Forex Trading
|
|
You can also increase your knowledge about this highly lucrative form of trading by going to our Forex Trading Book Store. Here you will find a large assortment of books about currency trading. As a mater of fact, if you decide to seriously pursue forex trading, it is essential to build your knowledge base. Therefore we encourage you to browse our book store and purchase those books which received good customer reviews. To perform forex trading, you will need a currency trading knowledge base and reference books.
What is Forex trading? Forex trading is foreign exchange trading. In Forex trading, currencies are traded around the world. The Forex market is by far the biggest market in the world. Volume of trades per day is 100 times that of the New York stock exchange, with trades averaging more then 1.5 trillion dollars per day. Foreign exchange trading is simply buying one currency with another currency. Or to put it another way, Forex trades result in the buying of one currency and the selling of another (currency trading), simultaneously. In foreign exchange lingo this is called a cross. If the value of the currency that you bought goes up, you can then sell that currency and make some money.
Lets look at the basic concepts involved in this type of trading.
Currencies around the world are always changing in value. There are currently 180 currencies around the world. The Forex trader is one who is knowledgeable in those factors which have an affect on the value of that currency for that particular country. The Forex trader is always looking for currencies which have decreased in value and are expected to increase in value. In this sense, the Forex trader is like a stock market trader. While the stock market trader is looking for companies where the stock in the company is expected to increase in value, the Forex trader follows the same principle but is looking for currencies which are expected to increase in value. What are some common factors which have an effect on the currency value for a particular country?
First, the currency value is determined by the purchasers of the currency, and these purchasers are primarily travelers, governments and Forex traders. But the purchasers need to determine what the fair market value is for a currency. The fair market value is the price that the buyer and seller agree upon. It is not the economist who determines the value of a currency, but rather simple supply and demand of that currency determines it’s value. Just like supply and demand determines the price of oil, supply and demand determines the value of currency. Common Forex pairs are US dollar and Japanese yen, Euro and US dollar. When looking at the value of a currency, it is always in relative terms because you are comparing it to the value of another countries currency.
So what are the factors which come into play when determining the fair market value of a currency.
Forex Trading - Factors Which Have an Affect on Currency Value
- Political Situation in That Country
To what degree of law and order exists in that country. Is the political situation very unstable. How much governmental bribery and corruption takes place in that country. The type of government that is in place, and what relationship do they have with the United States, UK, China and Russia. If a country in general is very messy politically, this can lower the value of their currency. - Economy of That Country
What is the job and unemployment situation in that country, and to what degree does inflation exist within that country? Is the country high tech or mostly farming or agriculture? Does the country have a growing economy? To what degree does poverty exist within that country? All of these factors play a roll in determining the robustness of the economy of that country. - Demographical Make Up of the Population
If the country consists of a large young population who is open to change, this has a positive affect on the value of their currency. As the work force of a country increases in size, then the economy of that country can grow. This also has a positive affect on the value of their currency. - How National Leaders Appear
How a national leader comes across to the rest of the world is very important. Do they seem tricky or untrustworthy, or do they appear to have a solid character, integrity, and a high degree of moral standards. This has to do with not only political leaders, but any prominent individual within the society who is presented to the world through world media sources. Any world known celebrity can play the same role as a political leader in terms of the perception people develop about that particular country. - How do People Around the World Perceive That Country
How a country is perceived from outside is very important. News and media play an important role here. Also, the more secretive a country is, and therefore the less which is known about a country, generally speaking the lower the value of their currency. In terms of outside perception, China is a case in point. China has created the perception to many Americans that the only way they can get ahead in terms of creating a robust economy, is to steal other countries technology, such as the technology within the United States. Cheating and piracy is running rampant within China and cheating is very much a part of the Chinese society. A recent study showed that 60% of Chinese Ph.D.’s plagiarized in order to produce a dissertation. Whether or not China’s poor academic standards will devalue the China currency remains to be seen. - Countries Natural Resources
How much of a natural resource or resources exist in that country, and do they have the technology and infrastructure to remove those natural resources. A case in point. Many of the middle eastern countries have massive oil reserves. Saudi Arabia is such a country. Because of the world demand for oil, this has a positive affect on the value of Saudi Arabia’s currency. - Extent of Natural Disasters in That Country
Has the country had a major earthquake or hurricane which has a deleterious affect on their economy. This can cause the market value of a currency to drop, which provides a buying opportunity for the Forex trader. - How Solitary or Open is the Country
Is a country starting to open it’s doors to outsiders, and therefore attract business from outside. Or are they more closed. China is a another good case in point. China is becoming more and more open and as a result is attracting companies from around the world to tap into the vast market of China. This has a positive affect on the value of the Chinese currency. - Is the Country at War and for How Long
A long term war can have a deleterious affect on the currency for a country. A case in point. On March 19, 2003 Bush launched an invasion on Iraq. A war which was supposed to last only months has extended into years. It has been over four years and progress has been slow in terms of the Bush Administration objective, which is to establish a democracy within Iraq which can be controlled by the Iraq people. The war is currently costing $195 million per day. This has had a deleterious affect on the value of the American currency, and is one of the contributing factors as to why the value of American currency has been dropping. - Degree to Which Population is Educated
Does the country consists of a highly technical work force. To what degree of Internet connectivity exists within the country. A highly educated work force usually means a robust economy which has a positive affect on the currency of that country. - Terms of Trade
If a country makes more money from their exporting of goods, this rising revenue from it’s exports can increase the value of it’s currency.
|
|
These are just some of the parameters that a Forex trader needs to be concerned with. But indeed, those listed here are some of the important ones.
Why would a Forex trader even be concerned about these parameters? A Forex trader is concerned about these parameters because they all have an affect on the market value of the currency for that country. A Forex trader will look at trends and perform a trend analysis to determine if one or more of these factors will have an affect on the currency of that country in the future. A Forex trader performs speculative trading the same way a stock broker performs speculative trading, with both hoping the value of the currency or the value of the stock, will increase.
A Forex trader not only needs to know the factors which affect a countries currency, they also need to understand the dynamics of these factors and if new factors are developing for that particular country. New factors can appear and old factors can disappear. Which factors will appear and disappear is speculation, and hence the term speculative trading.
Forex Trading - Advantages
- Forex trading is free of controls and it can not be manipulated.
- Superior liquidity. It is the largest liquid financial market in the world.
- Trading can take place at any time. No closing or opening time to trade with Forex trading.
- A very small amount is needed to start Forex trading. As little as $250 is needed by some Forex traders.
- Can trade on small margins. Usually a foreign exchange trading with a 1% margin is available. A margin of 1.0% means you can trade up to USD $1,000,000 even though you only have $10,000 in your account.
- Volatile markets offering profit opportunities.
- No commission or transaction fees.
Forex Trading - Be Careful of Scams
In recent years, their has been an increase in interest by the general public in terms of Forex trading. Along with this increase interest there has also been a rise in Forex trading scams. The Commodity Futures Trading Commission (CFTC) has the authority to investigate and take legal action to close down various unregulated firms offering or selling foreign currency contracts to the general public. The Division of Trading and Markets (now Division of Clearing and Intermediary Oversight, or DCIO) issued an advisory in 2007 concerning foreign currency trading by retail customers. A basic summary of this document can be found at Foreign Currency Trading - Fraud Awareness and Prevention. Make sure your Forex broker’s firm meets the basic requirements as spelled out in the summation of this document, in particular, the basic registration requirement. This should decrease the probability that a scam is taking place.
Forex Trading - Conclusion
If you want to make money from the buying and selling of foreign currency, the prudent investor will create an understanding of what Forex trading is all about. Here we have tried to provide some understanding from a conceptual perspective, and we looked at some advantages to Forex trading. We encourage those who want to build their knowledge further, to refer to our list of resources. Because Forex trading can carry a high risk, it may not be for every one, but enormous gains can be realized and many find that Forex trading offers more advantages over stock market trading. The value of a countries currency is dependent on many factors. By understanding a countries currency value factors, and what factors are expected to exist and not exist in that country, can lead to successful investing in the Forex trading arena. This is the type of knowledge your Forex broker should know, but for an individual who does not have the time needed to do this type of research, all you really need to know is whether or not the value of a particular currency, against another currency, displays an increasing trend or a decreasing trend. If the value trend is increasing you buy, and if the trend is decreasing you sell. The following videos describe the basic concepts of Forex trading:
Forex Trading - Videos
Forex Trading - Currency Converter
Forex Trading - 12 PM Foreign Exchange Rates
NY Fed | Foreign Exchange Rates (12 PM)
The New York Fed announced its decision to discontinue the publication of foreign exchange rates on December 31, 2008, given the availability of alternative market-based sources for these rates.
US: 0.8712 USD = 1 AUD 2008-08-20 NYFed noon buying
1 Australian Dollar buys 0.8712 United States Dollars - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 1.6240 BRL = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 1.6240 Brazilian Reais - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 1.0627 CAD = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 1.0627 Canadian Dollars - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 6.8529 CNY = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 6.8529 Chinese Yuan - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 5.0727 DKK = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 5.0727 Danish Kroner - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 1.4701 USD = 1 EUR 2008-08-20 NYFed noon buying
1 European Monetary Union Euro buys 1.4701 United States Dollars - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 7.8089 HKD = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 7.8089 Hong Kong Dollars - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 43.610 INR = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 43.610 Indian Rupees - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 109.98 JPY = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 109.98 Japanese Yen - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 3.3340 MYR = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 3.3340 Malaysian Ringgit - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 10.1400 MXN = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 10.1400 Mexican Pesos - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 0.7112 USD = 1 NZD 2008-08-20 NYFed noon buying
1 New Zealand Dollar buys 0.7112 United States Dollars - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 5.4084 NOK = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 5.4084 Norwegian Kroner - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 1.4145 SGD = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 1.4145 Singapore Dollars - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 7.7550 ZAR = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 7.7550 South African Rand - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 1047.30 KRW = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 1047.30 South Korean Won - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 107.900 LKR = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 107.900 Sri Lanka Rupees - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 6.3870 SEK = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 6.3870 Swedish Kronor - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 1.1008 CHF = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 1.1008 Swiss Francs - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 31.400 TWD = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 31.400 Taiwan N.T. Dollars - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 34.130 THB = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 34.130 Thai Baht - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 1.8603 USD = 1 GBP 2008-08-20 NYFed noon buying
1 UK Pound buys 1.8603 United States Dollars - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
US: 2.1446 VEF = 1 USD 2008-08-20 NYFed noon buying
1 United States Dollar buys 2.1446 Venezuelan Bolivar Fuertes - The New York Fed is strongly considering discontinuing the publication of foreign exchange rates at the end of 2008, given the availability of alternative market-based sources for these rates. A final decision will be announced in September 2007. If you have further questions, please email fxrates@ny.frb.org.
Forex Trading - News
Forex Articles (ActionForex.com)
Educational articles on trading the forex market. Available in ActionForex.com
Buy the Strongest, Sell the Weakest
One of the best technical tools we can use in our analysis is the status other currency pairs. If you are of the opinion that because of fundamental reasons the US Dollar will weaken, your next step would be to find the currency pair that gives you the best chance...
Stop Loss?? I Don't Want To Use It
Last week I was reviewing a website which has a trading signal program for those investors who prefer to not being involved in confusing market analysis and I respect them because such services normally will bring them more time to do other important things in their daily life. But the...
Canadian Dollar: End of Month Trading Anomaly
Did you know that the Canadian dollar has a very unique trading characteristic at the end of every month? According to our statistical analysis, we found that over the past 10 years, USD/CAD tends to fall in the last week of the month with a 95 percent confidence level. A...
Central Banks Interventions in the New Millennia
The universe of foreign exchange has expanded dramatically since entering the new millennium and its future remains golden. Fresh from the pruning dictated by the introduction of the euro, the wave of banks mergers, and the emerging market crisis of 1998, currency trading benefited greatly from the equity crisis in...
Trading With The Trend And Consolidation Patterns
The FX-market will develop distinctive trends from time to time, as a result of the underlying fundamental factors which make up each currency within the pair traded. Often times these trends occur as one currency offers a significant higher interest rate, which continues to draw investment capital out of another...
Bollinger Bands and Breaks
The (FX) market follows a steady cycle of oscillating between a range bound and trending environment, on a long and short term basis. During range bound markets, the buying and selling forces remain more or less equal, and therefore compress the market into a sideways trading pattern such as the...
Getting Creative with Support and Resistance
When the basic applications of technical indicator fail to explain the current market climate, we can experiment with a new and fresh look at the charts. The following (1-hour) chart shows a steady downtrend, with its expected support and resistance levels. Since the trend is to the downside, we should...
An Introduction to an Exciting Market - FOREX
The largest traded "market" in the world is not the U.S., Japanese or European stock markets. It's the foreign exchange market. It's also called FOREX for short, or called the cash currency or spot currency market. Speculators can and do trade this huge market, in which over 1 trillion dollars...
Trending Markets and the Ideal Entry Price
From time to time, the FX-market will create a trending market environment, perhaps as the result of a disparity in interest rates among the two currencies within the pair traded. When this trend occurs, it may be in our best interest to simply align our own trading account in the...
Large Round Figures
Many traders, from the individual speculator to the large fund will focus on the large round figures or round numbers when applying their analysis to the FX-market for a number of reasons. Option traders tend to select these price levels whether their exercising American, European, or Exotic options, as well...
Do Candlestick Charts Work on Forex Charts?
In general Candlestick charting developed in the futures and stock markets and thus many of the patterns or techniques are suited more to these markets. Many still claim that Candlestick charting can be applied to the Forex market but there are limitations when the technique is used in Forex charts.
The Market is always Technical
Let's get this straight. Technical analysis is a wide ranging group of techniques which obtain information from price action or derivatives of price action and provide indications to the analyst on the expected direction of price. The basic concept that is often said is that it is based on the...
Is it possible to forecast future Forex movements?
I often hear traders claim that it is impossible to forecast price movement. I can categorically claim that it is possible, and have considerable success and good accuracy in the process utilizing technical analysis in 100% of my forecasting. Economists of course laugh at the idea that there can be...
How a Drop in Natural Gas May Lead to a Rally in Yen
Typically, when multi-strategy hedge funds head to the currency markets to raise funds they will liquidate their most profitable positions first. Over the past six months this has inevitable meant carry trades. For example since its short term bottom on May 17th, USD/JPY with its 500 basis point positive interest...
How To Increase Forex Profits 100% in 10 Minutes
This simple exercise will increase Forex profits 100% and works for 99% of all short-term FX traders - stop trading so much - widen out your stops - widen out your profit targets - and only trade in the direction of the trend indicated by 4 hour chart.
Developing the "Holy Grail" Trading System
What moves Forex? Conventional thinking would imply economic fundamentals or factors such as the strength of a country's economy, which contributes to currency flows. Therefore, one would assume that everyone else would buy the US dollar against the British pound. Why not? The US economy is the largest in the...
CHF, EUR and GBP Calendar Trading Patterns
This particular article focuses on observable trading patterns in European currencies, ones based on the calendar. There is some hesitancy to refer to them as "seasonal" patterns, as one would with commodities, for the simple reason that they are not based on some kind of easily discernable pattern of supply...
Calendar Yen Trading Patterns
If one first takes a look at the market from a monthly perspective, it can be seen that USD/JPY and the JPY-based crosses have months in which they demonstrate clear tendencies. Figure 1 outlines this. The graph takes a month-by-month look at USD/JPY since 1999 (seven years total), which encapsulates...
Intermarket Dynamics- Forex Insight on Gold
The price action in Gold has been the focus of deserving attention, yet further insight can be gained from an inter-market perspective. The usual historical inverse relationship between the USDX, US Dollar Index, and Gold has been out of sync. Both Gold and the dollar have been strengthening. We can...
Contrarian Signs in Dollar Sentiment
The market rewards those on the side of surprise. Traders, particularly in Forex, try to avoid surprises. This is not in itself surprising because joining the crowd, is a defensive action that occurs everywhere in nature. A swarm of bees, a flock of birds, and a herd of sheep, provide...
Powered by FirstRSS Plugin
