Compared to Equities or Futures, it can be easily said that the Forex market has several advantages and benefits. And Forex being a 24-hour market gives Currency trading the biggest advantage ever.
With no external control and a market open to all, Forex is the perfect currency trading platform to invest in. with the power in the hands of the currency traders, to choose any time of day to trade, whenever they want to, Forex trading basically puts the traders or investors in charge of how they want to trade and how much as well.
This is also because of the fact that Forex currency trading requires a very less amount of starting investment, which can easily enable a trader to open an account and start trading, unlike the cases in Stock Exchange and Futures market, where in, a fair amount of capital is required to start trading.
This facilitates trading for individuals or small traders, who can easily start trading small in the Forex market.
Being a round the clock market, Forex day trading enables the investor to select any time to trade, whatever is more suitable to him/her. Allowing trading for 5 and a half days a week, 24 hours a day, provides Forex traders with incomparable freedom leaving the decision for currency trading in their hands, whenever they want to, and not when the market allows them.
The Forex market is known as the Day Trading market because of the reason that basically, it trails the sun going around the world, and shifting from one main economic or banking center to another, starting from the United States to Australia, to New Zealand to the Far East, and towards Europe and then, again back to the United States.
With Forex, all through a trading day, the currency trading volume on the whole is established by two factors, one being which markets are open, and second being the time when every one of these Forex markets partly overlap one another.
The currency price at Forex day trading market, changes every second. One second a currency is up, the other second the other beats it to go high. Currency trading volume at Forex market remains high throughout, but it hits the highest point when the U.S, London and European markets are open, all at the same time, which only happens between the time periods of 1 p.m. to 4 p.m. by the GMT (Greenwich Mean Time).
As compared to the high volume of the U.S market, the level of the Pacific border markets, Japan and Hong Kong for instance, is quite low, but this still provides a Forex investor the opportunity to study and explore the vastly traded markets and currencies of the Pacific Region.
With more than $2 trillions of money being traded every day, Forex market is indisputably the biggest fiscal or financial market in the whole world. Here, the investors need to focus only on a few major currencies, rather than hundreds of equity or stocks. Forex market also is known for its fair costs and thin spreads.
Furthermore, Forex market has high levels of liquidity as compared to any other financial market and this is what makes Currency trading market the biggest economic market in the whole world. This liquidity largely comes from the banks which provide liberal cash flow to individual investors, companies and trade houses. And since the Forex market is a 24 hour market, the currency exchange trading experiences superior liquidity around the clock, as compared to the stock market, which contains a limited time period for high liquidity.
The instant trading through various means of communication such as phone and internet makes Forex day trading an instant trading business alongside making it a global trading platform.
With such high levels of liquidity, round the clock trading and steady trading prospects, Forex currency exchange market is undoubtedly one of the most profitable and potential business sectors.
Another basic benefit offered by the Forex market is that it is a no-commission market. With this free of commission trading, an investor gets to keep whole of the profit that he has earned through a day’s trading at the market. Keeping 100% of the profit is indeed a great deal for any trader today!
Taking advice from proficiently experienced Forex brokers will get you standard features like 100:1 leverage and regulated FCM status along with commission-free trading, to make your trading experience more professional.
Wednesday, December 5, 2007
Choosing the right Forex Broker
When new in the Currency trading market, one of the hardest decisions to make is that of choosing the right broker. It is difficult to decide on a Forex broker, whom we can safely open our trading accounts with, especially when there are so many of them in the market.
Offering features, limitations, pros and potential differing from there fellow brokers, there are a number of individually suitable brokers in the market.
Although every individual trader has its own personal parameters on which they judge the broker before choosing one, some parameters should be kept in mind always, before opting for any broker, whomsoever.
Is your broker established and regulated?
It is extremely important to know whether the broker you want to choose, is established and regulated or not. Choosing an established broker can confirm you about his reputation and the amount of expertise he has about the market.
A regulated broker will ensure credibility in your trade. This is because of the fact that every regulated broker has to present his fiscal reports to the regulatory bodies, such as local regulatory bodies like NFA (National Futures Association) or FDF (Swiss Federal Department of Finance) for US traders and brokers.
These reports, if failed to be presented, can give these bodies the right to penalize them to the extent of even expiring their market membership as a broker.
Such stringent rules and orders compel all these Forex brokers to maintain see-through fiscal reports. Also, such regulations on brokers facilitate the traders and depositors to trade safely, hence increasing their overall investor security.
What is the current state of affairs while trading?
The current state of affairs at your trading platform along with the features and conditions offered by your chosen broker are amongst the most important factors that should be kept in mind while trading. These factors include within them, certain aspects such as:
Brokerage or commission
Some brokers demand a fee or a commission from the traders. But it is acceptable if some of them are charging a fee, as they might be offering a smaller spread than the other brokers in market.
Smaller spread
Clearly, the lesser the spread on a currency pair, the better is the trading environment for the traders.
Trading implementation
Different brokers guarantee different targets. Most of them go in for assuring quick and visible implementations through normal market situations. Trading implementation deals with keeping a track of how rapid yet steady are the execution of trades really going on.
Investor protection
Make sure that all your trading details and finances are kept in a separate account and are secured with an insurance cover.
Lowest investment
Every trader or investor should have proper knowledge about the lowest sum of funds which are a pre requisite for opening an account for trading purposes.
If kept in mind before going in for a full fledged trading, this is a very useful and helpful feature which will help them to experiment a little and see for themselves, how well or bad do they perform.
Vigilance
Going by the above mentioned parameters, must have eliminated a number of brokers from your pick list. With a few left in hand now, you still have to cut short to just one or two of them to choose from.
Here is when you need to check the remaining. Once you have stepped in to the market, you should now get aware of your surroundings and get vigilant in your actions.
Some of the major aspects for which you should gain knowledge and get informed are:
Slippage
Slippage can be known as the unfavorable difference in the currency’s price movements between the price when the order is placed and the actual market value of it. What you need to know is whether your broker respects stop loss and win profit levels?
Customer support
This is the most significant factor to be considered before finally selecting a broker for yourself. Is your broker courteous to talk to? Do you think you can openly discuss your doubts and apprehensions with him? Is he enthusiastic to help his investors and clients?
If your broker is registered with the local regulatory bodies, it is very easy for you to visit the supervisory authority’s website or office and get hold of as much information as you require about your Forex broker.
Go ahead and ask other traders about their understandings, incidents and experiences with their own brokers.
Get as much of broker information as you can. You can take help from certain forums related to broker information such as ForexFactory, ForexNews.
With the above given parameters, it should be much easier for any trader or investor to now choose a broker, more wisely and diligently.
Shortcomings Of being a Forex Trader
Not everyone succeeds with Forex trading. It’s a fact known to all! But the thing to wonder about is that while some achieve more than they aim for, others fail to get back even what they invested.
Although there is no success formula when it comes to Forex Market Trading, certain measures can be taken and a few things kept in mind, which can put struggling traders, a step ahead from their current positions.
A little guidance and information regarding some important aspects of Forex trading will help the traders to know, what to do and what NOT to! It is at times better to recognize the key shortcomings and then keep away from them, in order to grow successfully.
Trade Secret
Traders spend years trying to discover the so called “Trade Secret”. A secret known to just a few other traders, which can turn them into a billionaire, overnight!
There is no such thing as a “Trade Secret”, which can make someone rich overnight. This is because of the fact that in the Forex market, Change is the only thing permanent! Every instant is only one of its kinds. Traders should work on discovering a Forex trading system that suits their own individuality and behavior, so that they can easily follow it.
Go for the thrill
Forex, Currencies and Fiscal matters have always attracted people by being an unpredictable, yet, challenging and exciting arena to explore. People are hence, attracted to becoming a Trader.
But if exploration and adventure are the only reasons for certain traders to join trading in the Forex market, they are soon about to realize how costly this quest turns out for them.
What’s Money Management?
A significant characteristic of any form of trading is the finances. Some people feel that they need to think about money management only when they have sufficient amount of profitable cash in hand. What they forget is that the trading involves a huge amount of risk in it too.
Only when a trader trades keeping in mind money management, it lets his profits to enhance systematically, while limiting his risk with each trade. Money management lets a trader know, how much he can afford to lose.
Easy Money
Easy money is also one of the most common reasons why people are attracted towards Forex market and trading. As seen on television or movies, they believe it easily when heroes turn into millionaires with just one bet.
Seeing along with it, how easy it is to trade, people want to become traders and invest whatever little they can afford, just to become rich easily.
Indeed it is easy to trade and the market is open for anyone who wants to come in and trade. But the main reason to enter into the market is to make money, an aspect of Forex trading which is not easy at all.
Making profits or accomplishing constant profits is a hard nut to crack in reality. It is something that needs and involves a lot of learning, persistence, restraint, dedication, and lots of other qualities, which are not that easy to keep up with.
Education
Education makes the foundation for any business, service or job or any other discipline, to be successful. Full knowledge about a matter one is dealing in, helps his/her understand in depth, what needs to be done.
Trading too, necessitates its traders to have thorough study and knowledge about the stream. Experience is of valuable significance here. Anyone with a high level of expertise or experience in the trading market can guide a new trader correctly. Although, one needs to beware of some experts who might get a newbie going on the wrong side of it all.
Market is a teacher in itself, teaching everyday to a number of traders on what should have been done in a particular situation. Education, in terms of currency trading can take as many years as one can think of.
The market can prove any expert wrong at any point. So it is always said in terms of the market, that the learning never ends here!
Mental adjustment
Considered as one of the most undervalued issue when talking about trading matters and market, Mental adjustment is one of the main matters to be kept in mind when entering or deciding about entering into the trading world.
So many psychological issues such as ego, greed, proud, to name a few come into the picture when traders trade with each other. All these issues are a matter of significance as they determine whether to make or mar a deal.
Above mentioned are some of the most common hurdles and shortcomings faced by the traders, new and old, everyday.
It is not easy to trade. What one needs is the skill, education, patience, perseverance and the right kind of attitude to deal with any situation whatsoever, sportingly.
Market will someday show us profits and some days, loss. What we need to learn is to take risk, but with precautions.
Handling Forex with Risk management strategies
The enormous size of the Forex market gives it the speed and liquidity like no other financial world market. Losses exist, but Profits are even higher! But just like any other speculative trade, amplified risks are involved along with the probability for a higher profit/loss.
Exit the market at profit targets
Limit orders let the Forex investors stop further trading and leave the market at preset profit objectives. Creating a disciplined trading methodology, Limit orders allow the traders to fix a limit of the profits which they want to make, and then exit the market. Also, they are free from the work of continuous monitoring the market sitting in front of their computers all day.
Limit your losses
Stop/loss commands also follow the same motive as that of the limit orders, by allowing the investors to set an exit point for a loss. By limiting your losses to a pre set position, Stop/loss orders help investors control their risk conditions. By placing them well in advance, you have an almost accurate idea of how much in loss will you be, in case the stop/loss order is hit!
Accurate placing of stop and limit orders
Where does the investor place his stop and limit orders respectively, determines the amount of risk he is taking up. It is advisable not to place your stop/loss orders too close to the normal market price, as a little fluctuation in the market, can then trigger the order. Likewise, limit orders should also reflect a rational hope of profits you are expecting, based on the market's trading activity. They should be set at the rate which is not overexposed to the trade, and also not too close to the market.
'Stop-loss' and 'limit' orders can lower an investor's exposure to risk by a large proportion.
Analyze while trading Forex
The things to know about Forex Comprehending all the intricacies of the basics behind an investment, and understanding behind the major market trading, is the right way to go about trading Forex. Skilled technical analysis and good money management skills are the basic essentials to trade well. Analyze the market and create a position, establishing rational stop loss and profit taking levels.
With MarketForex, an investor has the facility to change their trade orders as many times as they want, either as a stop loss order or as a limit order. Currency markets are highly unpredictable and tentative in nature, as any currency can fluctuate to becoming very expensive or very cheap in relation to other.
There is always a momentous risk in any Forex or currency deal, and thats the shortcomings of being a forex broker. At MarketForex, our expertise and tools link to the world’s Forex trading floors, getting you the lowest foreign currency rates with the prospects of making a transaction.
Are you an “obsessed to win” trader?
Traders of all kinds have always been attracted towards Forex trading with the basic motive to make profits, and to win as much as they can. The thrill to enter the market, the adventure to bid the money, and the attempt to predict the unpredictable drives investors to this largest Foreign Exchange market in the world.
But what we as traders do not realize is that unknowingly, our emotions can make us trade incorrectly.
There is no doubt that entering Forex market can open a lot many avenues for you as a trader to explore large money making prospects easily accessible with the Forex trading these days. People from various genres, class and gender enter the Forex world on a daily basis, just for the hope of winning it all and experiencing the great style and life of a money-making Forex trader.
But, while get easily floored by the profits and winnings of a successful Forex trader, what is easily forgotten is the fact that while there are quiet a few traders who are winning at the Forex market one day, they can always be the ones who can lose all their winnings the very next day!
What needs to be understood is that Forex trading market is just like a war front, where you have every possibility to lose the battle as much as you have to win it. It is a war where you can easily lose all your capital and confidence if you do not act sensibly in your wars in opposition to the Forex market
Forex market can often act as a clever, frightening and a somewhat wicked enemy at times too. This is exactly why every move in the Forex trading market should be a planned and organized move. You, as a trader should never be unprepared when inside the trading system once. With such a volatile market as the Forex, anything can happen anytime. In the world of Forex market, the first thing that can go against you while trading is your over confidence to win.
An obsession to win for a trader, can become a benefit for the market, making it easier for your enemy to defeat you, as you become overpowered by your emotions.
A lot many traders and investors believe in the strategy of never to close a trade until or unless it is turning into a profitable one. An approach which can surely lead them to a series of losses. Also, many investors think that the assumptions and predictions they have made on a particular trade, based on some trading indicator and industrial analysis will always churn out accurate and right results for them.
Believing that the Forex market will begin performing in the exact same way in which they had predicted, even if the trading graphs and charts clearly indicate the opposite, is foolishness. An attempt which can make traders lose all their money on false anticipations. No wise Forex trader will trade with such illusions in his mind. In reality, the market can any moment, move against or with you. Such a behavior while trading will only lead you to continuously pouring in your money into losses, which will obviously be market’s gains.
You will be easily defeated by your own obsession of wining which will at the end of the day, turn into a loss for you instead of being profitable.
So, always keep in mind never to be obsessed with emotions and trade Forex.
But what we as traders do not realize is that unknowingly, our emotions can make us trade incorrectly.
There is no doubt that entering Forex market can open a lot many avenues for you as a trader to explore large money making prospects easily accessible with the Forex trading these days. People from various genres, class and gender enter the Forex world on a daily basis, just for the hope of winning it all and experiencing the great style and life of a money-making Forex trader.
But, while get easily floored by the profits and winnings of a successful Forex trader, what is easily forgotten is the fact that while there are quiet a few traders who are winning at the Forex market one day, they can always be the ones who can lose all their winnings the very next day!
What needs to be understood is that Forex trading market is just like a war front, where you have every possibility to lose the battle as much as you have to win it. It is a war where you can easily lose all your capital and confidence if you do not act sensibly in your wars in opposition to the Forex market
Forex market can often act as a clever, frightening and a somewhat wicked enemy at times too. This is exactly why every move in the Forex trading market should be a planned and organized move. You, as a trader should never be unprepared when inside the trading system once. With such a volatile market as the Forex, anything can happen anytime. In the world of Forex market, the first thing that can go against you while trading is your over confidence to win.
An obsession to win for a trader, can become a benefit for the market, making it easier for your enemy to defeat you, as you become overpowered by your emotions.
A lot many traders and investors believe in the strategy of never to close a trade until or unless it is turning into a profitable one. An approach which can surely lead them to a series of losses. Also, many investors think that the assumptions and predictions they have made on a particular trade, based on some trading indicator and industrial analysis will always churn out accurate and right results for them.
Believing that the Forex market will begin performing in the exact same way in which they had predicted, even if the trading graphs and charts clearly indicate the opposite, is foolishness. An attempt which can make traders lose all their money on false anticipations. No wise Forex trader will trade with such illusions in his mind. In reality, the market can any moment, move against or with you. Such a behavior while trading will only lead you to continuously pouring in your money into losses, which will obviously be market’s gains.
You will be easily defeated by your own obsession of wining which will at the end of the day, turn into a loss for you instead of being profitable.
So, always keep in mind never to be obsessed with emotions and trade Forex.
What moves the currency rates?
A lot of reasons can have their hands behind the fluctuating market and currency rates, and not one or two can be blamed for any sort of rise or fall in them. Although it would not be entirely wrong to say that the Forex market business is more or less based on these fluctuations only. Traders trade in this market, purchase and sell various currencies with the expectation of making gains if the value of the exchange moves in their favor. Now this sudden movement in the market can be caused by either market news or current events all over the world, which have an effect on the demand and supply of these currencies.
This law of demand and supply is what works well in this Forex market too. When the demand of a particular currency goes up, its market price also escalates as compared to the other currencies in the market.
Similarly, if the demand of a particular currency goes down, traders are no longer interested in holding it back with them, and so the market price of the currency also decreases.
Economic development
It is quiet obvious that the traders trading in currencies and interested in exchange markets, will be equally keen and interested in knowing about the overall economic development of the countries whose currencies they hold, or are interested in buying. Every trader wants to be convinced that they economy they are about to invest in is developing with a solid and steady growth, which can be known by studying various factors such as unemployment, import and export, and the GDP statistics of a particular country.
Rise in Unemployment experienced by any particular country is considered as a negative factor, whereas a fall in Unemployment is always measured as a positive aspect.
Similarly, an increase in the GDP figures of a particular country is considered as a positive feature, whereas a decrease in GDP figures is always measured as a negative aspect.
Also, a mount in the Exports numbers of a particular country are always considered as a positive trait as compared to the decrease in Exports numbers which is looked upon as a negative aspect.
Political strength
Lots of factors are responsible for determining the political stability of a particular country. These factors can be any kinds of alterations in government or by the government, rising unemployment rates, elections or international and political conflicts.
Every investor is cautious enough and considers all these factors in his mind before going in for investing in a particular economy.
Any kind of Political conflicts, natural calamity or terrorism attacks or wars are major contributors in making or marring the economy of a country.
Interest Rates
Around the world, interest rates are always followed by money. If the interest rates of a particular country rise up, investors big and small from all over the world would want to invest their money with it in order to gain higher returns on their investments.
Mostly it can be said that if you want to capitalize on higher investments, then you have to keep an eye on the rise and fall of the interest rates in a particular country. And the factors which will help you determine this rise and fall are mostly the financial rise indicators in addition to the speeches of the current leading, dominating and significant figures like big politicians, iron and steel magnets and businessmen.
The interest rate movements generally take place during the programmed meetings by the central banks like BOE, FED, ECB, and BOJ.
An increase in the Interest Rates is always considered as a positive factor for a particular country as compared to the decreased in Interest Rates.
This law of demand and supply is what works well in this Forex market too. When the demand of a particular currency goes up, its market price also escalates as compared to the other currencies in the market.
Similarly, if the demand of a particular currency goes down, traders are no longer interested in holding it back with them, and so the market price of the currency also decreases.
Economic development
It is quiet obvious that the traders trading in currencies and interested in exchange markets, will be equally keen and interested in knowing about the overall economic development of the countries whose currencies they hold, or are interested in buying. Every trader wants to be convinced that they economy they are about to invest in is developing with a solid and steady growth, which can be known by studying various factors such as unemployment, import and export, and the GDP statistics of a particular country.
Rise in Unemployment experienced by any particular country is considered as a negative factor, whereas a fall in Unemployment is always measured as a positive aspect.
Similarly, an increase in the GDP figures of a particular country is considered as a positive feature, whereas a decrease in GDP figures is always measured as a negative aspect.
Also, a mount in the Exports numbers of a particular country are always considered as a positive trait as compared to the decrease in Exports numbers which is looked upon as a negative aspect.
Political strength
Lots of factors are responsible for determining the political stability of a particular country. These factors can be any kinds of alterations in government or by the government, rising unemployment rates, elections or international and political conflicts.
Every investor is cautious enough and considers all these factors in his mind before going in for investing in a particular economy.
Any kind of Political conflicts, natural calamity or terrorism attacks or wars are major contributors in making or marring the economy of a country.
Interest Rates
Around the world, interest rates are always followed by money. If the interest rates of a particular country rise up, investors big and small from all over the world would want to invest their money with it in order to gain higher returns on their investments.
Mostly it can be said that if you want to capitalize on higher investments, then you have to keep an eye on the rise and fall of the interest rates in a particular country. And the factors which will help you determine this rise and fall are mostly the financial rise indicators in addition to the speeches of the current leading, dominating and significant figures like big politicians, iron and steel magnets and businessmen.
The interest rate movements generally take place during the programmed meetings by the central banks like BOE, FED, ECB, and BOJ.
An increase in the Interest Rates is always considered as a positive factor for a particular country as compared to the decreased in Interest Rates.
Forex vs. Futures
Being the largest financial market in the world, Foreign Exchange market deals in the business of trading of the world's various currencies, with more than $1.5 trillion changing hands every day. Futures, on the other hand, deals in contracts to buy or sell a foreign currency on a specific date in the future, the price for which is set today.
In other words, futures are the same as forward exchange deals, which are tailor made to the customer requirements and needs for the amount of funds and due date of deal.
There are plenty benefits of Forex over currency futures trading, especially with the difference between the two regarding their target audience, transactions fees and liquidity, as given below:
24-Hour Market
Currency market is a 24-hour market, unlike most of the futures exchanges, allowing its traders to react to the immediate news happenings by trading immediately. This facility cannot be availed with the futures market which only operates during business hours and not for 24 hours a day.
Superior liquidity
Forex markets hold unmatched liquidity as compared to currency futures. Especially with $1.5 trillion changing hands daily, Forex is the largest and most liquid market in the world. It can absorb a large trading volume and the transaction sizes are huge too, in comparison to any other market. Futures market, on the other hand, is a $30 billion market per day which provides only limited liquidity with a lesser trading volume.
Forex uses simple and easy price quotes
While the currency futures trading and price quotes have added complications of time factor and interest rates between various currencies, the Forex markets require no such adjustments of future calculations and consideration for the interest rate of future deals.
Forex trading is commission free
Futures trading contracts get along with them, trading costs, exchange fees and clearance fees which eat up most of the trader's profits. But this is not the case with Forex trading because here, the trader deals directly with the market through online exchange, thus saving the brokerage fees. Although, there is always an initiating cost to any trading being done, which is revealed in the bid/ask spread, present in all types of trading, be it Forex, Futures or Equities.
High execution quality and speed
It is only with Forex trading that a trader can experience high execution quality and speed because of its high trading ratio as compared to any other market. The reason why futures market does not offer rapid execution or price is due to the lesser volume of trading and liquidity and definitely due to uncertainty during normal market conditions, as the trading prices on market orders is far from certain.
Forex vs. Equities
Forex market offers several advantages over Equity trading, such as:
24 hours open market
The biggest advantage of the Forex market over the Equity trading is that of a 24 hours open market. Active 5 days a week, Forex market gives its traders what Equity trading does not. Equity trading is restricted to regular business hours, making Forex, the only incessantly moving trading platform.
Being a 24 hour trading market, there is always some investors, somewhere in the world who are dynamically trading foreign currencies. This also enables these investors to react to any breaking news of the market, immediately.
Forex market enables its investors to trade on the upward as well as the downward trends of the market, giving them the facility to buy and sell currencies. This serves as another major advantage of Forex market over Equity trading. This is because in the equity market, it is more difficult to trade during downward trend of the market, due to some market policies. There are a certain risk aspects as well, Read more about Risks in Forex
24 hours open market
The biggest advantage of the Forex market over the Equity trading is that of a 24 hours open market. Active 5 days a week, Forex market gives its traders what Equity trading does not. Equity trading is restricted to regular business hours, making Forex, the only incessantly moving trading platform.
Being a 24 hour trading market, there is always some investors, somewhere in the world who are dynamically trading foreign currencies. This also enables these investors to react to any breaking news of the market, immediately.
Higher trading volume
Also, the trading volume in the Equity trading or the major stock exchanges is often 100 times lesser than foreign exchange market. Furthermore, majority traders are willing to buy and sell currencies because of the need of various countries, which want to continue to trade goods with each other.
No commission and transaction fees
Forex serves as a more cost-efficient trade as compared to Equity trading, especially in terms of both commissions and transaction fees. Most of the sites dealing with Forex trading do not charge its investors or traders with any commissions or fees, while offering them, access to all the significant market information required for trading purposes. But in case of Equity trading, commissions range from $5 to $100 or more per trade in case of full service brokers.
Price stability through superior liquidity
The trading volume of the Forex market being 100 times more than the New York Stock Exchange, there are always dealers willing to buy or sell currencies here. The superior liquidity of the major currencies also helps ensure price stability in the Forex market. But this cannot be the case with the Equity trading which has a lower trade volume. This can therefore put the investors of the stock market to liquidity risk, resulting in larger price movements.
Higher leverage
Forex market offers higher leverage as compared to all the major stock exchange trade markets. While the commonly available leverage from the online Forex dealers is 100:1, the leverage offered by the Equity brokers is as low as 2:1 margin. Such high leverage enables the Forex traders to trade much larger sum of currency than they have deposited. Also that depends on the types of Forex brokers one considers for trading.
Forex market enables its investors to trade on the upward as well as the downward trends of the market, giving them the facility to buy and sell currencies. This serves as another major advantage of Forex market over Equity trading. This is because in the equity market, it is more difficult to trade during downward trend of the market, due to some market policies. There are a certain risk aspects as well, Read more about Risks in Forex
Forex Analysis - Stage 1
STAGE I – WHO
Although Forex as a market offers its successful traders with some of the big bonuses as rewards, it is also an equally tough market to crack, and doing well here takes more than just a knack for betting. Therefore, with the will of trading, the skill is also required, and who would help you get acquire this skill better than the previously successful traders. Their proven techniques and methods can be of great help to all the new traders who are yet to develop their own strategies for trading.
Every player in the Forex markets works his trading in his own way, with his own study, intuitions, and outlook. Any player on entering the market creates a force which is always relative to the outlook another trader. This force between the trader buyer and trader seller always plays a role in creating price changes, sometimes drastic and sometimes light, and also significant movements.
Every trader carries a different perspective, with a dissimilar mind-set, singular target, varied investment possibility, and market force. And even more, what mainly marks a distinction among these market traders are the various other elements of the Forex trading market, such as:
Appropriate level of discipline
Wise money management techniques
Profound research abilities
Achievable profit objectives
Sharp quantitative abilities
All these elements combine together to give a trader a certain level of sophistication.
In the market, there always are extremely superior and superior banks, financing firms and companies and traders. Here, all the banks, financial firms and companies, and investment corporations have an external governance of sticking to the rules, regulations and restrictions. Whereas an individual trader can only be restricted by his pocket as he has the smallest amount of external control or restriction that might keep him from taking wrong decisions.
When we talk about restrictions, one is the external control while the other is the internal restrictions. Internal restrictions can be imposed on themselves by only those traders which believe in maintaining self-discipline. While the others who cannot control their gut feelings or intuitions and want to “trade till they win it all” even after losing the entire sum of money which they had initially planned to trade with, can never reach that level of sophistication required to stay in position in the market.
Sophisticated traders are those which can successfully impose this discipline on themselves and are aware of the right time to start trading and stop it to quit too. A sophisticated trader always makes use of the tools and strategies to follow those highly skilled and professional previous market participants to extract profits and constructive returns from the market.
Although Forex as a market offers its successful traders with some of the big bonuses as rewards, it is also an equally tough market to crack, and doing well here takes more than just a knack for betting. Therefore, with the will of trading, the skill is also required, and who would help you get acquire this skill better than the previously successful traders. Their proven techniques and methods can be of great help to all the new traders who are yet to develop their own strategies for trading.
Every player in the Forex markets works his trading in his own way, with his own study, intuitions, and outlook. Any player on entering the market creates a force which is always relative to the outlook another trader. This force between the trader buyer and trader seller always plays a role in creating price changes, sometimes drastic and sometimes light, and also significant movements.
Every trader carries a different perspective, with a dissimilar mind-set, singular target, varied investment possibility, and market force. And even more, what mainly marks a distinction among these market traders are the various other elements of the Forex trading market, such as:
Appropriate level of discipline
Wise money management techniques
Profound research abilities
Achievable profit objectives
Sharp quantitative abilities
All these elements combine together to give a trader a certain level of sophistication.
In the market, there always are extremely superior and superior banks, financing firms and companies and traders. Here, all the banks, financial firms and companies, and investment corporations have an external governance of sticking to the rules, regulations and restrictions. Whereas an individual trader can only be restricted by his pocket as he has the smallest amount of external control or restriction that might keep him from taking wrong decisions.
When we talk about restrictions, one is the external control while the other is the internal restrictions. Internal restrictions can be imposed on themselves by only those traders which believe in maintaining self-discipline. While the others who cannot control their gut feelings or intuitions and want to “trade till they win it all” even after losing the entire sum of money which they had initially planned to trade with, can never reach that level of sophistication required to stay in position in the market.
Sophisticated traders are those which can successfully impose this discipline on themselves and are aware of the right time to start trading and stop it to quit too. A sophisticated trader always makes use of the tools and strategies to follow those highly skilled and professional previous market participants to extract profits and constructive returns from the market.
Forex Analysis - Stage 2
STAGE II – WHY
Before taking up any job, course or even a habit, what is important is to understand why exactly do you want to take it up? There always has to a reason for things to be done by you. When it comes to Forex market, investors have recently started rushing in, as more and more traders have now started earning their living through trading foreign exchange. All these investors trade Forex for many reasons, the main one being the superior returns which they are likely to get back. Apart from this, there are also many other factors which create an exclusive investment atmosphere for the traders in Forex, such as:
Accessibility
Liquidity
Commission free
Leverage
Accessibility
Being a 24 hour market, there is always some investor, someplace in the world whom you can trade with as so many such traders are dynamically trading foreign currencies somewhere in the world or another. This also enables these traders to respond to any latest news of the market, without delay.
Providing a 24 hour trading opportunity, you can trade anytime from Sunday 5:00 pm (ET) to Friday 4:30 pm. This gives traders a chance to trade according to their convenience, like going to bed or spending time with their family, or going by their own schedule.
Liquidity
Forex as a market contains high levels of liquidity, leading to an even higher degree of transparency in the big sized transactions and lots of money changing hands. Being the largest financial market in the world, Forex changes more than $2 trillion hands every day.
Being such a large and liquid market helps Forex attract enormous players, some retail and some large scale.
Commission free
With “free of commission” trading, many dealers believe is a perceived benefit of Forex. Forex trading lets its investors keep 100% of their trading profits. Although this does not change the high degree of business deal costs being paid to the dealers via the bid-ask spread, this free of cost trading makes Forex an even more lucrative business opportunity for the traders as well as the dealers.
Leverage
Forex market offers higher leverage and with its lower margin requirements it enables the Forex traders to trade with much bigger sum of currency as compared to their initial deposit. Leverage mostly also depends on the type of Forex broker an investor has chosen for trading.
Think about it this way, where would you find a trading market so partial to an investor, at least apparently. But to make the most of these factors, it is equally important for you to be aware of their shortcomings as well.
Surely all these factors like liquidity, leverage, convenience, and transaction costs can be used as money making tools, but so can they be used for losing all your funds. Yes, of course anything if misused or over used can result in harmful ways. Everything benefits to a limit, with a skill and method to use it with balance.
And this is what makes a difference between a beginner trader who might use these tools in all the wrong ways to destroy his wealth, and the refined investor who will have the experience and expertise to use them all to create wealth.
Before taking up any job, course or even a habit, what is important is to understand why exactly do you want to take it up? There always has to a reason for things to be done by you. When it comes to Forex market, investors have recently started rushing in, as more and more traders have now started earning their living through trading foreign exchange. All these investors trade Forex for many reasons, the main one being the superior returns which they are likely to get back. Apart from this, there are also many other factors which create an exclusive investment atmosphere for the traders in Forex, such as:
Accessibility
Liquidity
Commission free
Leverage
Accessibility
Being a 24 hour market, there is always some investor, someplace in the world whom you can trade with as so many such traders are dynamically trading foreign currencies somewhere in the world or another. This also enables these traders to respond to any latest news of the market, without delay.
Providing a 24 hour trading opportunity, you can trade anytime from Sunday 5:00 pm (ET) to Friday 4:30 pm. This gives traders a chance to trade according to their convenience, like going to bed or spending time with their family, or going by their own schedule.
Liquidity
Forex as a market contains high levels of liquidity, leading to an even higher degree of transparency in the big sized transactions and lots of money changing hands. Being the largest financial market in the world, Forex changes more than $2 trillion hands every day.
Being such a large and liquid market helps Forex attract enormous players, some retail and some large scale.
Commission free
With “free of commission” trading, many dealers believe is a perceived benefit of Forex. Forex trading lets its investors keep 100% of their trading profits. Although this does not change the high degree of business deal costs being paid to the dealers via the bid-ask spread, this free of cost trading makes Forex an even more lucrative business opportunity for the traders as well as the dealers.
Leverage
Forex market offers higher leverage and with its lower margin requirements it enables the Forex traders to trade with much bigger sum of currency as compared to their initial deposit. Leverage mostly also depends on the type of Forex broker an investor has chosen for trading.
Think about it this way, where would you find a trading market so partial to an investor, at least apparently. But to make the most of these factors, it is equally important for you to be aware of their shortcomings as well.
Surely all these factors like liquidity, leverage, convenience, and transaction costs can be used as money making tools, but so can they be used for losing all your funds. Yes, of course anything if misused or over used can result in harmful ways. Everything benefits to a limit, with a skill and method to use it with balance.
And this is what makes a difference between a beginner trader who might use these tools in all the wrong ways to destroy his wealth, and the refined investor who will have the experience and expertise to use them all to create wealth.
Forex Analysis - Stage 3
STAGE III – WHERE
Where to trade Forex from, or with whose help, is an extremely important question serving as the basis of a successful or an unsuccessful trading deal in the future. Choosing the right dealer or broker or brokerage firm makes all the difference.
When you are planning to choose a broker for yourself, always keep in mind the services he can provide you with and more importantly, under which terms and conditions? They can make you fill up many forms and a lot of paperwork also goes into it all. Every broker will have some exclusive features and services to offer you too. Always take a closer look at what you are agreeing to and understand and grade all their offered services.
Every dealer has his strength and weakness. What needs to be learnt is how to compare these strengths and weakness and see what suits our needs the best. Always choose a broker who is ready to move along with you and the Forex trading plans, methods and strategies that you have planned on. Also, comparing and taking knowledge about various brokers will arm you as a trader with all the information that you need before selecting a dealer who best matches your trading approach.
With the question remaining which dealer to choose, there can be various answers as traders will have varied answers to this one. The new and beginner traders are most likely to trust and select the brokers who approach them with the finest marketing techniques, high promises and greater benefits schemes.
Trick to get information about the dealer or broker is not by asking or believing him only, but by learning as much as you can about him and his past records by visiting his site, registering for a demo, and inquiring about him through some references or past clientele.
It is not always true that a dealer spending so much money making attractive advertisements is the best to trade with too. Also, when trading with a broker or a brokerage firm for the first time, always go in for a short term or a mid term trading duration. Keep the long term trading planning with them only when you have tried and tested any of them successfully.
In Forex market, every trader will find for themselves an optimal broker. Therefore, do not lose patience and go in for a dealer which approaches you first. Rather go in for a dealer who will work in your interest to provide you with optimized returns on your investment by harmonizing his trading technique with yours or vice versa.
Where to trade Forex from, or with whose help, is an extremely important question serving as the basis of a successful or an unsuccessful trading deal in the future. Choosing the right dealer or broker or brokerage firm makes all the difference.
When you are planning to choose a broker for yourself, always keep in mind the services he can provide you with and more importantly, under which terms and conditions? They can make you fill up many forms and a lot of paperwork also goes into it all. Every broker will have some exclusive features and services to offer you too. Always take a closer look at what you are agreeing to and understand and grade all their offered services.
Every dealer has his strength and weakness. What needs to be learnt is how to compare these strengths and weakness and see what suits our needs the best. Always choose a broker who is ready to move along with you and the Forex trading plans, methods and strategies that you have planned on. Also, comparing and taking knowledge about various brokers will arm you as a trader with all the information that you need before selecting a dealer who best matches your trading approach.
With the question remaining which dealer to choose, there can be various answers as traders will have varied answers to this one. The new and beginner traders are most likely to trust and select the brokers who approach them with the finest marketing techniques, high promises and greater benefits schemes.
Trick to get information about the dealer or broker is not by asking or believing him only, but by learning as much as you can about him and his past records by visiting his site, registering for a demo, and inquiring about him through some references or past clientele.
It is not always true that a dealer spending so much money making attractive advertisements is the best to trade with too. Also, when trading with a broker or a brokerage firm for the first time, always go in for a short term or a mid term trading duration. Keep the long term trading planning with them only when you have tried and tested any of them successfully.
In Forex market, every trader will find for themselves an optimal broker. Therefore, do not lose patience and go in for a dealer which approaches you first. Rather go in for a dealer who will work in your interest to provide you with optimized returns on your investment by harmonizing his trading technique with yours or vice versa.
Forex Analysis - Stage 4
STAGE IV – WHAT
When we talk about what to trade for in Forex, the first thing that comes into our minds is the Currency. But there are a few other elements too which make up for a complete trading plan such as the currency pair also known as the trading medium, the market actions that generate the market entry and exit points, and the overall attitude towards trade management.
Forex is a trading market which gives its traders, returns in the form of the comparative value price of one currency exchanged by the other. Always dealt in currency a pair, Forex has its major currency pairs like namely Euro/US Dollar or (EUR/USD) and US Dollar/Japanese Yen or (USD/JPY).
With this simultaneous buying and selling of exchange an investor hopes to make winnings on positive exchange rate oscillations. There is a constant fluctuating going on, down as well as up, within seconds with the exchange rates. This is where the whole art of trading lies, in flawlessly predicting the movement of the variation between the two currencies.
Creating a comprehensive trading plan and correctly comprehending and including all its major elements into it are a must for an unbeaten trading approach.
All of these elements combine together to form a strong trading management approach.
A trading deal with a currency with tight spread alongside using mid or long intervals as entry signals as well as a low leverage always has an enhanced probability for being a hit.
On the other hand, a trading deal with a currency with loose spread alongside using short interval as entry signals as well as high leverage positions will almost certainly serve as a big fall down.
And finally, the currency pair, the entry and exit signals, and the trade management method should all merge well simultaneously and be present without disagreements and overlapping.
Beginners or new traders create grave errors at times, by trying hard to fuse collectively all the methods or strategies they have heard about or gained knowledge about from miscellaneous sources. What should be done instead is to put in your own effort and analytically construct, analyze, and set up a complete trading plan which perfectly matches your trading approach.
The refined, professional and experienced investor always goes in for this extra bit of hard work, just to function with a harmonizing trading plan which will help him produce steady winning opportunities.
When we talk about what to trade for in Forex, the first thing that comes into our minds is the Currency. But there are a few other elements too which make up for a complete trading plan such as the currency pair also known as the trading medium, the market actions that generate the market entry and exit points, and the overall attitude towards trade management.
Forex is a trading market which gives its traders, returns in the form of the comparative value price of one currency exchanged by the other. Always dealt in currency a pair, Forex has its major currency pairs like namely Euro/US Dollar or (EUR/USD) and US Dollar/Japanese Yen or (USD/JPY).
With this simultaneous buying and selling of exchange an investor hopes to make winnings on positive exchange rate oscillations. There is a constant fluctuating going on, down as well as up, within seconds with the exchange rates. This is where the whole art of trading lies, in flawlessly predicting the movement of the variation between the two currencies.
Creating a comprehensive trading plan and correctly comprehending and including all its major elements into it are a must for an unbeaten trading approach.
All of these elements combine together to form a strong trading management approach.
A trading deal with a currency with tight spread alongside using mid or long intervals as entry signals as well as a low leverage always has an enhanced probability for being a hit.
On the other hand, a trading deal with a currency with loose spread alongside using short interval as entry signals as well as high leverage positions will almost certainly serve as a big fall down.
And finally, the currency pair, the entry and exit signals, and the trade management method should all merge well simultaneously and be present without disagreements and overlapping.
Beginners or new traders create grave errors at times, by trying hard to fuse collectively all the methods or strategies they have heard about or gained knowledge about from miscellaneous sources. What should be done instead is to put in your own effort and analytically construct, analyze, and set up a complete trading plan which perfectly matches your trading approach.
The refined, professional and experienced investor always goes in for this extra bit of hard work, just to function with a harmonizing trading plan which will help him produce steady winning opportunities.
Forex Analysis - Stage 5
STAGE V – WHEN
When exactly should I trade, must be one of the many questions in a novice trader’s mind. And yes, it is an important question, especially when you know that Forex is a 24 hours market, open for 5.5 days a week.
What needs to be understood is the fact that although its true that the Forex market is open 24 hours a day, but it does not at all mean that the market action the same always. Majority of traders and investors do not stop to give this fact a thought for even a moment. They do not even consider the impact this fact can have on their trades.
Being in this volatile market, you as a trader should always give yourself a fair chance to play. Just because a market is open 24 hours does not mean that all those 24 hours, it is moving in your favor. There will be hours minutes or even moments when the market can move against you. Trading during those circumstances is never advisable. Trade only when you are sure that the market is most expected to go with you. For example, the markets are known to go in slumber during the days when London and New York are closed.
This is exactly where technical indicators are useful. But for checking their authenticity of these technical indicators, the best way is the trading volume. It is believed that these indicators turn out to be more accurate when the trading volume is high.
But since there are no trading volume records obtainable in the Forex markets, it is advisable to make use of trading ranges, which is the next good option. Trading range can be defined as the difference established between the high and low price limit for a specific currency pair over a specified time period like one trading day.
With this approximate data in hand, an investor can now more precisely and cautiously calculate when is the right time for him to trade.
If the trading range is high, entering the market would be a safe bet at that hour rather than the time, when the trading range is tight or low. Let’s take the example of a trade in EURUSD, which has an average trading range of 25 pips at 10 AM EST against the EURUSD which has an average trading range of 7 pips at 10 PM EST.
Now entering the market during the morning session of trade will give you a little more space for a safe trade in case it does tend to fluctuate a little high or low, as compared to the evening trading session, in which you would as it is be trading on margins only.
That is the reason why technical indicators are given so much importance as they are mostly useful in predicting accurately, the movements of the market. More often than not, the beginners in this trading business tend to ignore the importance of "when to trade" in the market. The professional, expert and refined trader always appropriately times his entry in the market in order to reap the maximum benefits and make the most profitable deals. Limiting losses by analytically monitoring the market gives a trader a more prospective outlook.
When exactly should I trade, must be one of the many questions in a novice trader’s mind. And yes, it is an important question, especially when you know that Forex is a 24 hours market, open for 5.5 days a week.
What needs to be understood is the fact that although its true that the Forex market is open 24 hours a day, but it does not at all mean that the market action the same always. Majority of traders and investors do not stop to give this fact a thought for even a moment. They do not even consider the impact this fact can have on their trades.
Being in this volatile market, you as a trader should always give yourself a fair chance to play. Just because a market is open 24 hours does not mean that all those 24 hours, it is moving in your favor. There will be hours minutes or even moments when the market can move against you. Trading during those circumstances is never advisable. Trade only when you are sure that the market is most expected to go with you. For example, the markets are known to go in slumber during the days when London and New York are closed.
This is exactly where technical indicators are useful. But for checking their authenticity of these technical indicators, the best way is the trading volume. It is believed that these indicators turn out to be more accurate when the trading volume is high.
But since there are no trading volume records obtainable in the Forex markets, it is advisable to make use of trading ranges, which is the next good option. Trading range can be defined as the difference established between the high and low price limit for a specific currency pair over a specified time period like one trading day.
With this approximate data in hand, an investor can now more precisely and cautiously calculate when is the right time for him to trade.
If the trading range is high, entering the market would be a safe bet at that hour rather than the time, when the trading range is tight or low. Let’s take the example of a trade in EURUSD, which has an average trading range of 25 pips at 10 AM EST against the EURUSD which has an average trading range of 7 pips at 10 PM EST.
Now entering the market during the morning session of trade will give you a little more space for a safe trade in case it does tend to fluctuate a little high or low, as compared to the evening trading session, in which you would as it is be trading on margins only.
That is the reason why technical indicators are given so much importance as they are mostly useful in predicting accurately, the movements of the market. More often than not, the beginners in this trading business tend to ignore the importance of "when to trade" in the market. The professional, expert and refined trader always appropriately times his entry in the market in order to reap the maximum benefits and make the most profitable deals. Limiting losses by analytically monitoring the market gives a trader a more prospective outlook.
Forex Analysis - Stage 6
STAGE VI – HOW
How to trade is the most important factor that needs to be understood by once a perception of the external factors of trading has been made. The real job for a trader is to know his own mind. Working according to the external elements is a comparatively easy job, as they generally are quiet objective, accurate, reliable, and structured.
But same cannot be said about the trader's mind, which is firm at one minute, and soft in the other.
While trading and being a part of the ongoing fluctuations in the market, an investor undergoes an enormous range of thoughts and emotions. While some might turn out to be good like feeling lucky, or victorious, the others might turn out to be bad like fear of failure or anxiety. But going through all this turmoil, it is highly exceptional to come across a trader who constantly sticks by his initial trading plan.
When it comes to trading Forex, or any business for that matter, sentiments or emotions are the biggest hitch. This is because all these emotions tend to make a trader go weak when it comes to maintaining discipline and balance and adhering to the predefined trading plan.
What needs to be understood here is that discipline, control or restraint is far more important while trading Forex than the real currency traders are here to trade. This is because any kind of capital can only be sustained by anyone with correct management techniques and discipline.
A trader in this Forex trading business has a lot of value to the market. When a trader trades equipped with a thoroughly studied trading background and past trends and comprehensible goal study, he has the ability to build on a superb trading system.
This said, no guarantee can be taken of any trading system or approach, as it can rise to success in 1 second and go down into losses in the other.
And what’s more, the basic reason for this downfall is that a trader while going by his predefined trading plan must have at some point tried to mix it with his gut feelings or emotions. One thing should always be made clear that emotions have absolutely no place in trading.
These emotions generally come into play when a trader either encounters a large loss or a huge win. Emotions in such cases then tend to cause a trader to act in a different way, making him act illogically and foolishly at times just to go ahead and mess up his planned strategy and play the large moves by his gut feelings. Emotion causes the trader to apply his trading system in patches, with emotions taking over now and then.
Using simple trading strategies can get you to make big wins in the market, provided you stick to them through out. Professional or experienced traders always trade using conventional, carefully planned money management strategies which would enable them to trade with complete stability.
When it comes to large financial firms and institutions, complete stability is never an issue with them, as they have not one, but many human resources and assets at their side.
But when we talk about an individual investor, we can easily divide them into three different groups.
The ones who trade with inconsistency,
The investors who trade with manual constancy
And the traders who trade with programmed reliability.
While a new trader would always hop from one trading strategy to another, an experienced trader will work smoothly with constant restraint and discipline making it the basis of his trading actions which will help him increase his level of refinement.
How to trade is the most important factor that needs to be understood by once a perception of the external factors of trading has been made. The real job for a trader is to know his own mind. Working according to the external elements is a comparatively easy job, as they generally are quiet objective, accurate, reliable, and structured.
But same cannot be said about the trader's mind, which is firm at one minute, and soft in the other.
While trading and being a part of the ongoing fluctuations in the market, an investor undergoes an enormous range of thoughts and emotions. While some might turn out to be good like feeling lucky, or victorious, the others might turn out to be bad like fear of failure or anxiety. But going through all this turmoil, it is highly exceptional to come across a trader who constantly sticks by his initial trading plan.
When it comes to trading Forex, or any business for that matter, sentiments or emotions are the biggest hitch. This is because all these emotions tend to make a trader go weak when it comes to maintaining discipline and balance and adhering to the predefined trading plan.
What needs to be understood here is that discipline, control or restraint is far more important while trading Forex than the real currency traders are here to trade. This is because any kind of capital can only be sustained by anyone with correct management techniques and discipline.
A trader in this Forex trading business has a lot of value to the market. When a trader trades equipped with a thoroughly studied trading background and past trends and comprehensible goal study, he has the ability to build on a superb trading system.
This said, no guarantee can be taken of any trading system or approach, as it can rise to success in 1 second and go down into losses in the other.
And what’s more, the basic reason for this downfall is that a trader while going by his predefined trading plan must have at some point tried to mix it with his gut feelings or emotions. One thing should always be made clear that emotions have absolutely no place in trading.
These emotions generally come into play when a trader either encounters a large loss or a huge win. Emotions in such cases then tend to cause a trader to act in a different way, making him act illogically and foolishly at times just to go ahead and mess up his planned strategy and play the large moves by his gut feelings. Emotion causes the trader to apply his trading system in patches, with emotions taking over now and then.
Using simple trading strategies can get you to make big wins in the market, provided you stick to them through out. Professional or experienced traders always trade using conventional, carefully planned money management strategies which would enable them to trade with complete stability.
When it comes to large financial firms and institutions, complete stability is never an issue with them, as they have not one, but many human resources and assets at their side.
But when we talk about an individual investor, we can easily divide them into three different groups.
The ones who trade with inconsistency,
The investors who trade with manual constancy
And the traders who trade with programmed reliability.
While a new trader would always hop from one trading strategy to another, an experienced trader will work smoothly with constant restraint and discipline making it the basis of his trading actions which will help him increase his level of refinement.
Analysis stages in Forex
It will not be wrong if we say that Forex traders lead their lives, living on the edge. You never know what’s going to happen the next moment. In this currency world of speculations, instincts, calculations and uncertainties, the market experiences one moment of total harmony, and the next one of absolute commotion.
Amidst such high degrees of speculation and large amount of money at stake, can we precisely foretell the trend this market is going to follow each time? And furthermore, can we bet high capital on it?
For all this, we first need to be clear with the basics. The basics which tell us exactly what causes the market to move in the direction it does? What makes it follow the trend it does? Why are different traders trading with same currency using different strategies? Answers to all these questions can be a little tricky especially knowing that every trader senses different set of indications and warnings each time the market moves.
Every trader has his personal instinct behind his decision of buying or selling a currency, keeping in mind the atmosphere in the market. But there is still something that every sensible Forex trader does, Analysis! Before investing a sum of money in the market, any sensible trader would want to analyze the market, get full knowledge of the situation and be equipped to forecast what movement the market might take in the future. And to do this analysis, a trader must keep in mind the six important stages of analysis in Forex trading, which are:
Who tells us about the people involved with Forex who form the market and bring about action in it.
Why is about comprehending the outlook of the Forex market and the openings or prospects which it provides to its traders.
Where tell us to match our goals with the goals a genuine and professional dealer.
When tells us about the right time when our trades can bring us maximum efficiency.
What is all about choosing a trading medium or currency pair on the basis of your budget and investment principle.
How is about choose a trading toolkit which will help us advance our trading skills and techniques.
Every trader requires building up a fanatical sense of the Forex market and what’s happening in it and around them. Not every move of the currency market can be predicted though, but we can definitely try developing an understanding of the situation and the environment of the market.
What all the above mentioned six stages do is help us in creating more advantageous trading options. With the systematic and balanced use of these stages, we can easily create and execute a complete trading plan, the one that covers all the major trading aspects and angles.
It is important to understand who actually trades Forex? Also needed to be known are the participants, and the reasons for their success and failure. This will help us make use of the points which lead to successful results and avoid the ones which led to a loss.
To know why to trade Forex at the first place is the very reason why we should be interested in trading with it. Only if we know the advantages and disadvantages of this market will we be able to make up our minds for or against trading Forex.
It is also important to know from where we should trade. Always choose the right trading platform or broker who can professionally allow your trading style to mingle with its approach.
For deciding upon what to trade for, we should always choose a currency pair and money management method which will boost your returns.
Deciding on when you should trade is also an important aspect to be kept in mind before you start to trade. Always advisable is to trade when the situation you are in, is most liable to generate the best circumstances for you to execute your trading methods and techniques.
Choosing on how to trade should always be done keeping in mind the usage of those methods that make best use of your skills and also help you follow the previously well-known successful traders of the market.
Amidst such high degrees of speculation and large amount of money at stake, can we precisely foretell the trend this market is going to follow each time? And furthermore, can we bet high capital on it?
For all this, we first need to be clear with the basics. The basics which tell us exactly what causes the market to move in the direction it does? What makes it follow the trend it does? Why are different traders trading with same currency using different strategies? Answers to all these questions can be a little tricky especially knowing that every trader senses different set of indications and warnings each time the market moves.
Every trader has his personal instinct behind his decision of buying or selling a currency, keeping in mind the atmosphere in the market. But there is still something that every sensible Forex trader does, Analysis! Before investing a sum of money in the market, any sensible trader would want to analyze the market, get full knowledge of the situation and be equipped to forecast what movement the market might take in the future. And to do this analysis, a trader must keep in mind the six important stages of analysis in Forex trading, which are:
Who tells us about the people involved with Forex who form the market and bring about action in it.
Why is about comprehending the outlook of the Forex market and the openings or prospects which it provides to its traders.
Where tell us to match our goals with the goals a genuine and professional dealer.
When tells us about the right time when our trades can bring us maximum efficiency.
What is all about choosing a trading medium or currency pair on the basis of your budget and investment principle.
How is about choose a trading toolkit which will help us advance our trading skills and techniques.
Every trader requires building up a fanatical sense of the Forex market and what’s happening in it and around them. Not every move of the currency market can be predicted though, but we can definitely try developing an understanding of the situation and the environment of the market.
What all the above mentioned six stages do is help us in creating more advantageous trading options. With the systematic and balanced use of these stages, we can easily create and execute a complete trading plan, the one that covers all the major trading aspects and angles.
It is important to understand who actually trades Forex? Also needed to be known are the participants, and the reasons for their success and failure. This will help us make use of the points which lead to successful results and avoid the ones which led to a loss.
To know why to trade Forex at the first place is the very reason why we should be interested in trading with it. Only if we know the advantages and disadvantages of this market will we be able to make up our minds for or against trading Forex.
It is also important to know from where we should trade. Always choose the right trading platform or broker who can professionally allow your trading style to mingle with its approach.
For deciding upon what to trade for, we should always choose a currency pair and money management method which will boost your returns.
Deciding on when you should trade is also an important aspect to be kept in mind before you start to trade. Always advisable is to trade when the situation you are in, is most liable to generate the best circumstances for you to execute your trading methods and techniques.
Choosing on how to trade should always be done keeping in mind the usage of those methods that make best use of your skills and also help you follow the previously well-known successful traders of the market.
How to trade Forex?
STEP 1:
The step 1 defines certain concepts and terms of Forex Trading-
Quotes are a vital part of the foreign exchange trading, as Forex trading is done in terms of quotes. Therefore, comprehending these quotes is the first important step.
Firstly, in a Forex quote, the currency listed first is known as the Base currency. For example, we have EUR/USD. Here, EUR is the Base currency.
Secondly, the base currency has always the value 1. In other words, the rate of other currency is calculated against 1 pt of the Base currency. For example, we have EUR/USD where EUR is the Base currency. Then 1 EUR = 1.2323 USD or the value of one currency against the other in the pair.
Thirdly, when dealing in terms of quotes, prices are expressed in terms of Pips. Pips can be defined as “percentage in points” and are mostly the fourth decimal point i.e. 1/100th of 1%.
Also used while trading through quotes, are two significant terms known as Bid and Ask. These two terms are responsible for making trading quote, a two-sided quote.
Bid can be defined as ''The price at which the base currency is sold concurrently buying the counter currency. Ask can be defined as “The price at which the base currency can be bought concurrently selling the counter currency''
STEP 2:
Step 2 illustrates the other key features of Forex trading which are namely, the leverage and the Margin. These two are immensely important in attracting the interest of the traders as they enhance the trading power of the investors.
The leverage is the ratio of the deposited amount to the amount that can be traded. Leverage enables the investors to deposit a small amount of money but still trade for a much larger amount. This way, investors can trade easily, utilizing less money to deal.
Margin, therefore, is the minimum amount required to be deposited before an investor starts trading. This can also be known as the initial amount with which the Forex trading account can be opened.
A detailed Example below illustrates exactly how Forex trading is done-
Supposing the current bid/ask price for EUR/USD is going by the rate of 1.5027/30, giving you the option to buy 1 euro with 1.5030 US dollars or sell 1 Euro for 1.5027 US dollars. Now, if you feel that the Euro is underrated against the US dollar, you would opt on buying Euros, selling your dollars at the same time. So you buy 100,000 euros by paying 150,300 dollars. You can then start analyzing the market, waiting for the exchange rates to rise.
As predicted, the rates begin to rise and then you decide a favorable rate at which you plan to sell your Euros to get a hefty profit. Supposing the Euro rises to 1.5090/93. Now, to realize your profits, you sell 100,000 euros at the current rate of 1.5090, and receive $150,900.
You bought 100k Euros at 1.5030, paying $150,300. You sold 100k Euros at 1.5090, receiving $150900. That's a difference of $600 or in other words, you successfully earned a profit of $600.
Return on Investment = $600
Always learn a lesson from the Forex Indicators, keep a watch, think long term and then take a step.
STEP 3:
MarketForex does e-trading using high end MarketForex softwares. Easily accessible and user friendly, they have a simple operating process. For instance, the currency pair to be bought or sold can simply be dealt with, by clicking on the sell or the buy key, placed in front of that currency.After the deal to be done is selected, a quote is then displayed by the software, making it easier for the user to keep track of the records. Also, MarketForex software provides some attractive powerful features such as account details of the holder, like balance, leverage and margins, along with stop/limit orders.
The trader also has the option of selecting various other currency pairs for trading purposes. Before investing always analyse the forex market with various types of Forex Analysis.
Spreads, Currency Pairs and Premiums
Below are the spreads that are offered to FX Solutions' customers during normal market conditions:
| Forex Symbol | Currency Pairs | Spreads |
| EUR/USD | Euro / U.S. Dollar | 3 pips |
| USD/JPY | U.S. Dollar / Japanese Yen | 3 pips |
| EUR/JPY | Euro / Japanese Yen | 4 pips |
| USD/CHF | U.S. Dollar / Swiss Franc | 4 pips |
| GBP/USD | British Pound / U.S. Dollar | 5 pips |
| NZD/USD | New Zealand Dollar / U.S. Dollar | 4 pips |
| USD/CAD | U.S. Dollar / Canadian Dollar | 5 pips |
| AUD/USD | Australian Dollar / U.S. Dollar | 4 pips |
| EUR/GBP | Euro / British Pound | 5 pips |
| EUR/CHF | Euro / Swiss Franc | 5 pips |
| AUD/JPY | Australian Dollar / Japanese Yen | 7 pips |
| CHF/JPY | Swiss Franc / Japanese Yen | 8 pips |
| CAD/JPY | Canadian Dollar / Japanese Yen | 9 pips |
| NZD/JPY | New Zealand Dollar / Japanese Yen | 9 pips |
| AUD/CAD | Australian Dollar / Canadian Dollar | 9 pips |
| EUR/CAD | Euro / Canadian Dollar | 9 pips |
| GBP/JPY | British Pound / Japanese Yen | 9 pips |
| AUD/NZD | Australian Dollar / New Zealand Dollar | 12 pips |
| GBP/CHF | British Pound / Swiss Franc | 12 pips |
| EUR/AUD | Euro / Australian Dollar | 12 pips |
To Access New Currency Pairs:
Double click any currency pair and a drop down menu will be available, then just choose the currency pair you want displayed. Or highlight a currency pair and click the currency pair drop down above the currency pairs and choose the currency pair you want displayed. See examples below.
Selecting A New Currency Pair
New Currency Pairs Selected
While we endeavor to display these price spreads at all times, there may be occasions, however rare, where a significant market or world event may force us to widen spreads without prior notice to our clients.
See our Fast Market Policy for more information.
Rollover/Interest Policy (Premium)
In the spot Forex market trades settle in two business days. If a trader sells 10,000 euros on Tuesday, the seller must deliver 10,000 euros on Thursday unless the position is held open and rolled over to the next value date. As a service to our traders, FX Solutions automatically rolls over all open positions to the next settlement date at 5:00 PM Eastern Standard Time. Roll over involves exchanging the expiring position for a position expiring the following settlement date. The positions being exchanged are not valued at the same price. If a trader is long the currency bearing the higher interest rate, the position "being sold" is worth more than the position being acquired. The reverse is also true; if a trader is short the currency bearing the higher interest rate, the trader is acquiring a position worth more than the one "being sold". The amount of the difference varies based on the currency pair, the interest rate differential between the two currencies, and fluctuates day to day.
FX Solutions operates a “3 Tier” system of daily premiums that reflects the degree of leverage chosen by the client.
Tier 1 – Institutional
This set of rates is available to accounts that select leverage of 50:1 or less. The rates offered are directly based on the interest rate differentials in the interbank cash market and closely reflect the rates available to more unleveraged, institutional-type participants in that market.
Tier 2 – Retail
This set of rates will apply to accounts that select a leverage of 100:1. The rates are based on those available in the interbank market but include an additional spread which will take into account the higher degree of leverage chosen by retail forex accounts.
Tier 3 – Leveraged
This set of rates will apply to those accounts that select leverage of 200:1 or higher. Although based on the rates available in the interbank market, these rates have been adjusted to include a “cost of capital” spread. This spread is based on the institutional lending rate charged to cover the capital costs of maintaining positions on a leveraged basis. By choosing a significantly higher degree of leverage, a client is basically borrowing against the net capital of the brokerage company.
At 5:00 PM each day, funds are subtracted from or added to accounts with open positions because of this automatic roll over.
Note
On Wednesdays, the amount added or subtracted to an account as a result of rolling over a position is three times the usual amount. This "3-Day" rollover accounts for settlement of trades through the weekend period. When there are bank holidays in either settlement country the normal roll schedule does not apply.
* The “end of day” premium process commences at 5pm Eastern Time each day and can take several minutes to complete. Trades that are open at 5pm will generally receive or be charged a premium based on the change of value date. Clients seeking to place trades to earn interest should always make sure that they have sufficient equity in their account to “maintain” those trades. They should not rely on the application of the end-of-day premium to sustain their positions and FX Solutions will not be held liable for any account that receives a margin call under these circumstances.
Two Central Banks, Two Vastly Different Monetary Policy Biases
On Thursday, December 6, the Bank of England and the European Central Bank will each announce their monetary policy decisions. The markets are betting that both central banks will leave their rates steady, but the perceived bias of each bank is very different, which may create interesting opportunities when trading the Euro and British Pound this week. Furthermore, the varying biases leave open a very important question: if there is a policy change, who will hike and who will cut?
A global credit crunch has rocked the markets since August when the US subprime lending fiasco first came to the forefront, though the issue had been simmering under the radar for quite sometime. As a result, major financial institutions have grappled with the effects of billion dollar write-downs on subprime-backed assets, which have taken a particularly large toll on the US. However, other markets have not been immune. In fact, European and UK interbank lending rates have recently hit multi-year highs while equity markets remain especially jittery and prone to declines. This has left central banks like the Bank of England and the European Central Bank uneasy, as the instability of the markets adds to mounting downside risks to growth. On the other hand, rocketing food and energy costs have threatened price stability as they push CPI figures in the UK and Euro-zone through the roof. On Thursday, December 6, the BoE and ECB will each announce their monetary policy decisions. The markets are betting that both central banks will leave their rates steady, but the perceived bias of each bank is very different, which may create interesting opportunities when trading the Euro and British Pound this week. Furthermore, the varying biases leave open a very important question: if there is a policy change, who will hike and who will cut?Bank of England – Risks Tilted Towards A Cut In The Near-Term, Watch For Surprise Policy Statement
Rate Announcement: December 6, 2007 at 12:00 GMT
Bias: No Change, But Chance of Rate Cut
The minutes of the Bank of England's November monetary policy meeting reflected a 7-2 vote to keep rates steady at 5.75 percent, with members Blanchflower and Gieve voting for a cut amidst fears that money markets may become tighter as the credit crunch persists. The report suggested that the central bank was indeed becoming more dovish compared to October, when the vote was 8-1. However, comments that a cut could be misinterpreted and concerns regarding upside inflation risks from higher oil and commodity prices signals that the monetary policy committee would prefer to wait until price pressures subside. Nevertheless, traders should keep the most recent BOE Quarterly Inflation Report in mind, as the bank's forecasts saw inflation calming in 2008, assuming at least one rate cut in the first quarter of 2008. Has anything changed since the last BOE meeting that indicates the potential for an actual rate cut in December?
Yes. On the economic front, retail sales for the month of October unexpectedly fell 0.1 percent from the month prior while more current GfK consumer confidence figures eased to -10 from -8, indicating that sentiment continues to wane and will likely drag spending figures lower as well. Meanwhile, housing market data has eroded quite a bit, with Nationwide house prices down 0.8 percent during November – the sharpest drop in 12 years – while mortgage approvals slumped to a nearly three-year low of 88,000 in October from 100,000. Meanwhile, a spike in short-term interbank lending rates (LIBOR) in recent days to multi-year highs signals that tight credit market conditions are only getting worse. On the other hand, October CPI readings were stronger than expected at an annual rate of 2.1 percent, which is above the BOE’s 2.0 percent ceiling. These inflation readings warrant attention, as record higher oil prices above $98/bbl in November will likely drive CPI reports for the same period booming as well. Nevertheless, the BOE did forecast a pick up in price pressures in late 2007 before they would pull back in 2008, signaling that they may not be entirely uncomfortable with the inflation readings. As a result, dovish MPC members like John Gieve and David Blanchflower – who recently called for a rate cut to “get ahead of the curve” – may stand a good chance of garnering additional support for decrease in the benchmark lending rate. Whether there will be enough votes to take a majority remains to be seen, but the unexpected issue of a dovish policy statement following the meeting could be almost as bearish for the British Pound as an actual rate cut.
European Central Bank – Still Hawkish, But No Hike.
Rate Announcement: December 6, 2007 at 12:45 GMT
Bias: No Change, But Chance of Rate Hike
When it comes to discussing price stability, the European Central Bank has been one of the most hawkish central banks throughout the year. After the November policy meeting, ECB President Trichet continued to note upside inflation risks and proclaimed that “monetary policy stands ready to counter upside risks to price stability.” Meanwhile, Trichet touted the strength of the Euro-zone economy and was optimistic regarding GDP forecasts, as resilience in emerging markets is likely to offset the impact of a slowdown in the US. Nevertheless, “the ongoing reappraisal of risk in financial markets…led to continued uncertainty,” and supported the case for leaving rates steady. Will this very same “continued uncertainty” lead the ECB to leave rates unchanged again in December? That’s what the markets are counting on.
Currently, futures are pricing in no change in rates on Thursday, as price stability remains the primary concern of the ECB. This is rather unsurprising as their hawkish stance has been justified by November CPI estimates of 3.0 percent, which is well above their 2.0 percent ceiling. Furthermore, the unemployment rate for the Euro-zone fell to a record low of 7.2 percent in October, which may help to support consumer sentiment and thus, spending, going forward. Also faring well was the manufacturing sector, with PMI improving to 52.8 from 51.5. However, just like the UK and the US, Euro-zone credit conditions are still extremely tight and financial markets remain easily spooked and prone to volatility. As a result, the markets are betting that the ECB will leave rates unchanged at 4.00 percent on Thursday, but the deal-breaker for Euro bulls is whether or not Trichet will remain hawkish in his subsequent policy statement: If the ECB President notes the phrase “strong vigilance,” traders may immediately start betting on a hike in January, as this has previously served as an excellent signal of impending policy action. On the other hand, if the policy statement is essentially a reprint of the report from the month prior, or the ECB focuses more on the downside risks to growth, the Euro could falter as the markets judge that Trichet’s monetary policy tightening cycle is done for good.
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