Quote convention: OIL will be quoted with OIL as the base – Example OIL/USD = 118.00 USD per barrel

Expiration date: Oil trading can only be renewed up to the close of business on the fourth US business day prior to the 25th calendar day of the month, preceding the contract month. If the 25th day is a non-business day, trading shall cease on the fourth business day prior to the business day preceding the 25th calendar day.

Trading hours: 01.30 London time until 22:30 London time. Outside these hours no opening or closing of deals will be allowed.

Availability: Oil trading is not available in USA and some other regions.

If you wish to get involved in the Forex market, open an account, for free.

Technical Traders

Technical traders make their decisions using two primary tools:

* Charting tools (trend lines, support and resistance levels, etc,)
* Quantitative Trading Models (mathematical analysis to identify trading opportunities).

The goal of a technical analysis is to study historical data or past behavior of the market in order to predict future market movements. Traders may using their own charts and/or models, or use those developed by third-party providers.

Fundamental Traders

Fundamental traders analyze key economic data, including news and government reports, to evaluate trading opportunities. They believe that currency exchange rates are affected primarily by economic and political conditions, and occasionally by central banks intervening in the currency markets in an attempt to influence the value of their currencies.

Some of the key figures tracked by fundamental traders include interest rates, inflation, trade balance, GDP (Gross Domestic Product), CPI (Consumer Price Index), PPI (Producer Price Index), capacity utilization, factory orders, durable goods orders, inventories, and employment statistics. They are also constantly evaluating the potential impact of military conflicts, natural disasters, and changes in political leadership.

Another factor that often influences trading decisions is market sentiment. Traders often read news, analyst reports, and Web site bulletin boards to get a sense of the general market sentiment and then trade either with or against that sentiment.

If you wish to get involved in the Forex market, open an account, for free.

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Successful trading is often described as optimizing your risk with respect to your reward, or upside. Any trading strategy should have a disciplined method of limiting risk while making the most out of favorable market moves. We will illustrate one decision making model which uses a Simple Moving Average (“SMA”) technical study, based on a 12-period SMA, where each period is 15 minutes. This is one example of a trading decision making strategy, and we encourage any trader to research other strategies as thoroughly as possible.

We will use a simple algorithm: when the price of the currency crosses above the 12-period SMA, it will be taken as a signal to buy at the market. When the currency price crosses below the 12-period SMA, it will be a signal to “Stop and Reverse” (“SAR”). In other words, a long position will be liquidated and a short position will be established, both with market orders. Thus this system will keep the traders “always in” the market – he will always have either a long or short position after the first signal. In the chart below, the white line represents the price of USDJPY, the purple line represents the 12-period SMA of USDJPY, and the red line indicates where USDJPY crosses above the SMA, generating a buy signal at approximately 129.90:

This is a simple example of technical analysis applied to trading. Many strategies used by professional traders make use of moving averages along with other indicators or “filters”. Note that the moving average method has an element of risk control built in: a long position will be stopped out fairly quickly in a falling market because the price will drop below the SMA, generating a stop-and-reverse signal. The same holds true for a sell signal in a rising market. Note that the SMA is generated automatically by GCI’s integrated charting application.

Sample Strategy 2 – Support and Resistance Levels

One use of technical analysis, apart from technical studies, is in deriving “support” and “resistance” levels. The concept here is that the market will tend to trade above its support levels and trade below its resistance levels. If a support or resistance level is broken, the market is then expected to follow through in that direction. These levels are determined by analyzing the chart and assessing where the market has encountered unbroken support or resistance in the past.

For example, in chart below EURUSD has established a resistance level at approximately .9015. In other words, EURUSD has risen up to .9015 repeatedly, but has been unable to move beyond that point:

The trading strategy would then be to sell EURUSD the next time it gets close to .9015, with a stop placed just above .9015, say at .9025. This would have indeed been a good trade as EURUSD proceeded to fall sharply, without breaking the .9015 resistance. Hence a substantial upside can be achieved while only risking 10 or 15 pips (.0010 or .0015 in EURUSD).

If you wish to get involved in the Forex market, open an account, for free.

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The most common currency pair is EUR/USD.

The exchange rate: The exchange rate is always changing. The value of one currency is determined by market supply and demand forces, by comparing it to another currency. In a currency pair, the first currency is called the ‘base currency’; the second currency is called the ‘quote currency’ or ‘counter currency’.

When you buy a currency pair, you buy the base currency and sell the quote currency. The exchange rate tells buyers how much of the quote currency they need to buy one of the base currency. The order in a pair always stays the same, being a common approach by the industry. USD/JPY, for example, is a pair (USD = base, JPY = the quote). The order within the pair, in the way you use the term, does not change. So you either BUY it or SELL it, depending on the direction of the trade. For example: USD/JPY – you either BUY JPY using USD or you Sell JPY to get USD. On the currency rate table on the Easy-Forex® website you can view the way in which each pair available for trade is ordered.

Here is an example: EUR/USD 1.2500 means you need 1.25USD to buy one euro. It also means if you sell one euro you get 1.25USD. All trades involve buying one currency and selling another currency at the same time. If in the next day the Euro is rising against the USD and the exchange rate is now 1.26, for every 1 Euro that you bought, you have earned 1USD cent. Or, if you traded the opposite direction, for every EUR that you sold (at 1.25) you lost 1USD cent (since you “buy” back the EUR for 1.26).

Buy and sell currency: Traders in the foreign exchange market buy and sell currency to try to make profit. There are two prices for currency: the buy price, called the ‘BID’; and the sell price, called the ‘ASK’.

The difference between the ‘bid’ and the ‘ask’ is called the ‘spread’. The spread represents the difference between what the market maker gives to buy from a trader, and what the market maker takes to sell to a trader.

For example: the EUR/USD bid/ask rate is 1.2100/1.2200. The market maker gives $1.21 when buying from the trader, but takes $1.22 when selling to the trader. If traders buy and sell immediately without any change in the exchange rate, they lose money. This happens because of the spread – traders pay more to buy the currency than they receive when they sell in that one moment.

In fact, the spread is the leading source of income for the market maker. Like any other market, the merchant will buy at one price and sell at a higher price.

Quotes: The price of a currency is called the ‘quote’. There are two forms of quotes in the Forex market: direct quotes, and indirect quotes.

A direct quote is the price for one US dollar in terms of another currency. An indirect quote is the price for one UNIT of another currency in terms of the US dollar.

Please note: in general, most currencies are quoted against the USD (e.g. – “direct quote”). But, the EUR, GBP, AUD, NZD (as well as Gold XAU and silver XAG) are indirect quoted, for example: GBP/USD.

The quote is the price to a currency pair that the deal will be made with. This is unlike an ‘indication’, where the price given by a market maker is only informational (for trader’s knowledge, rather than for execution).

If you wish to get involved in the Forex market, open an account, for free.

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Further incentives to Forex trading:

* An enormous liquid market making it easy to trade most currencies.
* Volatile markets offering profit opportunities.
* Standard Forex instruments for controlling risk exposure.
* The ability to profit in rising or falling markets.
* Leveraged trading with low margin requirements.
* Many options for zero commission trading.

Forex trading: The investor’s goal in Forex trading is to profit from foreign currency movements. Forex trading or currency trading is always done in currency pairs. For example, the exchange rate of EUR/USD on Aug 26th, 2003 was 1.0857. This number is also referred to as a “Forex rate” or just “rate” for short. If the investor had bought 1000 euros on that date, he would have paid 1085.70 U.S. dollars. One year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. dollar. The investor could now sell the 1000 euros in order to receive 1208.30 dollars. Therefore, the investor would have USD 122.60 more than what he had started one year earlier. However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a “risk-free” investment. One example of a risk-free investment is long-term U.S. government bonds since there is practically no chance for a default, i.e. the U.S. government going bankrupt or being unable or unwilling to pay its debt obligation.

When trading currencies, trade only when you expect the currency you are buying to increase in value relative to the currency you are selling. If the currency you are buying does increase in value, you must sell back the other currency in order to lock in a profit. An open trade (also called an open position) is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position.

However, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency.

Exchange rate: Because currencies are traded in pairs and exchanged one against the other when traded, the rate at which they are exchanged is called the exchange rate. The majority of the currencies are traded against the US dollar (USD). The four next-most traded currencies are the euro (EUR), the Japanese yen (JPY), the British pound sterling (GBP) and the Swiss franc (CHF). These five currencies make up the majority of the market and are called the major currencies or “the Majors”. Some sources also include the Australian dollar (AUD) within the group of major currencies.

The first currency in the exchange pair is referred to as the base currency and the second currency as the counter or quote currency. The counter or quote currency is thus the numerator in the ratio, and the base currency is the denominator. The value of the base currency (denominator) is always 1. Therefore, the exchange rate tells a buyer how much of the counter or quote currency must be paid to obtain one unit of the base currency. The exchange rate also tells a seller how much is received in the counter or quote currency when selling one unit of the base currency. For example, an exchange rate for EUR/USD of 1.2083 specifies to the buyer of euros that 1.2083 USD must be paid to obtain 1 euro.

At any given point, time and place, if an investor buys any currency and immediately sells it – and no change in the exchange rate has occurred – the investor will lose money. The reason for this is that the bid price, which represents how much will be received in the counter or quote currency when selling one unit of the base currency, is always lower than the ask price, which represents how much must be paid in the counter or quote currency when buying one unit of the base currency. For example, the EUR/USD bid/ask currency rates at your bank may be 1.2015/1.3015, representing a spread of 1000 pips (also called points, one pip = 0.0001), which is very high in comparison to the bid/ask currency rates that online Forex investors commonly encounter, such as 1.2015/1.2020, with a spread of 5 pips. In general, smaller spreads are better for Forex investors since even they require a smaller movement in exchange rates in order to profit from a trade.

Margin – Amount to Risk: Banks and/or online trading providers need collateral to ensure that the investor can pay in case of a loss. The collateral is called the margin and is also known as minimum security in Forex markets. In practice, it is a deposit to the trader’s account that is intended to cover any currency trading losses in the future. Margin enables private investors to trade in markets that have high minimum units of trading by allowing traders to hold a much larger position than their account value. Margin trading also enhances the rate of profit, but has the tendency to inflate rates of loss, on top of systemic risk.

Leveraged financing: Leveraged financing, i.e., the use of credit, such as a trade purchased on a margin, is very common in Forex. The loan/leveraged in the margined account is collateralized by your initial deposit. This may result in being able to control USD 100,000 for as little as USD 1,000. A relatively small market movement will have a proportionately larger impact on the funds you have deposited or may have to deposit. This may work against you as well as for you. You may sustain a total loss of the margin funds deposited and any additional funds deposited to maintain your positions.

Five ways private investors can trade in Forex directly or indirectly:

* The spot market
* Forwards and futures
* Options
* Contracts for difference
* Spread betting

A spot transaction: A spot transaction is a straightforward exchange of one currency for another. The spot rate is the current market price, also called the benchmark price. Spot transactions do not require immediate settlement, or payment “on the spot.” The settlement date, or “value date,” is the second business day after the “deal date” (or “trade date”) on which the transaction is agreed to by the two traders. The two-day period provides time to confirm the agreement and arrange the clearing and necessary debiting and crediting of bank accounts in various international locations.

Risks: Forex trading is risky. There are ways to reduce risk such as setting a Stop Loss on deals. Read more about the risks involved and how to lower exposure to risk.

If you wish to get involved in the Forex market, open an account, for free

Technorati Tags: Alternative Investments, Controlling Risk, Currency Movements, Currency Pairs, Currency Trading, Foreign Currencies, Foreign Currency, Foreign Exchange Market, Forex Dealers, Forex Trading, Free Investment, Investment Option, Liquid Market, Margin Requirements, Numerator, Private Investors, Profit Opportunities, Risk Exposure, Risk Free Investment, Time Events, Trading Forex, Value Of The Euro, Volatile Markets

What is risk capital? Risk capital is the money experts suggests you use for trading in the market. It is money you have that you do not need for day to day living and you can afford to lose.

Can I reduce risk? You can reduce risk in many different ways. Brokerage Firms have tools to help you make the most of your trading. First it is important to understand the market.Customers are trained for free. Easy-Forex™ believes that good training is necessary for trading success. You can deposit a small amount and do some small trades at first to help you understand how the market operates. Another way to reduce risk is to try to judge what direction a currency might take by studying what has happened in the market until now and the causes of changes in the market. This is called forecasting. Forecasting helps you to develop an idea what might happen in the market in the near future. You can also place Stop Loss and Take Profit limits on your trades. This reduces the risk of losing more than you feel comfortable with. Stop Loss and Take Profit help you to control your trading. When you place these limits on your trades, you do not have to watch the computer screen every minute.

Leveraged trading: The leveraged nature of the Forex market means that risks and rewards are higher. Any movement in the market will have an effect on what you win or lose. With leveraged trading, the effect can be increased on a big scale. You can win a great amount, or you can lose a great amount. This is why it is important to understand the market. It is important to use methods that limit your risk. Learn to be a disciplined trader.

Is foreign exchange trading right for me? Foreign exchange trading is not the right investment for everyone. If you are responsible and trade to the limits you set for yourself, you will find there are rewards. But you must take risks to get rewards. The risks must be right for you.

If you wish to get involved in the Forex market,  open an account, for free.

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What is the spread? The spread is the difference between the buy (also called bid) price and the sell (also called ask) price. Two prices are given for a currency pair. The spread represents the difference between what the market maker gives to buy from a trader, and what the market maker takes to sell to a trader. If a trader buys any currency and immediately sells it – and no change in the exchange rate has happened – the trader will lose money. The reason for this is that the bid price is always lower than the ask price.

For example, the EUR/USD bid/ask currency rates at your bank may be 1.2015/1.3015. This represents a spread of 1000 pips. This spread is very high compared to the bid/ask currency rates for online Forex investors, such as 1.2015/1.2020 – a spread of 5 pips.

In general, smaller spreads are better for Forex investors because a smaller movement in exchange rates lets them profit from a trade more easily.

If you wish to get involved in the Forex market, open an account, for free.

Technorati Tags: Ask Online, Bid Ask, Bid Online, Bid Price, Buy And Sell, Buy Sell, Currencies, Currency Rates, Decimal Points, Eur Usd, Exchange Rate, Exchange Rates, Forex Market, Investor, Investors, Japanese Yen, Money, Online Investors, Pip, Pips, Quote, Usd Jpy

Do market makers go against a customer’s position? Market makers work with customers. They buy and sell to people who want to enter the market. They always tell customers both rates: the buy rate and the sell rate. Market makers do not advise customers. Market makers do not act for customers. They help because they can give expert information about different finance positions. Market makers have good policy to reduce risk. Authorities guide the way market makers act.

Do market makers and customers have opposite interests? Market makers always provide the buy price and the sell price. Customers always know both prices. Market makers are neutral. They do not try to increase their profit by decreasing the customer’s profit. The trade process is based on supply and demand.

Who can influence the market? The forex market is huge, with trillions of dollars transacted daily and a constant online flow of information across the world. This makes it difficult for an individual trader (person or organization) to influence the market. Easy-Forex™ gives you access to to this exciting market through its online trading platform. With foreign exchange, there is a different price to buy and to sell. This difference is called the ‘spread’ and it is where Easy-Forex™ earns money, making a small profit on each deal. Accordingly, Easy-Forex™ maintains neutrality (as for the direction of any deals made by its clients), since the leading source of its income is in the spreads.

What is the risk for market makers? Market makers deal with large amounts of finance and trade. They can combine all their client’s money and use banks to reduce risk. This is called hedging their exposure and by combining all the money, they hedge in bulk giving them a much stronger position. Easy-Forex™ works within relevant international regulations as well as its own risk management policy. It cooperates with the world’s big banks: UBS (Switzerland) and RBS (Royal Bank of Scotland).

If you wish to get involved in the Forex market, open an account, for free.

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You decide to open a contract for trade and it has these elements in it:
The currency pair for trading – e.g. EUR/USD
The direction of the trade – BUY euro and SELL US dollars
The price – say 1.3500
The contract value – EUR 100,000

As the trader, you purchase this contract, believing you will profit once you close (offset) the contract.

If you are right (for example: the rate increased to 1.3600), then you would profit: for every euro in this contract you made profit of 1 US cent. In total, the profit would be $1,000 (100,000 x 1 cent). However, do you need ALL the EUR 100,000 to open this contract? The answer is: NO. You can LEVERAGE the trading: the trader is required to risk, for example, only 1:100 of the contract value. Accordingly, for a contract of 100,000 only $1,000 is needed. However, if there was loss, and the value of the WHOLE contact dropped to 99,000, then the deal is automatically closed, since the “guarantee” made by the trader was only $1,000.

Please note that the LEVERAGE offered in the Forex market is usually between 1:50 and 1:200. With leverage, you have more money to use for trading than the balance in your account because you can ‘leverage’ what you do have – that means you use what you have to increase the amount you can trade and to increase your profit when you succeed in trading in the right direction of a currency pair. On the other side, when there is a loss: the higher the leverage, the quicker you are subject to automatic closure of your deal.

How does leveraged trading work? Leveraged trading works by establishing a rate you can use for every dollar in your account. The money you put for the trade is the actual money you risk. It is called ‘margin’ or the amount you risk. Easy-Forex offers leverage rates from 1:50 up to 1:200 (note for USA only up to 1:00). For example: If you invest $100 and leverage it at 1:200, then you have $200 to trade for every $1 in your investment (margin). If you start trading with your $100 investment, you can buy up to a value of $20,000 (200×100).

Why does leveraged trading exist? In the Forex market, leveraged trading exists to create the possibility of making a bigger profit. Leverage is necessary because Forex trades involve very small differences in price. The difference can be a very small part of one cent. With such small amounts, it can take a long time to make a meaningful profit, as well as bigger initial investments. Using leverage, you can get a return on your investment faster and using smaller initial deposits. Forex trades happen very quickly. When you are using leverage, you should be careful. The higher the leverage used the more chance you have of losing your investment when the currency pair is going opposite to your investment. You are advised not to risk more than you can accept to lose.

What is a ‘margin’? A ‘margin’ is the amount you put into the Forex contract you open (the investment which you risk). Online trading brokers must make sure that traders can pay if they lose money when they trade. Traders put money into an account that can be used to cover any losses they make. This amount is also called ‘minimum security’. With a margin, traders are able to invest in markets where the smallest trade you can make is already high. Margin trading can increase profit, but it can also increase loss.

The profit and loss rates when you leverage your trade: As mentioned, your margin is your investment. Accordingly, you invest a margin of $1,000 for a contract of $100,000. This is a 1:100 rate. If the currency exchange rate moved, for example, 0.5% that would be a 50% change on your margin! Since the contract is 100 times the margin, then the change of 0.5% becomes 100 times bigger, to 50%.

Can you limit your risk? You can limit your risk by using ‘Stop-Loss’ rates. These rates are decided by you, the trader. You choose a rate that is the lowest you want to go. If the market reaches that rate, your deal is automatically stopped so you do not lose any more money. Because you set the rate, you can control your investment. You can make sure that you do not lose more than you are prepared to lose. In the same way, you can set a ‘Take-Profit’ rate. Your deal will stop when the profit rate you have decided is reached. Take-Profit makes it easy you to control their trading, without having to constantly monitor your position.

You can change your set rates at any time while your deal is open: It is important you know that 100% guarantee for pre-set rates is impossible because market conditions might suddenly affect trading. For example, the market might suddenly change very fast, and those involved in the Forex trade might be unable to execute pre-set rates because the trading environment is suddenly out of their control.

If you wish to get involved in the Forex market, open an account, for free.

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Reasons to Invest in the Foreign Exchange Markets:

1. The ability to leverage relatively low amounts of investments and control large sums of currencies.
2. Most Forex brokerage firms don’t charge commissions to execute a trade
3. The ability to buy and sell at will due to extremely large market.
4. Unstable markets provide conditions where knowledgeable investors can make vast sums of profits.
5. The ability to limit risk though the use of available tools.
6. It does not matter if a currency is raising or falling, you still are able to make money.

Trading In the Forex Markets:

The name of the game in any investment is to make money. In other words, you want to buy low and sell high. Investing in the FX is no different. The vast majority of the investments are made by people or institutions which have no intention of every actually taking possession of the currency. They are simply attempting to use educated guess to determine which direction a currency is going to move and make a profit from it.

Currencies are always traded in pairs. One might sell US dollars and buy Euro’s or vice versa. Remember, to truly make a profit in the currency markets you must have a plan to get the profits you have made back into your own countries currency. Let’s say you live in the United States and make an investment in Euro’s and own them at a later date. Your next trade could be in Japanese Yen, where you also made a big profit trading the Euro’s for the Yen. What do you do now; you live in the US and can’t spend Yen. So, a very important long term consideration for any currency investor is how are they repatriate there profits into there home countries currency.

A very common measure of an investment is called, the Return on Investment (ROI,) Regardless of whether you’re investing in currencies, real estate or a business venture this is a very important consideration that must be considered in all investment transactions. There are very safe forms of investments that are considered risk free, such as US Treasury Bonds. For an investment in a currency to be considered a good investment you should be able to receive a profit that more than marginally exceeds an investment in US bonds.

The Major Currencies and how Exchange Rates are Determined:

There are five major currencies that are traded most often. They are the US Dollar (USD,) the Euro (EUR,) the Japanese Yen (JPY,) the British Pound (GBP,) and the Swiss Frank (CHF.) There are certain foundations that also consider the Australian Dollar (AUD) a major currency. At some point in the near future, at least we hope the Chinese government will remove the restrictions presently placed on the trading of there national currency and allow it also to be freely traded.

As we mentioned earlier currencies are always traded in pairs. The initial currency in the pair is called the base currency and the next currency is named quote or counter currency. The base currency is the denominator and the counter or quote currency is thus the numerator in the ratio. The value of the base currency is always one. Thus the exchange rate is how many of the counter currency must be paid to buy the base currency.

The bid price for a counter currency is always lower than the ask price. The reason for this is that the bid price, which represents how much will be received in the counter or quote currency when selling one unit of the base currency, is always lower than the ask price, which represents how much must be paid in the counter or quote currency when buying one unit of the base currency.

An example of a trade might be the following. A trade of  EUR/USD bid/ask currency rates at your bank may be 1.1015/1.2015, representing a spread of 1000 pips (also called points, one pip = 0.0001.) The smaller the spread the better for the investor. The reason for this is that in order to profit the currency needs to make a smaller movement.

The Advantages and Disadvantages of Margins:

The term “Margin” is essentially a loan by a brokerage firm to an investor that is a client of that firm. As with any loans, interest is paid on that loan. The longer the loan is outstanding the higher the interest expense associated with that loan.

There are many ways the use of margins can work against a currency investor. In fact, the number one reason novice investors fail to succeed in the currency markets is there lack of knowledge of margins. The good new is that margins can also work for the investor and produce extremely large profits with a very small investment.

Learning how to make margins work for you as opposed to against you is one of the most important concepts a Forex trader must understand. Fortunately today there are many exceptional Forex courses that instruct this vital concept in detail.

An example of how this could work against is when an investor takes a long term position in a currency utilizing a large margin. If they were to hold that currency for a few months and make a small profit when they sold they could still lose money on the investment due to the interest expense associated with the borrowed funds, called margins.

It is of the utmost importance if you intend on trading the currency markets that your understanding the benefits and pitfalls of the use of margins is at the highest level. There are other techniques that can be utilized instead of margins that can also produce the same large profits with a very small investment. If for no other reason than understanding margins a new trader would be wise to enrol in a course that teaches the ins and outs of there use.

How to use Leverage to Finance your Forex Trading:

Of course the use of margins is one way to leverage a relatively small investment into large potential profits as we discussed earlier. But, the are significant risk with this method and it should be understood at its highest level to be utilized successfully.

There are other Methods you can Utilize Leverage to Increase your Earnings:

1. Forwards
2. Futures
3. Options
4. The Spot Market
5. Spread Betting
6. Contracts For Difference

The Spot Deal:

With this type of transaction an swap of currencies is made. The current market price is the spot rate, which is also some times called the benchmark price. This types of swaps are not required to resolved right away.  There is a value or settlement date and is usually the second day after the deal has been made. This period permits the time required to exchange funds from one bank account to another which could be located anywhere in the world.

If you wish to get involved in the Forex market, open an account, for free

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