22 Nov 2011

Forex Trading – Getting Started

Forex Trading: a Beginner’s Guide

The forex market is the world’s largest international currency trading market operating non-stop during the working week. Most forex trading is done by professionals such as bankers. Generally forex trading is done through a forex broker – but there is nothing to stop anyone trading currencies. Forex currency trading allows buyers and sellers to buy the currency they need for their business and sellers who have earned currency to exchange what they have for a more convenient currency. The world’s largest banks dominate forex and according to a survey in The Wall Street Journal Europe, the ten most active traders who are engaged in forex trading account for almost 73% of trading volume.

However, a sizeable proportion of the remainder of forex trading is speculative with traders building up an investment which they wish to liquidate at some stage for profit. While a currency may increase or decrease in value relative to a wide range of currencies, all forex trading transactions are based upon currency pairs. So, although the Euro may be ‘strong’ against a basket of currencies, traders will be trading in just one currency pair and may simply concern themselves with the Euro/US Dollar ( EUR/USD) ratio. Changes in relative values of currencies may be gradual or triggered by specific events such as are unfolding at the time of writing this – the toxic debt crisis.

Because the markets for currencies are global, the volumes traded every day are vast. For the large corporate investors, the great benefits of trading on Forex are:

  • Enormous liquidity – over $4 trillion per day, that’s $4,000,000,000. This means that there’s always someone ready to trade with you
  • Every one of the world’s free currencies are traded – this means that you may trade the currency you want at any time
  • Twenty four – hour trading during the 5-day working week
  • Operations are global which mean that you can trade with any part of the world at any time

From the point of view of the smaller trader there’s lots of benefits too, such as:

  • A rapidly-changing market – that’s one which is always changing and offering the chance to make money
  • Very well developed mechanisms for controlling risk
  • Ability to go long or short – this means that you can make money either in rising or falling markets
  • Leverage trading – meaning that you can benefit from large-volume trading while having a relatively-low capital base
  • Lots of options for zero-commission trading

How the forex Market Works

As forex is all about foreign exchange, all transactions are made up from a currency pair – say, for instance, the Euro and the US Dollar. The basic tool for trading forex is the exchange rate which is expressed as a ratio between the values of the two currencies such as EUR/USD = 1.4086. This value, which is referred to as the ‘forex rate’ means that, at that particular time, one Euro would be worth 1.4086 US Dollars. This ratio is always expressed to 4 decimal places which means that you could see a forex rate of EUR/USD = 1.4086 or EUR/USD = 1.4087 but never EUR/USD = 1.40865. The rightmost digit of this ratio is referred to as a ‘pip’. So, a change from EUR/USD = 1.4086 to EUR/USD = 1.4088 would be referred to as a change of 2 pips. One pip, therefore is the smallest unit of trade.

With the forex rate at EUR/USD = 1.4086, an investor purchasing 1000 Euros using dollars would pay $1,408.60. If the forex rate then changed to EUR/USD = 1.5020, the investor could sell their 1000 Euros for $1,502.00 and bank the $93.40 as profit. If this doesn’t seem to be large amount to you, you have to put the sum into context. With a rising or falling market, the forex rate does not simply change in a uniform way but oscillates and profits can be taken many times per day as a rate oscillates around a trend.

When you’re expecting the value EUR/USD to fall, you might trade the other way by selling Euros for dollars and buying then back when the forex rate has changed to your advantage.

Is forex Risky?

When you trade on forex as in any form of currency trading, you’re in the business of currency speculation and it is just that – speculation. This means that there is some risk involved in forex currency trading as in any business but you might and should, take steps to minimise this. You can always set a limit to the downside of any trade, that means to define the maximum loss that you are prepared to accept if the market goes against you – and it will on occasions.

The best insurance against losing your shirt on the forex market is to set out to understand what you’re doing totally. Search the internet for a good forex trading tutorial and study it in detail- a bit of good forex education can go a long way!. When there’s bits you don’t understand, look for a good forex trading forum and ask lots and lots of questions. Many of the people who habitually answer your queries on this will have a good forex trading blog and this will probably not only give you answers to your questions but also provide lots of links to good sites. Be vigilant, however, watch out for forex trading scams. Don’t be too quick to part with your money and investigate anything very well before you shell out any hard-earned!

The forex Trading Systems

While you may be right in being cautious about any forex trading system that’s advertised, there are some good ones around. Most of them either utilise forex charts and by means of these, identify forex trading signals which tell the trader when to buy or sell. These signals will be made up of a particular change in a forex rate or a trend and these will have been devised by a forex trader who has studied long-term trends in the market so as to identify valid signals when they occur. Many of the systems will use forex trading software which identifies such signals from data inputs which are gathered automatically from market information sources. Some utilise automated forex trading software which can trigger trades automatically when the signals tell it to do so. If these sound too good to be true to you, look around for online forex trading systems which will allow you undertake some dummy trading to test them out. by doing this you can get some forex trading training by giving them a spin before you put real money on the table.

How Much do you Need to Start off with?

This is a bit of a ‘How long is a piece of string?’ question but there are ways for to be beginner to dip a toe into the water without needing a fortune to start with. The minimum trading size for most trades on forex is usually 100,000 units of any currency and this volume is referred to as a standard “lot”. However, there are many firms which offer the facility to purchase in dramatically-smaller lots than this and a bit of internet searching will soon locate these. There’s many adverts quoting only a couple of hundred dollars to get going! You will often see the term acciones trading forex and this is just a general term which covers the small guy trading forex. Small-scale trading facilities such as these are often called as forex mini trading.

Where do You Start?

The single most obvious answer is of course – on the internet! Online forex trading gives you direct access to the forex market and there’s lots and lots of companies out there who are in business just to deal with you online. Be vigilant, do spend the time to get some good forex trading education, again this can be provided online and set up your dummy account to trade before you attempt to go live. If you take care and take your time, there’s no reason why you shouldn’t be successful in forex trading so, have patience and stick at it!

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22 Nov 2011

Forex: Benefits of Trading the Forex Market

Trading the Forex market has become very popular in the last years. Why is it that traders around the world see the Forex market as an investment opportunity? We will try to answer this question in this article. Also we will discuss come differences between the Forex market, the stocks market and the futures market.

Some of the benefits of trading the Forex market are:

Superior liquidity.

Liquidity is what really makes the Forex market different from other markets. The Forex market is by far the most liquid financial market in the world with nearly 2 trillion dollars traded everyday. This ensures price stability and better trade execution. Allowing traders to open and close transactions with ease. Also such a tremendous volume makes it hard to manipulate the market in an extended manner.

24hr Market.

This one is also one of the greatest advantages of trading Forex. It is an around the click market, the market opens on Sunday at 3:00 pm EST when New Zealand begins operations, and closes on Friday at 5:00 pm EST when San Francisco terminates operations. There are transactions in practically every time zone, allowing active traders to choose at what time to trade.

Leverage trading.

Trading the Forex Market offers a greater buying power than many other markets. Some Forex brokers offer leverage up to 400:1, allowing traders to have only 0.25% in margin of the total investment. For instance, a trader using 100:1 means that to have a US$100,000 position, only US$1,000 are needed on margin to be able to open that position.

Low Transaction costs.

Almost all brokers offer commission free trading. The only cost traders incur in any transaction is the spread (difference between the buy and sell price of each currency pair). This spread could be as low as 1 pip (the minimum increment in any currency pair) in some pairs.

Low minimum investment.

The Forex market requires less capital to start trading than any other markets. The initial investment could go as low as $300 USD, depending on leverage offered by the broker. This is a great advantage since Forex traders are able to keep their risk investment to the lowest level.

Specialized trading.

The liquidity of the market allows us to focus on just a few instruments (or currency pairs) as our main investments (85% of all trading transactions are made on the seven major currencies). Allowing us to monitor, and at the end get to know each instrument better.
Trading from anywhere.

If you do a lot of traveling, you can trade from anywhere in the world just having an internet connection.

Some of the most important differences between the Forex market and other markets are explained below.

Forex market vs. Equity markets

Liquidity

FX market: Near two trillion dollars of daily volume.
Equity market: Around 200 billion on a daily basis.

Trading hours

FX market: 24hr market, 5.5 days a week.
Equity market: Monday through Friday from 8:30 EST to 5:00 EST.

Profit potential

FX market: In both, rising and falling markets.
Equity market: Most traders/investor profit only from rising markets.

Transaction costs

FX market: Commission free and tight spreads.
Equity market: High Commissions and transaction fees.

Buying power

FX market: Leverage up to 400:1.
Equity market: Leverage from 2:1 to 4:1.

Specialization

FX market: most volume (85%) is made on major currencies (USD, EUR, JPY, GBP, CHF, CAD and AUD.)
Equity market: More than 40,000 stocks to choose from.

Forex market vs. Futures market

Liquidity

FX Market: Near two trillion dollars of daily volume.
Futures market: Around 400 billion dollars on a daily basis.

Transaction costs

FX market: Commission free and tight spreads.
Futures market: High commissions fees.

Margin

FX market: Fixed rate of margin on every position.
Futures market: Different levels of margin on overnight positions than day time positions.

Trade execution

FX market: Instantaneous execution.
Futures market: Inconsistent execution.

All this makes the Forex market very attractive to investors and traders. But I need to make something clear, although the benefits of trading the Forex market are notorious; it is still difficult to make a successful career trading the Forex market. It requires a lot of education, discipline, commitment and patience, as any other market.

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22 Nov 2011

Easy-Forex Review – Is Easy-Forex Really “Easy”?

Easy-Forex has rapidly become one of the biggest players in the currency trading market.

Part of the reason for this is its name! Easy-Forex implies that Forex trading is easy, which of course we all know is not altogether true.

However, when you are just starting in Forex trading, the first thing you need to know is how much assistance and training you are going to get. So the purpose of an Easy-Forex review must be to see how far a system that calls itself Easy-Forex actually succeeds in making things “easy”.

Easy-Forex does in fact have a number of unique features that do make it as easy as it can be to get a foothold in Forex trading.

  • One of the features of Easy-Forex that many people find attractive is that there is no software to download. This is not actually unique to Easy-Forex but it gives it an edge over trading platforms that do require a software download, which is the majority. If you have had your share of download problems and set-up glitches, you will certainly appreciate this. Plus it means that you can access your account instantly from any PC anywhere in the world.
  • Easy-Forex make it very easy to make a trade by allowing you to deposit funds using your credit card or Paypal. This avoids the frustration of finding that by the time your funds are in place, the price has moved.
  • Where Easy-Forex really scores is that it has a human face! This makes it probably the best Forex trading system for you if you are just starting. As soon as you register you are allocated your own personal account manager who works closely with you and who is very easy to get hold of when you have a question. The manager will advise you and will walk you through the initial stages. This to me is worth A LOT. And it is a better way of learning the ropes than using a demo account.
  • You don’t have to pay a commission to Easy-Forex when you make a winning trade. This is because Easy-Forex makes its profits from competitive spreads. Some people sneer at this, alleging that it means they can’t call themselves commission-free. But of course they are a business so they have to make a profit somewhere – but they aren’t making it directly from YOU.
  • One very big plus for Easy-Forex is the freeze-rate option that they offer. If you are a hesitant person, like me, it is extremely valuable. It gives you “thinking time” while deciding whether to accept a trade. Without it, the rate could change while you are hesitating and you could lose a good opportunity. Alternatively you might plunge into trades which on reflection might not be a good idea.

So there are features which do help to put the “easy” in Easy-Forex. But of course an Easy-Forex review would not be an Easy-Forex review without weighing up the negatives too. And you will see some very disgruntled people putting negative comments on the forums.

The majority of these seem to be from people who have lost money with Easy-Forex. And make no mistake, you WILL have losing trades. If you can’t cope with this, Forex trading is not for you, period. The real secret of trading Forex is to make sure that your winning trades outnumber your losing trades. And to do this, it is essential that you know what you’re doing. To this end, Easy-Forex is acknowledged to have the most thorough and personal tutorial service of any Forex trading system.

Another point that people complain about is that if you carry over a day-trade to the next day, Easy-Forex make a charge, and if you don’t have that money in your account, they deduct it from your credit-card without prior warning. To prevent this, it is essential that you keep sufficient money in your account.

An Easy-Forex review cannot provide a complete analysis of Easy-Forex – it can only weigh up the pros and cons. There are other excellent Forex trading systems on the market and of course you need to compare them, though in my experience Easy-Forex has more unique features to make it really easy to start trading. But whether it is for YOU, only you can decide!

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22 Nov 2011

Commodity Forex Online Trading – Be A Forex Killer Effortlessly!

Just how large is Commodity Forex Online Trading? Well, if you consider that the New York Stock Exchange trades volume is “just” 25 billion per day then you’ll realize how big a market Commodity Forex Online Trading really is! In fact it is three times bigger than the combined stocks and futures markets! Now how big is that!

But what is it that Forex Traders trade in the Foreign Exchange Market? The answer to that question is simple: Money! Forex Trading is the act of trading one currency against another. A trader might decide to sell some of the US Dollars he/she owns and buy Japanese Yens. This simultaneous exchange of currencies is thus at the core of Commodity Forex Online Trading. Because two currencies need to be involved in any trade, they are referred to as pairs. For example the Euro dollar and the US dollar (EUR/USD) or the British pound and the Japanese Yen (GBP/JPY).

In the old days, when the barter economy formed the basis of daily exchanges, the value of one product was estimated against that of another, and a trade would take place based on that estimation. This analogy still holds true for the Commodity Forex Online Trading market with the difference that the estimation of one currency against the other is based on the global market value of these currencies and not on the estimation of a few individuals.

Commodity Forex Online Trading actually means that when a currency is sold in order to make way for another, the forex trader actually invests in the economy of the country, the currency of which he/she is purchasing, and in doing so, effectively buys a “share” in that country’s economy. In our example, a trader who purchases Japanese Yens does so in anticipation of the market valuation of Japan’s current and future health of its economy.

All things considered equal, the rate of exchange of one currency against the other reflects the condition of each country’s economy. A country’s economy is dictated by internal and external forces, such as war, drought, political stability, civil unrest and so forth. The flow of currencies from one country to another results in large parts from such events.

The Commodity Forex Online Trading Market is unlike any other financial market, not only due to its size but also to the fact that it has neither a physical location nor a central exchange, unlike the New York Stock Exchange for example. As such, Forex Trading is considered an Over the Counter (OTC) market in that it has no boundaries and is independent from any central bank or institution. Simply put, Commodity Forex Online Trading is run electronically through a giant network of computers. Within a network of banks, continuously, 24 hours a day.

It used to be that until the late 1990, Forex Trading was only available to the big players who had to have an initial working capital of millions of US Dollars before being allowed to trade. Largely the sole domain of bankers and big financial institutions, it had no place for the little guy. The rise of the Internet has been such that Commodity Forex Online Trading firms can now offer trading account to smaller mom’s and pops retailers.

These small and oftentimes inexperienced traders can quickly become expert in the Commodity Forex Online Trading business by using expert forex trading software such as Forex Killer.

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