FOREX - the foreign exchange market or currency market or Forex is the market where one currency is traded for another. It is one of the largest markets in the world.
Some of the participants in this market are simply seeking to exchange aforeign currency for their own, like multinational corporations which must pay wages and other expenses in different nations than they sell products in. However, a large part of the market is made up of currency traders, who speculate on movements in exchange rates, much like others would speculate on movements of stock prices. Currency traders try to take advantage of even small fluctuations in exchange rates.
In the foreign exchange market there is little or no 'inside information'. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time.
Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar.
Unlike stocks and futures exchange, foreign exchange is indeed an interbank, over-the-counter (OTC) market which means there is no single universal exchange for specific currency pair. The foreign exchange market operates 24 hours per day throughout the week between individuals with forex brokers, brokers with banks, and banks with banks. If the European session is ended the Asian session or US session will start, so all world currencies can be continually in trade. Traders can react to news when it breaks, rather than waiting for the market to open, as is the case with most other markets.
Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to the BIS study.
Like any market there is a bid/offer spread (difference between buying price and selling price). On major currency crosses, the difference between the price at which a market maker will sell ("ask", or "offer") to a wholesale customer and the price at which the same market-maker will buy ("bid") from the same wholesale customer is minimal, usually only 1 or 2 pips. In the EUR/USD price of 1.4238 a pip would be the '8' at the end. So the bid/ask quote of EUR/USD might be 1.4238/1.4239.
This, of course, does not apply to retail customers. Most individual currency speculators will trade using a broker which will typically have a spread marked up to say 3-20 pips (so in our example 1.4237/1.4239 or 1.423/1.425). The broker will give their clients often huge amounts of margin, thereby facilitating clients spending more money on the bid/ask spread. The brokers are not regulated by the U.S. Securities and Exchange Commission (since they do not sell securities), so they are not bound by the same margin limits as stock brokerages. They do not typically charge margin interest, however since currency trades must be settled in 2 days, they will "resettle" open positions (again collecting the bid/ask spread).
Individual currency speculators can work during the day and trade in the evenings, taking advantage of the market's 24 hours long trading day.
talking about novices, either. Whether you trade Forex for a living, as a hobby or just for fun, odds are against your success. That's a simply astonishing fact. However, the remaining 5% of Forex traders somehow manage to break even and there are those lucky few that actually make money in the currency market – consistently!
Like the TV show says … “How’d they do that, anyway?”
That's the million dollar questions, isn’t it? Countless books, seminars and expos have been hosted to answer this very question. That sad fact is that thousands of books have been written and countless seminars and interviews have been conducted in an attempt to answer the magic questions. The reality of the situation is that there is no magic formula; no one single Holy Grail of Forex trading.
So what do the successful traders do that the rest of us have simple not comprehended. They have mastered a process of winning where they combine and customize several factor to produce consistent results. They have mastered the Process of Trading.
The Process of Trading is:
Strategy > Money Management > Self-Mastery
Here are some simple Forex Education tips to help you master the process of forex trading:
Success Tip #1 – You’ve Got To Have a Plan
You must have a written business plan that will detail all aspects of your trading. When are you going to trade, how much to risk, strategies for entries and exits are just o name a few. To become a consistent (profitable) Forex trader you have to plan your trade sand trade your plan.
Simplicity rules! Don’t make this plan too complicated. One sheet of paper for you mission statement and another for your trading plan should suffice. Anything more is probably too complicated.
Success Tip #2 – Focus on Your Personal Psychology
Knowing yourself will allow you to master the discipline necessary to execute high quality trades with solid money management techniques. Lack of discipline is fatal in Forex trading. Go on a personal journey to identify you attitudes towards risk and money. Get intimate with your strengths and weaknesses as a trader and build in to your trading plan strategies to minimize those weaknesses and maximize your strengths.
Different personalities lend to different trading styles. Get familiar with all the different styles and over time you will begin to gravitate towards one particular style. Don’t fight the urge like I did. I insisted I was a day trader, but had only limited results. I found my winning percentages were much higher when I entered swing trades. Guess what’s my bread and butter strategy now!
Success Tip #3 – Be Realistic About Your Expectations
This is a hard one, I know! I am on the internet every day and the amount of advertising is staggering. Brokers are offering free education (fox in the hen house if you ask me), forums of all different trading styles and points of view. Gurus pushing their system as “the one” that will make you the big bucks. How do you get through all that noise?
Let me tell you loud and clear right now – everyone is right and everyone is wrong. You have to make a personal commitment to become a successful trader, find a trading style that works for you and expect a slow and steady approach to wealth building through Forex.
What works for me may not work for you. Expect to go through an exploratory period where you are learning and at the same time exploring yourself as a trader. Keep an open mind and don’t pay attention to all the noise out there.
Success Tip #4 – Exercise Patience
Rome was not built in a day and neither will your trading account. In fact, I tell all of my students that while they are studying to become successful Forex traders they should not look solely at their account balance as an indication of success or failure.
By tracking and increasing your percentage of high quality trades you execute is a far better barometer of your progress than your account balance. Cause and effect rule here. Over time when you increase your probabilities through the execution of high quality trades your account balance will respond accordingly.
Keep the focus on the process and with time your results will blow your mind.
Success Tip #5 - Money Management Is Top Priority
I would rather have a shaky strategy and excellent money management techniques than the other way around. This topic warrants its own blog post to do it justice. Limited your exposure (read “risk”) allows for you to stay in the game and allow the laws of probability to work.
Let’s take a casino for example. They need gamblers to frequent their slot machines to make money. Why? They have a game that has a greater than 50% chance of making money for the house. The more people that play the slots, the greater the casino’s profits.
The casino controls risk by payout tables (always favoring the house!) and increases their probabilities by keeping gamblers at the slot machines (read “free drinks”). As a trader you must limit your risk by committing only 1% - 3% of available capital to a single trade. When you execute enough trades with a high probability strategy you too can clean up like the casinos – but only by staying in the game long term.
In conclusion, Forex trading is not easy. It’s hard work and will test the limits of your patience and perseverance. If anyone tells you otherwise .., buyers beware! It can be a very rewarding and profitable venture if done correctly. In the end it is a profession that requires a learning curve and practical experience, no different than an airline pilot or engineer. Understanding how to approach and learn this game will allow you to reap all the benefits advertised. It is your Forex Education that you will master the Process of Forex Trading.
The marketThe currency trading (FOREX) market is the biggest and the fastest growing market on earth. Its daily turnover is more than 2.5 trillion dollars, which is 100 times greater than the NASDAQ daily turnover.Markets are places to trade goods. The same goes with FOREX. The Forex goods (or merchandise) are the currencies of various countries. You buy Euro, paying with US dollars, or you sell Japanese Yens for Canadian dollars. That's all.How does one profit in Forex? Very simple and obvious: buy cheap and sell for more! The profit is generated from the fluctuations (changes) in the currency exchange market.The nice thing about the FOREX market, is that regular daily fluctuations, say - around 1%, are multiplied by 100! (in general, Easy-ForexT offers trading ratios from 1:50 to 1:200). If, for example, the exchange rate of "your" pair of currencies increased by 0.6% in the last 4 hours, your profit will be 60% on your investment! Such can happen in one business day, or in a few hours, even minutes.Moreover, you cannot lose more than your "margin"! You may profit unlimited amounts, but you never lose more than what you initially risked and invested.You can implement your choice (the pair of currencies, the volume amount) under any direction to which the market is moving, and yet make profit. It does not matter whether the exchange rate is going up or down: you can always decide to buy Euro and sell dollar, or vice versa - buy dollar and sell Euro. You don't have to physically possess certain currencies in order to perform "buy" or "sell" with them.How do I start?Register (Easy-ForexT offers the simplest and quickest registration process, no obligation); deposit your first trading "margin" amount (credit cards are welcome, only by Easy-ForexT); start trading.It can't be simpler or easier than that. Need help? We'll provide you with 1-on-1 training and service, as much as necessary (Easy-ForexT offers real people service, live, in your own language).
The Forex trading market is a relatively new phenomenon. Never before in the history of the world have we seen such an amazing event. In only 30 years, this industry has developed from almost nothing to a daily US$1.5 trillion market. How did this happen? Was it by design? Or was it by accident?Well the answer falls somewhere in between. There are three distinct time frames that set the stage for today's style of currency trading. The first time frame is the pre-currency trading era of the 1950s. The second time frame is the worldwide, politically volatile atmosphere of the 1970s. The third time frame is what has occurred in this free market economy since the demise of the gold standard 30 years ago. In each time frame, there have been three catalysts: war, gold, and foreign banks- that have played a significant role in propelling currency development.
Forex has always been a magnet for investors and traders, who are looking for an exciting business venture to invest in, giving them the thrill, adventure and excitement, along with an idea of a quick and easy way to make profits.
But, for those who are relatively new to the Forex trading world, it is extremely important to know exactly what you are getting into. When it comes to the matter of investing a huge amount of your hard earned money into something, first time investors should always make sure what they ought to expect out of it. What should and should not be done. What steps should be taken to play safe and what to do that keeps them at away from the frauds and scams.
First of all what needs to be learnt is, what is Forex and how does it work? What need’s to be known next are a few important trading tips, which will facilitate you during your transactions.
Foreign Exchange or Forex or FX is one of the biggest money market in the world, and is a platform where currency is sold and bought freely between buyers and sellers. Forex, unlike any other financial markets, has no physical location or central exchange.
With over $1.5 trillion USD being traded daily, the foreign exchange market has now become a market which is open to trading by an average investor as much as it is open to a high investor.
Launched over three decades back, in the early seventies, Market Forex introduced free exchange rates worldwide, according to which, the price of the currencies was determined on the basis of demand and supply only.
A number of reasons are responsible for making Forex a distinctive financial market. To begin with, no external regulatory authority is allowed to set or fix currency prices or rates in this market, making Forex is market which cannot be controlled in any way. Also, it is one of those few money markets that necessitate very little trading education, training and experience.
In order to know the Forex market well, the new traders should know how to start trading Forex. The few important things to be kept in mind when beginning to trade Forex are as follows:
What needs to be done firstly is, to open a Forex account. This can be done by filling up an application form, providing the required essential credentials, like personal details, financial particulars, and other details such as whether or not, a broker will be allowed to mediate with any trade if it appears to get too precarious and dicey.
Once your account has been created and recognized, you can begin to flow cash in to it and start trading Forex.
New Forex traders are always advised to create two accounts while trading, one of them being a real account, while the other being a demo one. A real account will facilitate the trader to actually trade in the market, with real money.
The demo account helps the new investor learn more about the trading business. This way the new trader can practice his moves of trading in the market, without the fear of losing all his money in case he/ she goofs up or ends up making the wrong deal.
Also, before you start trading in the market, you should have a closer look at all the top five foreign currencies and their current rates to make sure, you are aware of the current rates and are not missing anything.
The top five Forex currencies are: Pound/USD, Swiss franc/USD, Euro/Yen, USD/Yen and Euro/USD.
Always keep a check on the market. With the time intervals on hourly, daily and weekly schedules with all the currencies that are in any way related to your trade.
Being a successful trader requires to come up with individual and unique trading strategies. There is no “Golden Mantra” or “Trade Secret”, which will work for the traders.
Every investor needs to come up with their own, personal and distinctive trading approach when it comes to the market. There are different ways by which, the traders approach the market. Sometimes they may bank solely on industrial and technical analysis.
Some may like better to go in for a more elementary and basic approach for trading, while others may make use of the past records of the market, combined with both technical as well as fundamental techniques for trading.
All these strategies help the traders in studying the patterns of currency price trends and movements, making it easier for them to foresee the course of the potential developments in the Forex market.
Currency prices in Forex market mostly move in trends. They have a pattern, through which, certain movements can be studied. Some of these movements which have been studied over several years mostly help in discovering that pattern in the market trend. These trends are what should be recognized and valued properly, to facilitate the creation of an excellent trading strategy.
Any factors, financial or political, having some control over the value or the price of a currency, have already been measured by the market to be included as an important factor in creating a price trend.
When trading for the first time, it is always advisable to invest by the trends. Trading with a trend can facilitate you by advancing your chances with profit. Many new investors are enthusiastic to start trading as soon as they can, eventually ending up trading in any direction.
Trading by a trend or following a pattern and studying the market can increase your odds of being favored by the market, making your trading prospects high.
Unless your broker or signal provider is calling the shots for you, a certain amount of bona fide forex training is in order. From formal schooling to online education and learn-at-home courses, sorting through the various forex training alternatives can be more confusing than the subject of forex itself.
Regardless of where you are in your forex career, make sure you stay abreast of current trends and changes as they apply to forex trading techniques, signals, pips, spreads, and more. As a well-educated forex trader, I still seek counsel from my favorite signal providers just to stay one step ahead. For many, one source of forex education is not enough, as different services offer varying degrees of information about the forex market. Make sure your forex education is both well rounded and from reputable trainers.
Futures traders have to not only compete in the Futures market but also against themselves. You have the potential to be a successful Futures trader, but you also have the potential to be your own worst enemy. We, as humans, are naturally emotional. Our egos want to be validated - we want to prove to ourselves that we know what we are doing and that we are capable of taking care of ourselves. We also have a natural instinct to survive.
All of these emotions and instincts can combine to provide us with trading successes every now and then. Much of the time, however, our unchecked emotions get the best of us and lead us to trading losses unless we learn to control them.
Many Futures traders believe it would be ideal if they could completely divorce themselves from their emotions. Unfortunately that is next-to-impossible and some of our emotions may actually help us to improve our trading success. The best thing that you can do for yourself is learn to understand yourself as a trader. Identify your strengths and your weakness, and pick a trading style that is right for you. Don't get too far down the road, like James did, before you spend time learning about you.
In this section you will learn about the following four psychological biases that may be affecting your trading results and what you can do to overcome them.
There are many many advantages over the various other ways of investing. First of all it is a 24 hr market, except for weekends of course. You have the US market then the european and then the Asian. One of the great times to trade is during the over lapping periods. The USA and European overlap between 5am & 9am eastern and the Euro & Asian between 11pm & 1am eastern. Usually the busiest time and best to trade.
The is also the risk factor for the accounts. With futures and options you can get margin calls that can wipe you out. If you get caught in a bad trade not only do you lose the money in the account but you may have to come up with alot more from your pocket. It can be very risking. But not in Forex. Worst case scenario you could lose whats in you account. But you would have to do something really stupid. Like making a big trade on a Fundamental day and leave it alone. If market takes a bad move and you weren't there. OOOPS. But That wouldn't happen with a smart trader.
Then there are the demo accounts which is an account where you can trade using all the right things, platform,charts,and information. But you are using play money, or what we call paper trading too.
Plus with Forex you have a mini account. Instead of needing thousands of dollars to get into it. You can open an account with as little as $300.00. Now of course you will be trading at 1 tenth of a trade. IN other words you controlling 10,000 instead of 100,000.00 These are call lots. Which also means you will only risk 1 tenth too!
So if you would love to learn to do investing and not have near the risk you really need to take a closer look at Forex trading.
For the absolute newcomer to forex trading, this short collection of videos found on youtube.com will gently introduce you to the world of currency exchange. Several education and forex training programs are readily available over the Web to further your trading skills and knowledge and range from forex courses to rather complex software algorithms to help with trade decisions. I suggest you take the time to read the appropriate reviews and feel free to post reviews on any company, platform or website that you have had experience with.
How did the taipans and billionaires get so filthy rich?!
Besides the more obvious hard work and diligence and always saving little by little in their piggy banks, the really rich guys know how to work up the foreign exchange. Basically, foreign exchange trading or simply FOREX trading is just the buying and selling of the world’s currencies. Money today is not the same as money tomorrow. Money has time value. The worth of a currency can go up or down. There is one secret that FOREX traders live by. And it is buy low, sell high. Don’t ever forget that rule. However, the trick is to know when to buy and when to sell. In FOREX trading, everything is by speculation. Sure, there are graphs to aid decisions. Business pages also give out strategies for the day. But the next step is always a guess based from the previous actions. FOREX traders like to call their speculations as smart guesses. Usually, patterns on the currency values can be derived from how the politics of a specific country is running. For example, if there is a plan to oust the president, most probably the value of that country’s currency will go down—how low, we don’t know. Usually. Because there are still a lot of factors to consider why a currency is going strong or not. Improvement on the tourism sector can mean more foreign investments. This will be good for a particular currency, but this may affect how the other countries are doing. These are just trade scenarios. As the cliché goes, one man’s medicine may be another man’s poison. One country’s good tidings may be another country’s, well, downfall. That is why in FOREX trading, another secret to live by is to be aware of the national news in the country concerned. Current events have a say on the economics of a country. Money makes the world go round, so to speak. But, if one is truly serious in earning their first million in FOREX trading, another secret is—it might be a good idea to invest in a FOREX trading training school. Learn from the pros and conquer the world afterwards. Let me leave you one last secret I learned from my father. If everyone is going in this direction, go the other way. This applies to FOREX and other areas of life. You won’t ever get rich by following the crowd.
Most of the experienced traders around the world consider the Forex market as the best and most profitable of the capital markets. During many years forex trading had been the great and exclusive domain of major banks, very large financial institutions and the countries central banks; a good example of such a bank would be the U.S. Federal Reserve Bank. But over the last few years, thanks to the internet era, the market has been opened to anyone willing to learn the right techniques in forex trading and with the intentions of making substantial profits as the above mentioned institutions, that annually and consistently make pretty high profits from trading in the Foreign Exchange market.
The foreign exchange market (FOREX) will exist wherever one currency is being traded for another. This market, also known as “currency market”, is by far the largest market in the world in terms of all the cash value traded per day, this trading includes all that is being performed between large commercial banks, central banks, currency speculators, governments, and other financial markets and institutions. The trades taking place in the forex markets across the globe it’s known to exceed on average $1.9 trillion/day. Retail traders, this is, small speculators are only a small part of this market, but this doesn’t mean they can’t grab huge profits if they have learn the right way to trade the Forex. These individual traders participate in the market through broker firms.
Every FOREX currency trading system has inherent risks. Despite the claims you may see on some FOREX web sites, FOREX is not risk-free. You are trading with substantial sums of money and there is always a possibility that trades will go against you. There are several trading tools, however, that can minimize your risk, and with caution, and above all education, the FOREX trader can learn how to trade profitably and while minimizing losses.
Risks
Assuming you are dealing with a reputable broker, there are still risks to FOREX trading. Transactions are subject to unexpected rate changes, volatile markets and political events.
Exchange Rate Risk – refers to the fluctuations in currency prices over a trading period. Prices can fall rapidly resulting in substantial losses unless stop loss orders are used when trading FOREX. Stop loss orders specify that the open position should be closed if currency prices pass a predetermined level. Stop loss orders can be used in conjunction with limit orders to automate FOREX trading – limit orders specify an open position should be closed at a specified profit target.
Interest Rate Risk – can result from discrepancies between the interest rates in the two countries represented by the currency pair in a FOREX quote. This discrepancy can result in variations from the expected profit or loss of a particular FOREX transaction.
Credit Risk – is the possibility that one party in a FOREX transaction may not honor their debt when the deal is closed. This may happen when a bank or financial institution declares insolvency. Credit risk is minimized by dealing on regulated exchanges which require members to be monitored for credit worthiness.
Country Risk – is associated with governments that may become involved in foreign exchange markets by limiting the flow of currency. There is more country risk associated with 'exotic' currencies than with major currencies that allow the free trading of their currency.
Forex Software - Claims, claims, and more claims about smart forex software designed to replace an intelligent forex professional when it comes to trading decisions. If it were as easy as a simple software program every bank or financial institution would be on board. Alternatively, invest your time reading reliable reviews from those with real experience using a specific forex software package or Web-based system. Forex Justice enables you to avoid the pitfalls of forex software purchases.
24-HOUR TRADING
Compared to stocks Forex-Trading is 24-hours. A forex trader can trade right away once they spot an oppotunity to buy low and sell high. Remember, money has time value. And a lot of factors in the economics and politics of a government affect how low a currency will drop or how high a currency will gain. It is fairly easy to say buy low and sell high. But the trick is to know when to do it. With 24-hour trading the FOREX trader has the ultimate advantage already. Since, afterall, Time is Money.
High liquidity
A market or business is considered very liquid if the assets involved can enable the person to directly meet his payment obligations. In other words, if cash is at hand—immediately. What is a more liquid market than the FOREX market? FOREX has high liquidity, because it can be traded swiftly, without considerable loss of value, and anytime within the trading hours or in FOREX trading’s case—24/7.
No commission
FOREX trading need not have brokers in between to facilitate. With other forms of money market ventures and stock trading, brokers come in handy; because they are able to handle varied forms of portfolios and company stocks for the investor. Even if FOREX trading is involved with multiple currencies, it is a very direct business where the trader himself can act on his own; thus no commissions are leaked out and all profits are kept!
Steady market availability
In all businesses, businessmen strive for a steady market, if not an increasing one. Why spend time in a trading scene when it is short-term? Because FOREX trading is all about the buying and selling of currencies, it is a continuously moving market. Money make the world go round, as the cliché goes. The market will always be there. The trader only has to be aware of the rising and falling of the currencies. When is the currency starting to be weak? When is it going strong? Is there a trend?
Taking action
This benefits and advantages all the more make FOREX trading a very attractive business venture. For first time FOREX traders, why not inquire now at your home bank on how to start making your money work for you? FOREX trading is the way to go.
