Forex is an interbank market that was created in 1971 when international trade transitioned from fixed to floating exchange rates. Since then the rates of currencies relative to each other are determined by the most obvious means which is the exchange at a mutually agreed rate.
This market surpasses the others in its volume. For example, the daily turnover of world securities market is estimated at $300 billion, while Forex approaches 1 to 3 TRILLION US dollars in the same amount of time.
However, Forex is not a market in a traditional sense. It doesn't have a fixed location of the trading floor as, for example, futures market does. The trading is done over the telephone and at the computer terminals in hundreds of banks around the world simultaneously.
Futures and securities markets have one more significant feature distinguishing them from Forex, and at the same time restricting them. The trading is suspended at the end of each day and resumed only next morning. Thus, should certain significant developments occur in the USA, the opening of Russian market next morning could quite surprise you, if you're trading there.
Forex is open 24 hours a day, and the currency exchange operations are maintained throught working days of the week. Almost every time zone (London, New York, Tokyo, Hong Kong, Sydney) has dealers willing to quote currencies.
Thursday, January 22, 2009
What controls the market?
The primary causes of changes in currency rates are economical forces as well as political and psychological factors.
Basic parameters of economy such as inflation, interest rates, unemployment, and many others affect exchange rates constantly and dramatically. Government policy has drastic influence on the rates too. Competence of the government in maintaining the currency is conducive for its rate increase. Decreasing interest rates stimulates decreased demand for the currency and, thus, depresses its value in the exchange operations. A decision of the Central Bank of a country to buy or sell the currency may strengthen or undermine its rate significantly.
Expectations of change in the economic conditions may lead to sudden and drastic fluctuation of the currency rate. This is the key concept, because the foreign exchange market is often controlled by expectation of changes, rather than the changes themselves.
Activity of professional currency exchange managers, especially when caused by the interests of powerful financial consortia, is another important market force. In many cases, the managers may act independently and use the market as a unique instrument to achieve their goals of changing major rates. Most, if not all of them, could not care less about the adequacy of charts used for technical analysis. Though, as major levels of resistance and support are approached, the behavior of the market becomes more and more "technical", and the reactions of large number of traders often become similar and predictable. Such periods in the market may lead to dramatic rate fluctuations, because significant funds happen to be invested in similar positions.
Basic parameters of economy such as inflation, interest rates, unemployment, and many others affect exchange rates constantly and dramatically. Government policy has drastic influence on the rates too. Competence of the government in maintaining the currency is conducive for its rate increase. Decreasing interest rates stimulates decreased demand for the currency and, thus, depresses its value in the exchange operations. A decision of the Central Bank of a country to buy or sell the currency may strengthen or undermine its rate significantly.
Expectations of change in the economic conditions may lead to sudden and drastic fluctuation of the currency rate. This is the key concept, because the foreign exchange market is often controlled by expectation of changes, rather than the changes themselves.
Activity of professional currency exchange managers, especially when caused by the interests of powerful financial consortia, is another important market force. In many cases, the managers may act independently and use the market as a unique instrument to achieve their goals of changing major rates. Most, if not all of them, could not care less about the adequacy of charts used for technical analysis. Though, as major levels of resistance and support are approached, the behavior of the market becomes more and more "technical", and the reactions of large number of traders often become similar and predictable. Such periods in the market may lead to dramatic rate fluctuations, because significant funds happen to be invested in similar positions.
Why Forex appeals to investors
In conclusion of this short presentation of Forex, we can define the main causes of popularity of this market among both professional and amateur investors.
Liquidity. This market can absorb such daily trading volumes as to surpass the capacity of any other market. High liquidity is a powerful attractive force for any investor, because it provides freedom to open or close a position of any size at a current market rate.
Continuous access. The 24-trading is an important attraction. The Forex participants do not have to wait to react to any event, as is usual with many other markets.
Flexible control. A position on Forex may be opened for just the period of time desired by the trader.
Cost. Forex traditionally does not have any commissions exept for natural market spread between bid and ask.
Unambiguous quotations. The majority of trades may be executed at a uniform market price because of the high liquidity of the market. It allows to avoid the instability inherent to futures and other currency investments where only limited amounts of currencies may be sold at the market rate at a given time
Liquidity. This market can absorb such daily trading volumes as to surpass the capacity of any other market. High liquidity is a powerful attractive force for any investor, because it provides freedom to open or close a position of any size at a current market rate.
Continuous access. The 24-trading is an important attraction. The Forex participants do not have to wait to react to any event, as is usual with many other markets.
Flexible control. A position on Forex may be opened for just the period of time desired by the trader.
Cost. Forex traditionally does not have any commissions exept for natural market spread between bid and ask.
Unambiguous quotations. The majority of trades may be executed at a uniform market price because of the high liquidity of the market. It allows to avoid the instability inherent to futures and other currency investments where only limited amounts of currencies may be sold at the market rate at a given time
Traders without bounds
Just three months ago bankers, brokers and financial traders were perceived by the majority of Russian citizens as space aliens. The future appeared set for many years ahead. Then the crisis made some corrections. For the first time in seven years employment agencies became flooded with the former "celestial beings".
A series of publications was issued by several financial industry magazines saying that highly qualified financial professionals would get to do things unfamiliar to them. This situation should not be overly dramatized, though. The former participants of the securities market can apply their knowledge and experience to world currency market as Eugene A. Sokolinsky, the director of "Akmos Trade" (http://www.akmos.ru) dealing center thinks.He says:
An article by A. Zaitsev "Should you trade futures on the Internet?" appeared in "RCB" magazine 16'98. I would like to express my disagreement with a few of his ideas.
A series of publications was issued by several financial industry magazines saying that highly qualified financial professionals would get to do things unfamiliar to them. This situation should not be overly dramatized, though. The former participants of the securities market can apply their knowledge and experience to world currency market as Eugene A. Sokolinsky, the director of "Akmos Trade" (http://www.akmos.ru) dealing center thinks.He says:
An article by A. Zaitsev "Should you trade futures on the Internet?" appeared in "RCB" magazine 16'98. I would like to express my disagreement with a few of his ideas.
INTERNET BUSINESS IS NOT A CAR RIDE
We trade on FOREX foreign currency exchange. Instead of futures we deal with another financial instrument, but from the point of view of trading technology they don't have significant differences, thus all further comments concerning FOREX are equally applicable to the futures. I respectfully quote the author:
A professional trader should analyze the situation continously, he should be concentrated, attentive, and decisive. Can you do it behind the steering wheel?
Unfortunately, other things are also hard to do behind the steering wheel, scratch your back, for example.
Let us compare trader's work on FOREX or futures market over the Internet with the work in a dealing room, whose advantages are often mentioned by my opponent.
Generally speaking, in my opinion, it is best to trade "on the floor" through your own broker on all world currency exchanges with a deposit of a few million dollars. There is no time lag in this case, but it is cost prohibitive to many people. You can also establish a dealing center at home. If you install a satellite dish on your patio, pay Reuters Tenfore or CQG for their services, that would be around $1,500 a month, you could get a rather decent information system, lacking, though, the ability to participate in the trading directly. Traders don't usually spend that much. That is why we should face the reality and come back down to our wicked earth from heaven
A professional trader should analyze the situation continously, he should be concentrated, attentive, and decisive. Can you do it behind the steering wheel?
Unfortunately, other things are also hard to do behind the steering wheel, scratch your back, for example.
Let us compare trader's work on FOREX or futures market over the Internet with the work in a dealing room, whose advantages are often mentioned by my opponent.
Generally speaking, in my opinion, it is best to trade "on the floor" through your own broker on all world currency exchanges with a deposit of a few million dollars. There is no time lag in this case, but it is cost prohibitive to many people. You can also establish a dealing center at home. If you install a satellite dish on your patio, pay Reuters Tenfore or CQG for their services, that would be around $1,500 a month, you could get a rather decent information system, lacking, though, the ability to participate in the trading directly. Traders don't usually spend that much. That is why we should face the reality and come back down to our wicked earth from heaven
FOREX : What Is It And How Does It Work?
The Foreign Exchange market, also referred to as the "FOREX" is the biggest and largest financial market in the world. It has a daily average turnover of US$1.9 trillion- just imagine that amount of money! Don't you want to join this trillion-dollar industry?FOREX is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY). So basically, FOREX is trading.There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency.The other 95% is trading for profit, or what you call speculation. Investors frequently trade on information they believe to be superior and relevant, when in fact it is not and is fully discounted by the market.On one side of each speculative stock trade is a participant who believes he has superior information and on the other side is another participant who believes his information is superior.For speculators, the best trading opportunities are with the most commonly traded (and therefore most liquid- meaning its in cash or convertible to cash) currencies, called "the Majors." Today, more than 85% of all daily transactions involve trading of the Majors.A true 24-hour market, FOREX trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - real time- day or night.The FOREX market is considered an Over The Counter (OTC) or 'interbank' market. This is because the transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange compared to stocks and futures markets.Understanding FOREX quotesReading a FOREX quote may seem a bit confusing at first. However, it's really quite simple if you remember two things: 1) The first currency listed first is the base currency and 2) the value of the base currency is always 1.The US dollar is the centerpiece of the FOREX market and is normally considered the 'base' currency for quotes. In the "Majors", this includes USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. For example, a quote of USD/JPY 110.01 means that one U.S. dollar is equal to 110.01 Japanese yen.When the U.S. dollar is the base unit and a currency quote goes up, it means the dollar has appreciated in value and the other currency has weakened. If the USD/JPY quote we previously mentioned increases to 113.01, the dollar is stronger because it will now buy more yen than before.The three exceptions to this rule are the British pound (GBP), the Australian dollar (AUD) and the Euro (EUR). In these cases, you might see a quote such as GBP/USD 1.7366, meaning that one British pound equals 1.7366 U.S. dollars.In these three currency pairs, where the U.S. dollar is not the base rate, a rising quote means a weakening dollar, as it now takes more U.S. dollars to equal one pound, euro or Australian dollar.In other words, if a currency quote goes higher, that increases the value of the base currency. A lower quote means the base currency is weakening.Currency pairs that do not involve the U.S. dollar are called cross currencies, but the premise is the same. For example, a quote of EUR/JPY 127.95 signifies that one Euro is equal to 127.95 Japanese yen.When trading FOREX you will often see a two-sided quote, consisting of a 'bid' and 'offer'. The 'bid' is the price at which you can sell the base currency (at the same time buying the counter currency). The 'ask' is the price at which you can buy the base currency (at the same time selling the counter currency).
Foreign exchange market
The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is the largest and most liquid financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. The average daily trade in the global forex and related markets is continously growing and was last reported to be over US$ 4 trillion in April 2007 by the Bank for International Settlement.
Market size and liquidity
The foreign exchange market is unique because of
its trading volumes,
the extreme liquidity of the market,
the large number of, and variety of, traders in the market,
its geographical dispersion,
its long trading hours: 24 hours a day except on weekends (from 3pm EST on Sunday until 4pm EST Friday),
the variety of factors that affect exchange rates.
the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
the use of leverage
As such, it has been referred to as the market closest to the ideal perfect competition, notwithstanding market manipulation by central banks. According to the BIS,[1] average daily turnover in global foreign exchange markets is estimated at $3.98 trillion. Trading in the world's main financial markets accounted for $3.21 trillion of this.
This $3.21 trillion in main foreign exchange market turnover was broken down as follows:
$1.005 trillion in spot transactions
$362 billion in outright forwards
$1.714 trillion in forex swaps
$129 billion estimated gaps in reporting
Of the $3.98 trillion daily global turnover, trading in London accounted for around $1.36 trillion, or 34.1% of the total, making London by far the global center for foreign exchange. In second and third places respectively, trading in New York accounted for 16.6%, and Tokyo accounted for 6.0%.
In addition to "traditional" turnover, $2.1 trillion was traded in derivatives.
its trading volumes,
the extreme liquidity of the market,
the large number of, and variety of, traders in the market,
its geographical dispersion,
its long trading hours: 24 hours a day except on weekends (from 3pm EST on Sunday until 4pm EST Friday),
the variety of factors that affect exchange rates.
the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
the use of leverage
As such, it has been referred to as the market closest to the ideal perfect competition, notwithstanding market manipulation by central banks. According to the BIS,[1] average daily turnover in global foreign exchange markets is estimated at $3.98 trillion. Trading in the world's main financial markets accounted for $3.21 trillion of this.
This $3.21 trillion in main foreign exchange market turnover was broken down as follows:
$1.005 trillion in spot transactions
$362 billion in outright forwards
$1.714 trillion in forex swaps
$129 billion estimated gaps in reporting
Of the $3.98 trillion daily global turnover, trading in London accounted for around $1.36 trillion, or 34.1% of the total, making London by far the global center for foreign exchange. In second and third places respectively, trading in New York accounted for 16.6%, and Tokyo accounted for 6.0%.
In addition to "traditional" turnover, $2.1 trillion was traded in derivatives.
Retail forex brokers
There are two types of retail brokers offering the opportunity for speculative trading. Retail forex brokers or Market makers. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks. Retail forex brokers, while largely controlled and regulated by the CFTC and NFA might be subject to forex scams [5] [6]. At present, the NFA and CFTC are imposing stricter requirements, particularly in relation to the amount of Net Capitalization required of its members. As a result many of the smaller, and perhaps questionable brokers are now gone. It is not widely understood that retail brokers and market makers typically trade against their clients and frequently take the other side of their trades. This can often create a potential conflict of interest and give rise to some of the unpleasant experiences some traders have had. A move toward NDD (No Dealing Desk) and STP (Straight Through Processing) has helped to resolve some of these concerns and restore trader confidence, but caution is still advised in ensuring that all is as it is presented.
Non-bank foreign exchange companies offer currency exchange and international payments to private individuals and companies. These are also known as Foreign Exchange Brokers but are distinct from Forex Brokers as they do not offer speculative trading but currency exchange with payments. i.e. there is usually a physical delivery of currency to a bank account.
It is estimated that in the UK, 14% of currency transfers/payments are made via Foreign Exchange Companies[7]. These companies' selling point is usually that they will offer better exchange rates or cheaper payments than the customer's bank. These companies differ from Money Transfer/Remittance Companies in that they generally offer higher-value services.
Money Transfer/Remittance Companies perform high-volume low-value transfers generally by economic migrants back to their home country. In 2007, the Aite Group estimated that there were $369 billion of remittances (an increase of 8% on the previous year). The four largest markets (India, China, Mexico and the Philippines) receive $95 billion. The largest and best known provider is Western Union with 345,000 agents globally.
Non-bank foreign exchange companies offer currency exchange and international payments to private individuals and companies. These are also known as Foreign Exchange Brokers but are distinct from Forex Brokers as they do not offer speculative trading but currency exchange with payments. i.e. there is usually a physical delivery of currency to a bank account.
It is estimated that in the UK, 14% of currency transfers/payments are made via Foreign Exchange Companies[7]. These companies' selling point is usually that they will offer better exchange rates or cheaper payments than the customer's bank. These companies differ from Money Transfer/Remittance Companies in that they generally offer higher-value services.
Money Transfer/Remittance Companies perform high-volume low-value transfers generally by economic migrants back to their home country. In 2007, the Aite Group estimated that there were $369 billion of remittances (an increase of 8% on the previous year). The four largest markets (India, China, Mexico and the Philippines) receive $95 billion. The largest and best known provider is Western Union with 345,000 agents globally.
Trading characteristics
There is no unified or centrally cleared market for the majority of FX trades, and there is very little cross-border regulation. Due to the over-the-counter (OTC) nature of currency markets, there are rather a number of interconnected marketplaces, where different currencies instruments are traded. This implies that there is not a single exchange rate but rather a number of different rates (prices), depending on what bank or market maker is trading, and where it is. In practice the rates are often very close, otherwise they could be exploited by arbitrageurs instantaneously. Due to London's dominance in the market, a particular currency's quoted price is usually the London market price. A joint venture of the Chicago Mercantile Exchange and Reuters, called FxMarketSpace opened in 2007 and aspires to the role of a central market clearing mechanism.
The main trading center is London, but New York, Tokyo, Hong Kong and Singapore are all important centers as well. Banks throughout the world participate. Currency trading happens continuously throughout the day; as the Asian trading session ends, the European session begins, followed by the North American session and then back to the Asian session, excluding weekends.
There is little or no 'inside information' in the foreign exchange markets. Exchange rate fluctuations are usually caused by actual monetary flows as well as by expectations of changes in monetary flows caused by changes in GDP growth, inflation, interest rates, budget and trade deficits or surpluses, large cross-border M&A deals and other macroeconomic conditions. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time. However, the large banks have an important advantage; they can see their customers' order flow.
Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX is expressed (called base currency). For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.5465 dollar. Out of convention, the first currency in the pair, the base currency, was the stronger currency at the creation of the pair. The second currency, counter currency, was the weaker currency at the creation of the pair.
The factors affecting XXX will affect both XXX/YYY and XXX/ZZZ. This causes positive currency correlation between XXX/YYY and XXX/ZZZ.
On the spot market, according to the BIS study, the most heavily traded products were:
EUR/USD: 27 %
USD/JPY: 13 %
GBP/USD (also called sterling or cable): 12 %
and the US currency was involved in 86.3% of transactions, followed by the euro (37.0%), the yen (16.5%), and sterling (15.0%) (see table). Note that volume percentages should add up to 200%: 100% for all the sellers and 100% for all the buyers.
Trading in the euro has grown considerably since the currency's creation in January 1999, and how long the foreign exchange market will remain dollar-centered is open to debate. Until recently, trading the euro versus a non-European currency ZZZ would have usually involved two trades: EUR/USD and USD/ZZZ. The exception to this is EUR/JPY, which is an established traded currency pair in the interbank spot market. As the dollar's value has eroded during 2008, interest in using the euro as reference currency for prices in commodities (such as oil), as well as a larger component of foreign reserves by banks, has increased dramatically. Transactions in the currencies of commodity-producing countries, such as AUD, NZD, CAD, have also increased
The main trading center is London, but New York, Tokyo, Hong Kong and Singapore are all important centers as well. Banks throughout the world participate. Currency trading happens continuously throughout the day; as the Asian trading session ends, the European session begins, followed by the North American session and then back to the Asian session, excluding weekends.
There is little or no 'inside information' in the foreign exchange markets. Exchange rate fluctuations are usually caused by actual monetary flows as well as by expectations of changes in monetary flows caused by changes in GDP growth, inflation, interest rates, budget and trade deficits or surpluses, large cross-border M&A deals and other macroeconomic conditions. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time. However, the large banks have an important advantage; they can see their customers' order flow.
Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX is expressed (called base currency). For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.5465 dollar. Out of convention, the first currency in the pair, the base currency, was the stronger currency at the creation of the pair. The second currency, counter currency, was the weaker currency at the creation of the pair.
The factors affecting XXX will affect both XXX/YYY and XXX/ZZZ. This causes positive currency correlation between XXX/YYY and XXX/ZZZ.
On the spot market, according to the BIS study, the most heavily traded products were:
EUR/USD: 27 %
USD/JPY: 13 %
GBP/USD (also called sterling or cable): 12 %
and the US currency was involved in 86.3% of transactions, followed by the euro (37.0%), the yen (16.5%), and sterling (15.0%) (see table). Note that volume percentages should add up to 200%: 100% for all the sellers and 100% for all the buyers.
Trading in the euro has grown considerably since the currency's creation in January 1999, and how long the foreign exchange market will remain dollar-centered is open to debate. Until recently, trading the euro versus a non-European currency ZZZ would have usually involved two trades: EUR/USD and USD/ZZZ. The exception to this is EUR/JPY, which is an established traded currency pair in the interbank spot market. As the dollar's value has eroded during 2008, interest in using the euro as reference currency for prices in commodities (such as oil), as well as a larger component of foreign reserves by banks, has increased dramatically. Transactions in the currencies of commodity-producing countries, such as AUD, NZD, CAD, have also increased
Factors affecting currency trading
Although exchange rates are affected by many factors, in the end, currency prices are a result of supply and demand forces. The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses (and distills) as much of what is going on in the world at any given time as foreign exchange.
Supply and demand for any given currency, and thus its value, are not influenced by any single element, but rather by several. These elements generally fall into three categories: economic factors, political conditions and market psychology
Supply and demand for any given currency, and thus its value, are not influenced by any single element, but rather by several. These elements generally fall into three categories: economic factors, political conditions and market psychology
Algorithmic trading in forex
Electronic trading is growing in the FX market, and algorithmic trading is becoming much more common. According to financial consultancy Celent estimates, by 2008 up to 25% of all trades by volume will be executed using algorithm, up from about 18% in 2005.
Forex swap
In finance, a forex swap (or FX swap) is an over-the-counter short term interest rate derivative instrument. In emerging money markets, forex swaps are usually the first derivative instrument to be traded, ahead of forward rate agreements and before exotics.
Structure:
A forex swap consists of two legs:
a spot foreign exchange transaction, and
a forward foreign exchange transaction.
These two legs are executed simultaneously for the same quantity, and therefore offset each other.
It is also common to trade forward-forward, where both transactions are for (different) forward dates.
Structure:
A forex swap consists of two legs:
a spot foreign exchange transaction, and
a forward foreign exchange transaction.
These two legs are executed simultaneously for the same quantity, and therefore offset each other.
It is also common to trade forward-forward, where both transactions are for (different) forward dates.
FOREX TRADING
Forex Trading is the act of trading currencies from different countries against each other. Forex is acronym of Foreign Exchange.
For example, in Europe the currency in circulation is called the Euro (EUR) and in the United States the currency in circulation is called the US Dollar (USD). An example of a forex trade is to buy the Euro while simultaneously selling US Dollar. This is called going long on the EUR/USD.
For example, in Europe the currency in circulation is called the Euro (EUR) and in the United States the currency in circulation is called the US Dollar (USD). An example of a forex trade is to buy the Euro while simultaneously selling US Dollar. This is called going long on the EUR/USD.
How does Forex Trading Work?
Forex trading is typically done through a broker or market maker. As a forex trader you can choose a currency pair that you feel is going to change in value and place a trade accordingly. For example, if you had purchased 1,000 Euros in January of 2005, it would have cost you around $1,200 USD. Throughout 2005 the Euro’s value vs. the U.S. Dollar’s value increased. At the end of the year 1,000 Euros was worth $1,300 U.S. Dollars. If you had chosen to close your trade at that point, you would have made $100.
Forex trades can be placed through a broker or market maker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the Interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds
Forex trades can be placed through a broker or market maker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the Interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds
The Foreign Exchange Market
The Foreign Exchange Market goes by many names—Currency Exchange, Foreign Exchange, Forex, FX—but no matter the term, it is simply the trading of one currency against another. Currencies are traded in the form of currency pairs with pricing based on exchange rates and spreads established by participants in the forex market.
History
The forex market is an inter-bank or inter-dealer network first established in 1971 when many of the world’s major currencies moved towards floating exchange rates. It is considered an over-the-counter (OTC) market, meaning that transactions are conducted between two counter parties that agree to trade via telephone or electronic network. OTC trades are not centralized in one location like some equity stock markets such as the New York Stock Exchange (NYSE) or the Chicago Options Board Exchange (CBOE) where options and futures are traded.
As FX trading has evolved, several locations have emerged as market leaders. Currently, London, England contributes the greatest share of transactions with over 32% of the total trades. Other trading centers—listed in order of volume— are New York, Tokyo, Zurich, Frankfurt, Hong Kong, Paris, and Sydney.
Because these trading centers cover most of the major time zones, FX trading is a true 24-hour market that operates five days a week. For example, as a trader in New York, you have access to the FX market starting Sunday evening when the market opens in Sydney for the start of the trading week. Trading centers around the globe then come online until New York closes at 4:30 PM EST. Of course, by this time, Sydney will have reopened for the next trading day so you can continue to trade around the clock until the New York close on Friday.
History
The forex market is an inter-bank or inter-dealer network first established in 1971 when many of the world’s major currencies moved towards floating exchange rates. It is considered an over-the-counter (OTC) market, meaning that transactions are conducted between two counter parties that agree to trade via telephone or electronic network. OTC trades are not centralized in one location like some equity stock markets such as the New York Stock Exchange (NYSE) or the Chicago Options Board Exchange (CBOE) where options and futures are traded.
As FX trading has evolved, several locations have emerged as market leaders. Currently, London, England contributes the greatest share of transactions with over 32% of the total trades. Other trading centers—listed in order of volume— are New York, Tokyo, Zurich, Frankfurt, Hong Kong, Paris, and Sydney.
Because these trading centers cover most of the major time zones, FX trading is a true 24-hour market that operates five days a week. For example, as a trader in New York, you have access to the FX market starting Sunday evening when the market opens in Sydney for the start of the trading week. Trading centers around the globe then come online until New York closes at 4:30 PM EST. Of course, by this time, Sydney will have reopened for the next trading day so you can continue to trade around the clock until the New York close on Friday.
Why Do We Need to Exchange Currencies?
Individuals and organizations exchange currencies whenever they require foreign goods or services. A trading market has developed around these needs, and hedging practices refined.
Historically, the forex trading market centered around central banks, commercial financial institutions, and multinational corporations. However, with the advent of web-based trading applications such as OANDA’s FXTrade, small retail traders and even individuals now participate directly in the forex market on equal footing with these large institutions.
Historically, the forex trading market centered around central banks, commercial financial institutions, and multinational corporations. However, with the advent of web-based trading applications such as OANDA’s FXTrade, small retail traders and even individuals now participate directly in the forex market on equal footing with these large institutions.
FXTrade InfoCenter
FXTrade:
Discover how economic indicators affect foreign currency movement. Find out about crude oil crack spreads and other timely topics of interest. Or access OANDA's open order books to see how client price expectations may be affecting the currency markets.
From glossaries to blogs, from currency fundamentals to advanced analysis, from open books to wikis, the OANDA FXTrade InfoCenter is your one-stop site for free currency commentary, news, analysis, and graphical tools to understand the forex market.
Discover how economic indicators affect foreign currency movement. Find out about crude oil crack spreads and other timely topics of interest. Or access OANDA's open order books to see how client price expectations may be affecting the currency markets.
From glossaries to blogs, from currency fundamentals to advanced analysis, from open books to wikis, the OANDA FXTrade InfoCenter is your one-stop site for free currency commentary, news, analysis, and graphical tools to understand the forex market.
Board-Approved Forex Policies
As part of the forex hedging implementation plan, management will develop a Foreign Currency Hedging Policy to be approved by the Board of Directors. This policy will act as a guideline for managing foreign currency risk. A detailed policy includes the following components:
Hedging objectives Currency exposures Hedging timeframes for future exposures (3, 6, 12, or 24 months) Authorized hedging products Speculation limits and authorizations, if applicable Internal controls (segregation) & reporting Performance measures (not based on whether the hedge is profitable) Risk management structure Departmental responsibilities: trading, reporting, compliance (tax, GAAP), and management reports (treasurers, controllers, and tax) Board Approval
Hedging objectives Currency exposures Hedging timeframes for future exposures (3, 6, 12, or 24 months) Authorized hedging products Speculation limits and authorizations, if applicable Internal controls (segregation) & reporting Performance measures (not based on whether the hedge is profitable) Risk management structure Departmental responsibilities: trading, reporting, compliance (tax, GAAP), and management reports (treasurers, controllers, and tax) Board Approval
Properly Educated Personnel
Qualified staff is necessary to manage hedging processes, particularly for hedging future transactions and engaging in speculative trading. When your company is considering whether to hedge future foreign currency transactions, proper validation of the forecasted foreign currency exposures requires good judgement and investigation skills. Your staff must be qualified and trained to identify and manage these exposures effectively.
Speculative forex transactions carry a higher than average degree of risk, and forex speculation is not a recommended activity for companies (unless it is the prime focus of their business). If your company decides to trade foreign currencies speculatively, be aware of the risks. For example, in addition to the normal volatility, risk can also be associated with factors such as changes in a country's political condition, economic climate, or acts of nature, all of which may substantially affect the price or availability of a given currency. You must, therefore, carefully consider your investment objectives, level of experience, and appetite for such risk prior to entering this speculative market. Most importantly, do not invest money that your company is not in a position to lose.
Speculative forex transactions carry a higher than average degree of risk, and forex speculation is not a recommended activity for companies (unless it is the prime focus of their business). If your company decides to trade foreign currencies speculatively, be aware of the risks. For example, in addition to the normal volatility, risk can also be associated with factors such as changes in a country's political condition, economic climate, or acts of nature, all of which may substantially affect the price or availability of a given currency. You must, therefore, carefully consider your investment objectives, level of experience, and appetite for such risk prior to entering this speculative market. Most importantly, do not invest money that your company is not in a position to lose.
Counterparty Risk
Every contract carries the risk (for each party) that the counterparty will not live up to its contractual obligations or will default. For example, the provider may not execute the foreign currency transaction as directed. Or, once the forex transaction is executed, there is a risk of default if the provider didn't hedge out the transaction with another customer’s trade or with another forexliquidity provider.
To help manage risk, you must verify counterparty viability before placing any trade with them. For example, verify that the counterparty:
has extremely good credit has a strong capital position has risk management policies which hedge out any net forex exposures to an appropriate liquidity provider. The use of margin accounts should eliminate the counterparty’s exposure to any customer losses
To help manage risk, you must verify counterparty viability before placing any trade with them. For example, verify that the counterparty:
has extremely good credit has a strong capital position has risk management policies which hedge out any net forex exposures to an appropriate liquidity provider. The use of margin accounts should eliminate the counterparty’s exposure to any customer losses
Forex Forecast Management
If your company has decided to hedge future forex transactions, you must be aware of the potential for forecasting errors. Senior personnel must validate any forecast transactions (to ensure they are reasonable and they reflect future corporate directions). Further, you may wish to limit the amount you hedge to a percentage of long-term forecast transactions. Hedging a smaller amount may reduce your exposure, particularly if you are unsure about future sales, future market stability, or the reliability of your long-range forecasts.
If you hedge future transactions that do not actually occur, the hedge is exposing your company to currency movements with no offset transactions—effectively, your company is speculating or betting on foreign exchange movements.
One solution for reducing the risk of uncertain future forecasts is to reduce the hedging amount. Another solution is to segregate future forecast hedges into smaller tranches (amounts) and apply different hedging products to each tranch. As an example, if you are concerned with the forecast purchase amount, 50 per cent of your future foreign currency product purchases might be hedged with a carry spot trade (a cheaper solution provided the future transaction actually takes place), while another 25 percent might use a currency option with a higher strike price. While the option may be more expensive and result in higher product costs, it would help you avoid the costs of extreme currency movements when your forecasting confidence levels are too low.
For companies following US GAAP or IFRS GAAP, the FAS 133 and IAS 39 standards require accuracy in future forecasts to obtain favorable accounting treatment. When setting up your management accounts, consider how to manage the P&L impact of forecast errors. If local units are charged the P&L impact of forecast errors, then they will have a better incentive to produce reliable forecasts.
If you hedge future transactions that do not actually occur, the hedge is exposing your company to currency movements with no offset transactions—effectively, your company is speculating or betting on foreign exchange movements.
One solution for reducing the risk of uncertain future forecasts is to reduce the hedging amount. Another solution is to segregate future forecast hedges into smaller tranches (amounts) and apply different hedging products to each tranch. As an example, if you are concerned with the forecast purchase amount, 50 per cent of your future foreign currency product purchases might be hedged with a carry spot trade (a cheaper solution provided the future transaction actually takes place), while another 25 percent might use a currency option with a higher strike price. While the option may be more expensive and result in higher product costs, it would help you avoid the costs of extreme currency movements when your forecasting confidence levels are too low.
For companies following US GAAP or IFRS GAAP, the FAS 133 and IAS 39 standards require accuracy in future forecasts to obtain favorable accounting treatment. When setting up your management accounts, consider how to manage the P&L impact of forecast errors. If local units are charged the P&L impact of forecast errors, then they will have a better incentive to produce reliable forecasts.
Foreign Currency Exposure Capture and Validation
Today's accounting systems (if properly designed) can produce accurate reports, but they are only as good as the data entered into them. Strong internal control policies, such as reconciling intercompany balances in both underlying foreign currency and reporting currency amounts, will reduce the risk of hedging the wrong amounts. The appropriate personnel must regularly review these reports to validate the data and investigate unusual or unexpected foreign currency exposures. Maintaining accurate information about your foreign currency exposures will improve, with time and practice.
To help with the data capture process and identify previous foreign currency exposures, review the current gains/losses in your foreign currency general ledger account. You may also consider natural hedging offsets and strategic techniques for managing foreign exchange exposures over the longer term, such as moving some of your production to your larger sales markets so you can match the currency of your costs and revenues.
Keep in mind: in today’s world of outsourced solutions (Chinese manufacturing, accounting departments in India, and so on), certain strategic decisions may require long-term currency hedges to protect longer term outsourcing decisions.
To help with the data capture process and identify previous foreign currency exposures, review the current gains/losses in your foreign currency general ledger account. You may also consider natural hedging offsets and strategic techniques for managing foreign exchange exposures over the longer term, such as moving some of your production to your larger sales markets so you can match the currency of your costs and revenues.
Keep in mind: in today’s world of outsourced solutions (Chinese manufacturing, accounting departments in India, and so on), certain strategic decisions may require long-term currency hedges to protect longer term outsourcing decisions.
FOREX CURRENCY TRADING
FX, Forex or Foreign Exchange, is all about exchange of currencies from one hand to another at an ongoing price in the market. Forex is all about investing money in foreign currencies, just gain profit by selling at a higher price, the one you hold, just to buy another one at a lower price. Earlier, not many traders were clear about the Forex trading and that Forex is just short for "foreign exchange", as it did not get much publicity through media.
Foreign Exchange market is the biggest financial market in the world, with a potential of fast and great gains and a sizable number of investors. The advent of internet technology is what made Forex trading grow considerably popular as well as accessible with various types of investors.
About a decade ago, currency trading was only limited to large banks and financial firms because they were the only ones to have access to the tools and methods required to trade Forex market. However recently, due to up and coming efficient online platforms, technology has advanced to the point of being accessible to any and every individual trader who wishes to trade or invest in Forex. Marketforex.net being one of finest online trading platforms is easily accessible by all who are interested in investing in Forex.Although trading in the Forex market is done for almost all the foreign currencies, there are still, some foreign currency pairs which are considered as “Major” currency pairs as compared to the others. This is because these currency pairs are some of the most traded and most in demand currencies in the Forex trading market. These pairs dominate the percentage of trades and are as follows:
Euro/ U.S. Dollar
US Dollar/ Japanese Yen
US Dollar/ Swiss Franc
US Dollar/ British Pound.
The FOREX trading market offers its investors with exclusive and lucrative investing opportunities. Other factors like 24 hours open market, high leverage, commission-free trading and easy accessibility through various means of communications has helped Forex to become one of the most popularly invested financial markets.
With a daily volume of about $1.2 trillion money changing hands everyday, the magnitude of Forex market is definitely one of the highest as compared to the Equities and the Futures market. So, you should educate yourself comprehensively and take advantage of this giant investment vehicle.
Marketforex.net provides all the new as well as experienced traders with the opportunity to trade Forex more easily and more advantageously. We offer our clients with quicker results, better deals, higher leverage and superior customer support, thus offering them efficient and genuine Forex trading services through an advanced online trading platform.
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.
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.
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.
Forex Day Trading Prospects
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.
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.
Supervised Forex accounts and its Benefits
Forex or currency trading accounts can be easily controlled and managed using different techniques. Since Forex trading market is also known as over-the-counter trading market, it can be traded through different means of communications such as telephone and internet.
When you are an individual first time trader, opting for managed or supervised Forex accounts is always beneficiary. By trading with the guidance of expert and professional people, a new and inexperienced trader can make wiser and faster deals and decisions.
With Forex, even the slightest of political or economic change can cause fluctuation, for which everyone is unprepared. These sudden changes are sometimes difficult to predict, and that is where the professional come in, the ones who are used to observing these fluctuations and at times, there patterns. They also have a thorough knowledge about what occurring or events on the political or economic front can lead to fluctuations in market.
Forex markets deals in trading substantial volumes of capital, offering exceptional leverage and round the clock trading ever day, with all these serving as the benefits of trading Forex. And while the market being active 24 hours a day is a benefit, this can also at times serve as a downside for an average individual investor, for whom, it is quiet taxing to catch with the market, at all times.
So, when it is said that Forex is a 24 hour market, alongside being an advantage, it is also a bane for the individual or ordinary traders who are going to miss some of this ongoing trade.
When opting for supervised Forex accounts, you choose the “auto trading” system, where in, you can get associated with any of the professionally established brokers. These brokers will run your account on your behalf and you would not have to be placing all the deals. Alongside handling and managing your account, they will also observe and check the markets for you, almost round the clock, and also placing the limits and stops as the trade goes live.
This type of managed trading lets an individual investor free from the liability of keeping a check on the market 24 hours a day, giving him freedom to do other things while his broker does this hard work for him.
A lot can be done through computers these days. They can help us track this 24 hours market easily alongside checking on the other currency trading activities which can keep the trader conversant about the updated status of the market.
Many programs these days are being used to make Forex tracking a lot less boring. These software programs create fancy charts on the screen, as per the information fed into them. With the rapid advancement in the field of electronic media and computer technologies, alongside telecommunications, the level of a Broker’s knowledge has also increased. Forex brokers, these days are well versed with all the updated technologies, capable of getting full use out of them in any which way, to make Forex trading and interesting experience for their traders and investors.
And what’s more, with the internet coming into picture quiet rapidly, now days, there is no need to feed in the data manually into your computers. Comprehensive and updated market and trading related information and data is available, once the markets are closed for the day.This information and data can be then, easily downloaded into the computers and the work to examine the market can begin!
When you are an individual first time trader, opting for managed or supervised Forex accounts is always beneficiary. By trading with the guidance of expert and professional people, a new and inexperienced trader can make wiser and faster deals and decisions.
With Forex, even the slightest of political or economic change can cause fluctuation, for which everyone is unprepared. These sudden changes are sometimes difficult to predict, and that is where the professional come in, the ones who are used to observing these fluctuations and at times, there patterns. They also have a thorough knowledge about what occurring or events on the political or economic front can lead to fluctuations in market.
Forex markets deals in trading substantial volumes of capital, offering exceptional leverage and round the clock trading ever day, with all these serving as the benefits of trading Forex. And while the market being active 24 hours a day is a benefit, this can also at times serve as a downside for an average individual investor, for whom, it is quiet taxing to catch with the market, at all times.
So, when it is said that Forex is a 24 hour market, alongside being an advantage, it is also a bane for the individual or ordinary traders who are going to miss some of this ongoing trade.
When opting for supervised Forex accounts, you choose the “auto trading” system, where in, you can get associated with any of the professionally established brokers. These brokers will run your account on your behalf and you would not have to be placing all the deals. Alongside handling and managing your account, they will also observe and check the markets for you, almost round the clock, and also placing the limits and stops as the trade goes live.
This type of managed trading lets an individual investor free from the liability of keeping a check on the market 24 hours a day, giving him freedom to do other things while his broker does this hard work for him.
A lot can be done through computers these days. They can help us track this 24 hours market easily alongside checking on the other currency trading activities which can keep the trader conversant about the updated status of the market.
Many programs these days are being used to make Forex tracking a lot less boring. These software programs create fancy charts on the screen, as per the information fed into them. With the rapid advancement in the field of electronic media and computer technologies, alongside telecommunications, the level of a Broker’s knowledge has also increased. Forex brokers, these days are well versed with all the updated technologies, capable of getting full use out of them in any which way, to make Forex trading and interesting experience for their traders and investors.
And what’s more, with the internet coming into picture quiet rapidly, now days, there is no need to feed in the data manually into your computers. Comprehensive and updated market and trading related information and data is available, once the markets are closed for the day.This information and data can be then, easily downloaded into the computers and the work to examine the market can begin!
Tips for New Forex Traders
Forex has always been a magnet for investors and traders, who are looking for an exciting business venture to invest in, giving them the thrill, adventure and excitement, along with an idea of a quick and easy way to make profits.
But, for those who are relatively new to the Forex trading world, it is extremely important to know exactly what you are getting into. When it comes to the matter of investing a huge amount of your hard earned money into something, first time investors should always make sure what they ought to expect out of it. What should and should not be done. What steps should be taken to play safe and what to do that keeps them at away from the frauds and scams.
First of all what needs to be learnt is, what is Forex and how does it work? What need’s to be known next are a few important trading tips, which will facilitate you during your transactions.
Foreign Exchange or Forex or FX is one of the biggest money market in the world, and is a platform where currency is sold and bought freely between buyers and sellers. Forex, unlike any other financial markets, has no physical location or central exchange.
With over $1.5 trillion USD being traded daily, the foreign exchange market has now become a market which is open to trading by an average investor as much as it is open to a high investor.
Launched over three decades back, in the early seventies, Market Forex introduced free exchange rates worldwide, according to which, the price of the currencies was determined on the basis of demand and supply only.
A number of reasons are responsible for making Forex a distinctive financial market. To begin with, no external regulatory authority is allowed to set or fix currency prices or rates in this market, making Forex is market which cannot be controlled in any way. Also, it is one of those few money markets that necessitate very little trading education, training and experience.
In order to know the Forex market well, the new traders should know how to start trading Forex. The few important things to be kept in mind when beginning to trade Forex are as follows:
What needs to be done firstly is, to open a Forex account. This can be done by filling up an application form, providing the required essential credentials, like personal details, financial particulars, and other details such as whether or not, a broker will be allowed to mediate with any trade if it appears to get too precarious and dicey.
Once your account has been created and recognized, you can begin to flow cash in to it and start trading Forex.
New Forex traders are always advised to create two accounts while trading, one of them being a real account, while the other being a demo one. A real account will facilitate the trader to actually trade in the market, with real money.
The demo account helps the new investor learn more about the trading business. This way the new trader can practice his moves of trading in the market, without the fear of losing all his money in case he/ she goofs up or ends up making the wrong deal.
Also, before you start trading in the market, you should have a closer look at all the top five foreign currencies and their current rates to make sure, you are aware of the current rates and are not missing anything. The top five Forex currencies are: Pound/USD, Swiss franc/USD, Euro/Yen, USD/Yen and Euro/USD.
Always keep a check on the market. With the time intervals on hourly, daily and weekly schedules with all the currencies that are in any way related to your trade.
Being a successful trader requires to come up with individual and unique trading strategies. There is no “Golden Mantra” or “Trade Secret”, which will work for the traders.
Every investor needs to come up with their own, personal and distinctive trading approach when it comes to the market. There are different ways by which, the traders approach the market. Sometimes they may bank solely on industrial and technical analysis.
Some may like better to go in for a more elementary and basic approach for trading, while others may make use of the past records of the market, combined with both technical as well as fundamental techniques for trading. All these strategies help the traders in studying the patterns of currency price trends and movements, making it easier for them to foresee the course of the potential developments in the Forex market.
Currency prices in Forex market mostly move in trends. They have a pattern, through which, certain movements can be studied. Some of these movements which have been studied over several years mostly help in discovering that pattern in the market trend. These trends are what should be recognized and valued properly, to facilitate the creation of an excellent trading strategy.
Any factors, financial or political, having some control over the value or the price of a currency, have already been measured by the market to be included as an important factor in creating a price trend.
When trading for the first time, it is always advisable to invest by the trends. Trading with a trend can facilitate you by advancing your chances with profit. Many new investors are enthusiastic to start trading as soon as they can, eventually ending up trading in any direction. Trading by a trend or following a pattern and studying the market can increase your odds of being favored by the market, making your trading prospects high.
But, for those who are relatively new to the Forex trading world, it is extremely important to know exactly what you are getting into. When it comes to the matter of investing a huge amount of your hard earned money into something, first time investors should always make sure what they ought to expect out of it. What should and should not be done. What steps should be taken to play safe and what to do that keeps them at away from the frauds and scams.
First of all what needs to be learnt is, what is Forex and how does it work? What need’s to be known next are a few important trading tips, which will facilitate you during your transactions.
Foreign Exchange or Forex or FX is one of the biggest money market in the world, and is a platform where currency is sold and bought freely between buyers and sellers. Forex, unlike any other financial markets, has no physical location or central exchange.
With over $1.5 trillion USD being traded daily, the foreign exchange market has now become a market which is open to trading by an average investor as much as it is open to a high investor.
Launched over three decades back, in the early seventies, Market Forex introduced free exchange rates worldwide, according to which, the price of the currencies was determined on the basis of demand and supply only.
A number of reasons are responsible for making Forex a distinctive financial market. To begin with, no external regulatory authority is allowed to set or fix currency prices or rates in this market, making Forex is market which cannot be controlled in any way. Also, it is one of those few money markets that necessitate very little trading education, training and experience.
In order to know the Forex market well, the new traders should know how to start trading Forex. The few important things to be kept in mind when beginning to trade Forex are as follows:
What needs to be done firstly is, to open a Forex account. This can be done by filling up an application form, providing the required essential credentials, like personal details, financial particulars, and other details such as whether or not, a broker will be allowed to mediate with any trade if it appears to get too precarious and dicey.
Once your account has been created and recognized, you can begin to flow cash in to it and start trading Forex.
New Forex traders are always advised to create two accounts while trading, one of them being a real account, while the other being a demo one. A real account will facilitate the trader to actually trade in the market, with real money.
The demo account helps the new investor learn more about the trading business. This way the new trader can practice his moves of trading in the market, without the fear of losing all his money in case he/ she goofs up or ends up making the wrong deal.
Also, before you start trading in the market, you should have a closer look at all the top five foreign currencies and their current rates to make sure, you are aware of the current rates and are not missing anything. The top five Forex currencies are: Pound/USD, Swiss franc/USD, Euro/Yen, USD/Yen and Euro/USD.
Always keep a check on the market. With the time intervals on hourly, daily and weekly schedules with all the currencies that are in any way related to your trade.
Being a successful trader requires to come up with individual and unique trading strategies. There is no “Golden Mantra” or “Trade Secret”, which will work for the traders.
Every investor needs to come up with their own, personal and distinctive trading approach when it comes to the market. There are different ways by which, the traders approach the market. Sometimes they may bank solely on industrial and technical analysis.
Some may like better to go in for a more elementary and basic approach for trading, while others may make use of the past records of the market, combined with both technical as well as fundamental techniques for trading. All these strategies help the traders in studying the patterns of currency price trends and movements, making it easier for them to foresee the course of the potential developments in the Forex market.
Currency prices in Forex market mostly move in trends. They have a pattern, through which, certain movements can be studied. Some of these movements which have been studied over several years mostly help in discovering that pattern in the market trend. These trends are what should be recognized and valued properly, to facilitate the creation of an excellent trading strategy.
Any factors, financial or political, having some control over the value or the price of a currency, have already been measured by the market to be included as an important factor in creating a price trend.
When trading for the first time, it is always advisable to invest by the trends. Trading with a trend can facilitate you by advancing your chances with profit. Many new investors are enthusiastic to start trading as soon as they can, eventually ending up trading in any direction. Trading by a trend or following a pattern and studying the market can increase your odds of being favored by the market, making your trading prospects high.
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