| Home |
Why You Should Trade FOREX Over Other Investments
Everyone has heard of stocks and shares, probably even the futures market, but trading the FOREX (Foreign Currency Exchange, or FX) market is a relatively new phenomenon. Until recently, FOREX was the domain of the banking fraternity (large banks can trade billions of pounds daily), and the elite in financial and business circles. But now it is possible for the average person to be a part of this incredible and very profitable way of making a living, thanks to the personal computer and an internet connection. All done electronically and considered an over-the-counter (OTC) market, trading is far easier and less risky than either the futures or the stock markets. Money can be made both on a rising and falling market, unlike the stock market, which relies on shares increasing in price to create profit.
More and more astute internet entrepreneurs are shunning the traditional financial markets and turning to FOREX trading. They know that it is possible to earn a full-time income from part-time effort if youd like to make 200 to 3,000 for as little as ten minutes work, and with minimal risk, then FOREX is for you.
FOREX, the spot (cash) market for buying and selling currency, is the largest financial market in the world. Every day more than 1.5 trillion (yes, trillion) is traded globally and, unlike the stock market, which has fixed hours, it is a market that never sleeps. Somewhere in the world, at any time of day or night, FOREX is open for business, six days a week. The market starts each day in Sydney and moves around the globe as other FOREX financial centers open: first to Tokyo, then London and New York.
In simple terms, currencies are traded in pairs, for example the Euro and the US pound (EURUSD). The first currency in this case the Euro is known as the base currency; the second currency (here, the US pound), is the counter-currency. All trades result in the simultaneous buying of one currency and the selling of the other. Thus, in this example, if you place an order to buy the EURUSD, you are buying the Euro and selling the US pound. If you were to sell the pair, you would be selling the Euro and buying the US pound. There are many other currency pairs, such as USDJPY, GBPUSD, EURGBP, USDCHF and so on.
What makes trading FOREX an incredible way to make money online, is that price movements are highly predictable, creating trends that can be anticipated when it comes to decide when to buy and sell. Contrasting with stocks and shares, FOREX trading through brokers is commission free. It is also possible and definitely recommended to open a demo (practice) account with a broker first, where you can learn to trade and gain experience before you part with a cent of your own money.
Do you want financial freedom? With huge advantages over other more conventional money markets, why not experience the excitement of pips, rollovers, leverage, lots, long and short positions, limit orders etc. and start to trade FOREX. Good luck!
Penelope Housden.
Why Technical Analysis Works Well In The Forex Market
If you are considering currency trading in the Forex market, or you are already involved in Forex currency trading, here’s a money-making lesson that we can borrow from investors who use technical analysis to help them make investment decisions in the stock market.
The goal of performing technical analysis when currency trading is to predict profitable currency pair movements by analyzing price trends. The principles of technical analysis in the equity markets are the same as those in the Forex currency trading markets. In fact, the only real difference between the two is that the Forex market is open 24 hours a day while the equity markets are not.
This means that certain analytics that take time periods in consideration will need to be adjusted for Forex currency trading. Other than that, any of these common forms of equity technical analysis methodologies can be used when currency trading:
Elliott Waves — Developed by Ralph Nelson Elliott, this methodology is based upon the theory that market performance can be predicted by studying wave patterns that develop over a period of time.
Fibonacci Studies — Developed by 12th century mathematician Leonardo Fibonacci, this methodology is based upon the theory that changes in trends can be predicted based upon prices interacting with lines based upon certain sequences of numbers.
Parabolic SAR — Developed by J. Wells Wilder, this methodology is based upon the examination of prices in comparison to “stop and reversal” (SAR) numbers that indicate entry and exit points for a trade.
Pivot Points — A mathematical formula used to determine when to exit a trade based upon the numerical average of the high, low and closing prices.
As I mentioned earlier in this article, the key difference between technical analysis in the equities market, and technical analysis in the Forex currency trading market, is the fact that it is possible to participate in Forex trading 24 hours a day, seven days a week. That key difference is also the primary reason that technical analysis works so well in currency trading.
In order for technical analysis techniques to deliver maximum results, there needs to be extended periods of time available for patterns to develop and repeat. Because the Forex market never closes, and currency pairs are traded around the clock, definable patterns develop more quickly and the technical analyst has a plethora of Forex currency trading data available to work with.
Because more data means more accurate forecasting results, technical analysts can see better results, in quicker time, when combining technical analysis and Forex currency trading.
Understanding the Forex Trading System
The forex trading system involves buying and selling foreign currency. Unlike the stock market there is no fixed market for the forex trading system. A good and effective forex trading system allows the traders to transact easily and provide more chances to increase the earnings. Forex, foreign exchange market, is a market place where a currency of one country is sold for another countrys currency for some profit. Currencies are traded in pares, like, US pound and Japanese Yen or US pound and Euro.
Foreign exchange tradings are a great money making opportunity for those who know their way around, for newbie its a dream world where they either fall hard, sail well or fly high, its not easy to be a successful trader in the forex trading system., its a mix of luck and experience that must work to find success. There are a lot of companies and individuals over the internet and offline willing to help you earn money from the forex trading system but only a handful of these are true and can actually help.
Nowadays most of the calculations are done by easy to use software that need minimum input from the user. You will need help initially, and may take some time for you to get to know the forex trading system. The high degree off leverage can sweep you either way, in the forex trading system one has to assess the risk for self, think of the chance one may have individually or with the help of a broker and or signal provider one may have and the amount which one can safely risk without putting yourself into financial trouble. Its a law of nature, where theres potential to earn there potential to loose so just be prepared before you dive in.
Understanding the Basics of Forex Trading
Forex trading or Foreign Exchange Trading refers to the simultaneous tradingthat is, buying and sellingof two different currencies. It is done between and among major financial institutions, central banks, small retail currency traders or speculators, large international companies, government institutions, companies with overseas operations and the like.
Based on the amount of money being traded, the international forex trading market is the worlds biggest financial market. Everyday, forex trading market gets an average revenue of US 1 trillionan amount far greater than the total revenues produced by all the stock and bond markets in the world.
Characteristics
Forex trading is a kind of over-the-counter tradingit occurs directly between to financial institutions or currency traders. The trading markets may be interconnected but there is no single unified market. Hence, there is also no single or standard rate. Each rate or price depends on what is being traded. However, the traders traditionally use nearly similar rates.
Another characteristic of a forex trading is that it operates 24 hours; thus, one can trade any time of the day. Also, there is no need of an exchange floor, it operates through a global electronic network where trading occurs over the telephone and computer networks. This characteristic also prevents delays that consume a lot of time.
Forex trading market is also very competitive and is highly liquid. This allows the parties to get low dealing costs and better price.
Top Currency Traders and Major Currencies Traded
Wall Street Journal Europe says ten major currencies account for 73 percent of the total forex trading volume. Among them are Deutsche Bank, UBS, Citigroup, HSBC, Barclays, Merrill Lynch, J.P. Morgan Chase, Goldman Sachs, ABN Amro, and Morgan Stanley.
Among the currencies mostly traded are the US, Canadian, and Australian pounds; Euro; Yen; and Swiss Franc.
A study conducted by the Bank for International Settlements says that the most traded products are EuroUSD, USDJPY, and GBPUSD. The study noted that in spite euros continuous growth, forex trading market remains to be concentrated in pounds.
The Trade
Trade happens when you accept the offered price and when the dealer confirms. Exchange floor is no longer required, as mentioned earlier.
In every trade, two currencies are always involved and the currencies traded serve as the products traded. Each currency has a price expressed in another currency such as 1 euro is equivalent to 1.204 pound. In the said example, the euro trader sells the euro and buys the pound. There are no further costs in the trade. There are no commissions and other fees as well.
Large multinational companies engage in forex trading when they are buying from and selling goods to other countries. However, this kind of forex trading encompass only a small portion of he daily activities in the foreign exchange market. Most of the trading activities are carried out by currency speculators who earn from the changes in value of a particular currency.
Key players in the Market
BIS study shows that more than 50%of the forex trading transactions are interbank transactions. Trading revenues of most commercial establishments and currency speculators are deposited in the bank.
Central banks also play a big role in the forex trading market. These banks control the supply of money, interest, inflation and target rates in order to stabilize the forex trading market.