trader has at his disposal different types of orders to make FOREX trades. A clear understanding of each type of order is necessary to be a successful FOREX trader.
Market Order – is an order to buy or sell at the current market price. They can be used to enter or exit a trade.
Market orders should be used with care because in fast-moving markets there may be a difference between the price seen at the time a market order is given and the actual price of the transaction. This is due to slippage – the amount the market moves in the few seconds between giving an order and having it executed. Slippage could result in a loss or gain of several pips.
Limit Order – is an order to buy or sell at a certain limit. They can be used to buy currency below the market price or sell currency above the market price. When buying, your order is executed when the market falls to your limit order price. When selling, your order is executed when the market rises to your limit order price. There is no slippage with limit orders.
Stop Order – is an order to buy above the market or to sell below the market. They are most commonly used as stop-loss orders to limit losses if the market moves contrary to what the trader expected. A stop-loss order will sell the currency if the market falls below the point set by the trader.
One Cancels the Other (OCO) – this order is used when placing a limit order and a stop-loss order at the same time. If either order is executed the other is cancelled, allowing the trader to make a transaction without monitoring the market. If the market falls, the stop-loss order will be executed, but if the market rises to the level of the limit order, the currency will be sold at a profit.
Example OCO Transaction:
Buy: 1 standard lot EUR/USD @ 1.3228 = $132,280Pip Value: 1 pip = $10Stop-Loss: 1.3203Limit: 1.3328
This is an order to buy US dollars at 1.3328 and to sell them if they fall to 1.3203 (resulting in a loss of 25 pips or $250) or to sell them if they rise to 1.3328 (resulting in a profit of 100 pips or $1,000).
Here's another example:
The current bid/ask price for US dollars and Canadian dollars is
USD/CDN 1.2152/57
...meaning you can buy $1 US for 1.2152 CDN or sell 1.2157 CDN for $1 US.
If you think that the US dollar (USD) is undervalued against the Canadian dollar (CDN) you would buy USD (simultaneously selling CDN) and wait for the US dollar to rise.
This is the transaction: Buy USD: 1 standard lot USD/CDN @ 1.2157 = $121,570 CDNPip Value: 1 pip = $10Stop-Loss: 1.2147Margin: $1,000 (1%)
You are buying US$100,000 and selling CDN$121,570. Your stop loss order will be executed if the dollar falls below 1.2147, in which case you will lose $100.
However, USD/CDN rises to 1.2192/87. You can now sell $1 US for 1.2192 CDN or sell 1.2187 CDN for $1 US.
Because you entered the transaction by buying US dollars (buying long), you must now sell US dollars and buy back CDN dollars to realize your profit.
You sell US$100,000 at the current USD/CDN rate of 1.2192, and receive 121,920 CDN for which you originally paid CDN$121,570. Your profit is $350 Canadian dollars or US$287.19 (350 divided by the current exchange rate of 1.2187).
HOW TO CHOOSE A GOOD FOREX BROKER
8 Basic Tips on Choosing Best Forex Broker
Author: Mostafa Soleimanzadeh Posted: 01-11-2007 Comments: 0 Views: 145 Rating: (161) (?)
There are some basic notices that you should consider when you want choosing online forex broker. #1- Spread Amount The spread, which is calculated in pips, is the difference between how much you can buy or sell a currency at a specific point in time. Forex currencies are not traded through a central exchange market, so the spread can be different depending on the forex broker you use. Some online forex brokers have variable spread; some of them have two spread amounts that depend to day and night. Some of them their spread depends to the position of market. When market is quiet the spread is small and when market is busy the spread is high. I prefer forex brokers that have fixed spread, because over the long term fixed can be safer.
#2- Execution - How fast is the broker's order execution? - Do they offer automatic execution? - How much can you trade before having to request a quote? - Do they trade against their clients? The best way to find out is to open a demo account and give them a test drive.
#3- Leverage Options Leverage is expressed as a ratio between the total capital that is available to be traded and your actual capital. For example, when you have a ratio of 100:1, your forex broker will lend you $100 for every $1 of actual capital you have. Leverage is a necessity in forex trading because the price deviations in the currencies are set at fractions of a cent. Before choosing an online forex broker notice that what is their leverage. Many brokerages offer a flexible margin that allows you to choose the leverage that's right for you.
#4- Account Types Notice the forex broker you choose has mini account or not. Mini account is designed for those new to online currency trading and those with limited investment capital. There is a smaller deposit required to start trade of just $300 or less.
#5- Trading Platform Good trading software will show live prices that you can actually trade at, not just indicative quotes. It will offer Limit and Stop orders, and ideally will let you attach these to your entry order. One-Cancels-Other orders are another useful feature - they mean you can set up your trade and then leave the software to get on with it.
#6- Dealing tools and value-added services Find out online forex broker that offers the best resources and information to help you make the smartest trading decisions. A good company should offer real-time charts, technical analysis tools, real-time news and data, and software or website support. Be weary of any company that refuses to share information or trial versions before opening up an account. You will want to try out their system before you choose to invest money in it.
#7- Support Forex is a 24 hour market, so your online forex broker should offer 24 hour support. You should also check if you can close positions over the phone - essential in case your PC or internet connection crash at a critical moment. You could contact to their Internet help desks to see how quickly they respond to enquiries.
#8- Get Referrals Ask around and read forex forums to find out which forex brokers other people use and why they selected a specific broker.
http://www.articlesbase.com/finance-articles/8-basic-tips-on-choosing-best-forex-broker-249346.html
FOREX TRADING STRATEGIES
Fundamental analysis:
fundamental analysis describes methods of present and future valuation determined by social, economic, and political variables. While technical analysis is praised for its effectiveness at predicting short-term trends (under 3 months), the fundamental analysis approach is better suited at forecasting long-term movement in the FX market.Employing fundamental analysis strategies requires a basic understanding of supply and demand, the underlying force behind all financial markets. In the case of the FX market, the commodity being exchanged is a particular currency. Because the value of a currency is derived from the economic health of its respective country, global (or local) macroeconomic changes can invariably have an impact on currency rates.
Technical analysis:The aim of technical analysis is to forecast price trends in future basing on the historical data along with the one of the volume. Technical analysts are sure that any fundamentals and even expectations have affection to exchange rates changing being the factors of the market. Any private investor can have an access to the technical analysis tools in order to compute his or her trading decisions. Though, we can not state that these tools figure out unreliable estimations.Forex Trader should consider technical analysis as a key factor for success. Technical analysis basic overview is historical market prices analysis for the purpose of predicting price trends or having an adequate picture of prices movement in future. The concept of Forex Technical Analysis is made up of mathematical equations along with other technical applied towards Forex prices. Deep knowledge of the Forex Technical Analysis techniques is required for profitable dealing with Online Forex Market. The traders using technical analysis invest their money thoughtfully and monitor the daily prices movement precisely that lets them reach the profit. You can choose some basic technical indicators offered at our Forex Technical indicators page among lots of other ones.
FOREX TRADING TIPS.
Jumping into Forex trading with both feet? Here are five must-know tips on forex trading and mini forex to help you stay afloat in the Foreign Exchange currency market.
Know your forex trading market.Educate yourself about the currencies that you trade. The more you know about the country whose currency you’re trading in the forex market, the more accurately you’ll be able to predict which way the money will move.
Pick a forex trading system – and stick with it.Savvy forex traders will tell you that system is everything. Forex trading by system lets you automate your trades based on history, following the traditional peaks and valleys. Set up a system and live with it to make the most of your forex trading.
Practice makes perfect – but it’s not the real world.Practice forex trading accounts are great for learning how a particular trading account works – but they’re not the real world. Many experienced traders recommend starting off with a mini forex account to minimize your losses while you get acclimated.
Keep your eye on the margin.Margin trading is a great way to lose a lot of money quickly. Stay away from forex margin trading until you’re sure you know what you’re doing.
The only win that counts in forex trading is the bottom line. In forex trading, the bottom line is how much money you made at the end of the day. Don’t count won or lost trades – only dollars and cents.
Tony owns the http://www.live-forex-easy.com/ website. Please visit the site for more information about Swiss Forex Broker Marketiva.Swiss Forex Broker Marketiva
Article Source: http://EzineArticles.com/?expert=Tony_Chan
Remember dont be greedy and dont be fearful.
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