FOREX Magic

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Trading Systems

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 09:06:00 +0000

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Anyone involved in Day Trading Forex knows that it’s very important to have access to a good Forex Trading System. What many people don’t know is how to figure out whether or not a Forex trading system is good. There are many different things to take into consideration when you are choosing the system that you are going to work with but there are three basic requirements that every good Forex trading system will have in common.
Here are the three things you should always look for when choosing this type of day trading system:
Information on breaking picks. You need to know the hottest information that’s available for choosing the right picks in Day Trading Forex so you need a system that can tell you this.
In-depth trend analysis. In addition to the immediate changes in trading, you need to get a view of the big picture trends for long-term day trading.
Variety of options. You need a system that will allow for Managed Forex Trading as well as other options in day trading rather than a system that’s going to only give you one basic option for how trading takes place.

A Forex Trading Education Is Critical For Success

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 09:04:00 +0000

With more than a trillion dollars rotating in the market every day, Forex is the largest currency exchange market today. Forex or FX is full of money earning opportunities when treated tactically, thus forex trading education is worth its importance.
There are many people in this world who want to do Forex trading. To start with trading people should always learn about Forex trading first. They should take proper education on trading. It is always advisable never to do trading without proper knowledge. With the correct Forex trading education, a person can work his own way towards trading and with a clear profit.
While many of you may still doubt the word “education” in trading, but the truth is forex trading education is one thing that can stop you from making harmful errors and stupid blunders.
The basic thing to know before starting trading is what is forex? It’’s basically known as foreign exchange. Forex is the immediate exchange of one country’’s currency for another. The trading should be done at the right time to gain profit. A person can learn all this with thorough Forex trading education.
The main part of trading education is to learn about the market conditions. As the scenario of the market keeps on changing, Forex trading education will help you observe these market conditions and how can they be favorable for you.
The second step of a good trading education is to know about the risk control and risk management. With education on this you can learn to manage yourself and your emotions do not overpower your thrill of the possibility of making money. It trains you how to control your losses.

FOREX Scalping

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 09:02:00 +0000

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Forex scalping is a trading style used in Forex specializing in taking profits on small price changes, generally soon after a trade has been entered and has become profitable. It requires a trader to have a strict exit strategy because one large loss could eliminate the many small gains that the trader has worked to obtain. Having the right tools such as a live feed, a direct-access broker and the stamina to place many trades is required for this strategy to be successful.

FOREX Education

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:59:00 +0000

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FX Instructor, LLC is a US-based forex education company specializing in world class forex education based on the MetaTrader 4 platform, in our real-time Live Trading Room.

* See our charts, hear our voice, and ask questions while the market moves
* Observe us analyzing the market, opening positions, and managing trades
* Learn "best practices" for trading through our own example
* Acquire powerful new strategies and skills
* Learn to approach the market with discipline and patience
* Trade together with a global community of fellow traders
* Access a vast library of lessons, videos, and tutorials

*FX Instructor is the recommended trading school for all traders of FXOpen.*

Attending the Live Trading Room is beneficial for traders of all levels, no matter how big your account or experience - and it costs just $24.95 a month, with a 100% Satisfaction Guarantee.

This is quite possibly the best investment ever made by traders who becomes a member of our Live Trading Room community. To take advantage of the Live Trading Room

Most Traded Currencies

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:55:00 +0000

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Currencies are traded in dollar amounts called “lots”. One lot is equal to $1,000, which controls $100,000 in currency. This is what is known as the "margin". You can control $100,000 worth of currency for only 1,000 dollars. This is what is called “High Leverage”.

Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded. The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.

Here are some of the common symbols used in the Forex:

USD - The US Dollar EUR - The currency of the European Union "EURO" GBP - The British Pound JPN - The Japanese Yen CHF - The Swiss Franc AUD - The Australian Dollar CAD - The Canadian Dollar

There are symbols for other currencies as well, but these are the most commonly traded ones.

A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible.

Some of the common PAIRS are:

EUR/USD Euro / US Dollar "Euro"

USD/JPY US Dollar / Japanese Yen "Dollar Yen"

GBP/USD British Pound / US Dollar "Cable"

USD/CAD US Dollar / Canadian Dollar "Dollar Canada"

AUD/USD Australian Dollar/US Dollar "Aussie Dollar"

USD/CHF US Dollar / Swiss Franc "Swissy"

EUR/JPY Euro / Japanese Yen "Euro Yen"

The listed currency pairs above look like a fraction. The numerator (top of the fraction or "left" of the / however you want to SEE it) is called the base currency. The denominator (bottom of the fraction or "right" of the /however you want to SEE it) is called the counter currency. When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD. If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency. You are always doing the opposite of what you did with to base currency with the counter currency.

If this seems confusing then you’re in luck. You can always get by with just thinking of the entire pair as one item. Then you are just buying or selling that one item. Thinking like this will still enable you to place trades. You only need to be aware of the base/counter concept for Fundamental Analysis issues.

So why is it important to know about the base/counter currency? The base/counter currency concept illustrates what is actually taking place in a Forex transaction. Some of you reading this, know that short-selling was restricted in the stock market *(Short-selling is where you sell a stock/currency/option/commodity first and then try to buy it back at a lower price later). But in the FOREX you are always buying one currency (base) and selling another (counter). If you sell the pair you are simply flipping which one you buy and which one you sell. The transaction is essentially the same. This allows you to short-sell with no restrictions.

You want to be able to short-sell with no restrictions so you can make money when the market drops as well as when it rises. The problem with traditional stock market trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.

Know The FOREX Trading Terms

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:52:00 +0000

Spread
The spread is the difference between the price that you can sell currency at (Bid) and the price you can buy currency at (Ask). The spread on majors is usually 3 pips under normal market conditions. For more information on the trading conditions at Saxo Bank, go to the Account Summary on your Client Station and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary.
*
Pips
A pip is the smallest unit by which a cross price quote changes. When trading Forex you will often hear that there is a 3-pip spread when you trade the majors. This spread is revealed when you compare the bid and the ask price, for example EURUSD is quoted at a bid price of 0.9875 and an ask price of 0.9878. The difference is USD 0.0003, which is equal to 3 “pips”.

On a contract or position, the value of a pip can easily be calculated. You know that the EURUSD is quoted with four decimals, so all you have to do is cancel out the four zeros on the amount you trade and you will have the value of one pip. Thus, on a EURUSD 100,000 contract, one pip is USD 10. On a USDJPY 100,000 contract, one pip is equal to 1000 yen, because USDJPY is quoted with only two decimals.

Good Earnings With FOREX Trading

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:47:00 +0000

Earning has come to just a click away with the advent of online forex trading. The internet has already proved its worth in the trading system online, be it any business and when trading in forex market is talked about it has scored again.

It is a lot easier for the online trader to make investments online thus increasing his returns. The forex trading software has made the entire process further effortless. The software makes the trader task pretty uncomplicated by making and closing deals on its own thus leaving the trader tension-free, even where decision making process is concerned.

The online trading system with the help of software helps the trader and the broker to witness market changes right in front of them on the computer screen and that too in no time! Currency trading online can be learnt in no time with the help of the software. The process can be initiated on demo accounts and with virtual money which later on is easily applicable on real account and actual money. Practicing on virtual money spares the trader the risk of spending and loosing actual money.

Forex trading can be started at any point of time with gaining knowledge from the various courses available on the internet. These also are demo accounts available wherein the trader can actually learn trading in simpler ways. The learning process can go on slowly as the trader learns all the nuances of the forex market. The courses and demo accounts and other e-books make it very easy for the trader to know all that he needs to enter the forex market and start investing on real money.

To enhance the learning procedure, there also is currency trading software which gives an overall knowledge of the trading business and helps not only the new trader but also the experienced trader in investing online. The software provides all the required information and tips on investing so the decision making becomes easier for the trader.

To know which the appropriate software and how to use it, the trader can also take help from forex software review which tell him about the software usage, its performance and outcome. Reviews prove of a real help while buying software for trading online, as they might be given be users or experts. No matter how much experience the trader might have in the trade, he would need to update his knowledge every now and then in order to be successful.

For that required earning through forex trade, whether online or otherwise, the forex trading strategies remain the same and a knowledgeable and experienced trader and broker would use them just the right way to generate maximum profits.

Trading Strategy

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:46:00 +0000

A forex trading strategy can provide profit for a skilled speculator. A FX trading strategy is, simply put, a method for using foreign exchange rates of currency from various countries to buy one country’s currency when it is undervalued, and exchange it for another country’s currency with it is of normal or higher value, with the difference being profit.

A common forex trading strategy could involve US dollars and the Euro, the official currency of most European countries. To use a simple example of a forex trading strategy, a speculator would buy Euros when they were undervalued; let’s say two Euros equaled one US dollar. This would be unusual because normally the two currencies are almost equal.

By spending one hundred US dollars to buy two hundred Euros a speculator would be able to buy more goods in Germany, France or other European countries. When the market changed and became more even, the speculator would have twice as many goods as he normally would have, and would be able to exchange those goods for US dollars once again.

The difference would be profit. This is a very simple explanation of a forex trading strategy, but gives the basics to the new speculator.Of course, when coming up with a forex trading strategy the trader should only use money that he or she can afford to loose. This is speculation, as opposed to investment. The chances for profit are real, and could come quick but if the market turns the opposite way than expected the trader could actually loose money.

A forex trading strategy can reap large profits, but if anyone tells you that all trades will result in profit, they haven’t studied the market as well as they should have and they are not correct. Still having a sound forex trading strategy for a competent businessman can be a profitable venture. It requires study of the markets, which takes time and is usually best accomplished by reading financial newsletters and using tools available on the Internet.

Getting the advice of a professional forex trading strategy specialist can also be a sound choice. Professionals have the time, education and skills and can generally help a trader come up with a forex trading strategy that will result in profit more often than one could do without their help.The most sound forex trading strategy options are generally used by large multinational corporations who are often able to make steady profits.

Watching what large corporations do who are involved in forex trading, looking for patterns they may have set, can help a trader to get the benefit of the very expensive expertise used by these large companies. Making watching of the large traders a part of a person’s education is definitely a good place to start a forex trading education. Identifying the state of the market, determining the time frame you are working in, and the currencies that have fluctuation and getting the advice of professionals through self study can be the wisest forex trading strategy option available.

source: http://forextradings.org/forex_strategy-en-fx_strategy.html

Forex Forecasting

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:43:00 +0000

Basic Forex forecast methods: Technical analysis and fundamental analysis.
This article provides insight into the two major methods of analysis used to forecast the behavior of the Forex market. Technical analysis and fundamental analysis differ greatly, but both can be useful forecast tools for the Forex trader. They have the same goal - to predict a price or movement. The technician studies the effect while the fundamentalist studies the cause of market movement. Many successful traders combine a mixture of both approaches for superior results.

Technical analysis
Technical analysis is a method of predicting price movements and future market trends by studying charts of past market action. Technical analysis is concerned with what has actually happened in the market, rather than what should happen and takes into account the price of instruments and the volume of trading, and creates charts from that data to use as the primary tool. One major advantage of technical analysis is that experienced analysts can follow many markets and market instruments simultaneously.

Technical analysis is built on three essential principles:

1. Market action discounts everything! This means that the actual price is a reflection of everything that is known to the market that could affect it, for example, supply and demand, political factors and market sentiment. However, the pure technical analyst is only concerned with price movements, not with the reasons for any changes.

2. Prices move in trends Technical analysis is used to identify patterns of market behavior that have long been recognized as significant. For many given patterns there is a high probability that they will produce the expected results. Also, there are recognized patterns that repeat themselves on a consistent basis.

3. History repeats itself Forex chart patterns have been recognized and categorized for over 100 years and the manner in which many patterns are repeated leads to the conclusion that human psychology changes little over time.

Forex charts are based on market action involving price. There are five categories in Forex technical analysis theory:
* Indicators (oscillators, e.g.: Relative Strength Index (RSI)
* Number theory (Fibonacci numbers, Gann numbers)
* Waves (Elliott wave theory)
* Gaps (high-low, open-closing)
* Trends (following moving average).

Some major technical analysis tools are described below:
Relative Strength Index (RSI):
The RSI measures the ratio of up-moves to down-moves and normalizes the calculation so that the index is expressed in a range of 0-100. If the RSI is 70 or greater, then the instrument is assumed to be overbought (a situation in which prices have risen more than market expectations). An RSI of 30 or less is taken as a signal that the instrument may be oversold (a situation in which prices have fallen more than the market expectations).

Stochastic oscillator:
This is used to indicate overbought/oversold conditions on a scale of 0-100%. The indicator is based on the observation that in a strong up trend, period closing prices tend to concentrate in the higher part of the period's range. Conversely, as prices fall in a strong down trend, closing prices tend to be near to the extreme low of the period range. Stochastic calculations produce two lines, %K and %D that are used to indicate overbought/oversold areas of a chart. Divergence between the stochastic lines and the price action of the underlying instrument gives a powerful trading signal.

Moving Average Convergence Divergence (MACD):
This indicator involves plotting two momentum lines. The MACD line is the difference between two exponential moving averages and the signal or trigger line, which is an exponential moving average of the difference. If the MACD and trigger lines cross, then this is taken as a signal that a change in the trend is likely.

Number theory:
Fibonacci numbers: The Fibonacci number sequence (1,1,2,3,5,8,13,21,34...) is constructed by adding the first two numbers to arrive at the third. The ratio of any number to the next larger number is 62%, which is a popular Fibonacci retracement number. The inverse of 62%, which is 38%, is also used as a Fibonacci retracement number.

Gann numbers:
W.D. Gann was a stock and a commodity trader working in the '50s who reputedly made over $50 million in the markets. He made his fortune using methods that he developed for trading instruments based on relationships between price movement and time, known as time/price equivalents. There is no easy explanation for Gann's methods, but in essence he used angles in charts to determine support and resistance areas and predict the times of future trend changes. He also used lines in charts to predict support and resistance areas.

Waves
Elliott wave theory: The Elliott wave theory is an approach to market analysis that is based on repetitive wave patterns and the Fibonacci number sequence. An ideal Elliott wave patterns shows a five-wave advance followed by a three-wave decline.

Gaps
Gaps are spaces left on the bar chart where no trading has taken place. An up gap is formed when the lowest price on a trading day is higher than the highest high of the previous day. A down gap is formed when the highest price of the day is lower than the lowest price of the prior day. An up gap is usually a sign of market strength, while a down gap is a sign of market weakness. A breakaway gap is a price gap that forms on the completion of an important price pattern. It usually signals the beginning of an important price move. A runaway gap is a price gap that usually occurs around the mid-point of an important market trend. For that reason, it is also called a measuring gap. An exhaustion gap is a price gap that occurs at the end of an important trend and signals that the trend is ending.

Trends
A trend refers to the direction of prices. Rising peaks and troughs constitute an up trend; falling peaks and troughs constitute a downtrend that determines the steepness of the current trend. The breaking of a trend line usually signals a trend reversal. Horizontal peaks and troughs characterize a trading range.

Moving averages are used to smooth price information in order to confirm trends and support and resistance levels. They are also useful in deciding on a trading strategy, particularly in futures trading or a market with a strong up or down trend.

The most common technical tools:
Coppock Curve is an investment tool used in technical analysis for predicting bear market lows.

DMI (Directional Movement Indicator) is a popular technical indicator used to determine whether or not a currency pair is trending.

Unlike the fundamental analyst, the technical analyst is not much concerned with any of the "bigger picture" factors affecting the market, but concentrates on the activity of that instrument's market.

Fundamental analysis
Fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic, political, environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument. In practice, many market players use technical analysis in conjunction with fundamental analysis to determine their trading strategy. One major advantage of technical analysis is that experienced analysts can follow many markets and market instruments, whereas the fundamental analyst needs to know a particular market intimately. Fundamental analysis focuses on what ought to happen in a market. Factors involved in price analysis: Supply and demand, seasonal cycles, weather and government policy.

The fundamentalist studies the cause of market movement, while the technician studies the effect. Fundamental analysis is a macro or strategic assessment of where a currency should be trading based on any criteria but the movement of the currency's price itself. These criteria often include the economic condition of the country that the currency represents, monetary policy, and other "fundamental" elements.

Many profitable trades are made moments prior to or shortly after major economic announcements.

source: http://forextradings.org/forex_forecast-en-forex_forecast.html

Multiply Your Wealth With FOREX

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:41:00 +0000

To many people that sounds amazing, and perhaps it is. It can be very profitable for investors and fortunes have been made by many. The incentive to learn forex trading is the oldest incentive by far, the incentive to make profit. If you learn forex trading you are learning how to make your money make more money for you, the goal of all investors.

If you choose to learn forex trading online you are not alone since thousands of people choose this method every year. If you learn forex trading online you have the benefit of choosing an instructor from almost anywhere in the world, or to choose multiple instructors.

When you learn forex trading in this fashion your virtual classmates could be from England, Hong Kong, Singapore, Paris, or any other exotic locale that you may have only read about in the past.

Obviously this diversity of culture and knowledge will be beneficial. During online chats and student discussions questions will be raised that you may not have thought of yourself, and you’ll be able to benefit by hearing the answers.

The ultimate goal of forex trading is to trade currency in a consistent manner that will result in profit. For instance, buying Euros with US dollars and then selling the Euros for more than you gave for them when the market changes.

This is the oldest rule of business, buy low and sell high. If you learn forex trading you’ll be able to do this on a scale you never would have thought possible, limited only by the amount of investment funds you have and by market conditions.

source: http://forextradings.org/learn_forextrading-en-learn_fx.html

Exchange Rates

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:39:00 +0000

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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 term or quote currency. The counter term 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 term 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 term 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 instance, 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
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 can also enhance the rate of loss if the investor makes the wrong decision.

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.

There are three ways private investors can trade in Forex directly or indirectly:
The spot market
Forwards and futures
Options

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.

Forwards and Futures
Forwards make up about 46% of currency trading. A forward transaction is an agreement between two parties whereby one party buys a currency at a particular price by a certain date that is greater than two business days (a spot transaction).

A future contract is a forward contract with fixed currency amounts and maturity dates. They are traded on future exchanges and not through the interbank foreign exchange market.

Options
A currency option is similar to a futures contract in that it involves a fixed currency transaction at some future date in time. However the buyer of the option is only purchasing the right but not the obligation to purchase a fixed amount of currency at a fixed price by a certain date in future. The price is known as the premium and is lost if the buyer does not exercise the option.

Risks
Although Forex trading can lead to very profitable results, there are risks involved: exchange rate risks, interest rate risks, credit risks, and country risks. Approximately 80% of all currency transactions last a period of seven days or less, while more than 40% last fewer than two days. Given the extremely short lifespan of the typical trade, technical indicators heavily influence entry, exit and order placement decisions.

source: http://au.biz.yahoo.com/forex-education/exchange-rates.html

Trading Spot Gold and Silver

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:36:00 +0000

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Much like trading currency pairs, spot metals enables traders to take a long or short position in gold (XAU/USD) or silver (XAG/USD) while simultaneously taking the opposite position in the U.S. dollar or other major currencies. Spot gold and silver trades globally in an over-the-counter market, and prices float freely based on supply and demand. The spot price is the price quoted for the metal to be paid for (including delivery) two days following the date of the actual transaction (also known as the settlement date).

Spot gold and silver trades a lot like currency pairs in the foreign exchange market. Trading is available 24 hours a day from Sunday at 6:00 pm ET to Friday at 5:00 pm ET. There is no central market however, the main centers for trading spot gold and silver are London, New York, and Zurich. Liquidity is typically highest when European market hours overlap with trading in New York - roughly four hours a day during the morning for U.S. traders. There may be some illiquid periods for trading spot gold and silver around the close of the US market (5pm ET to 6 pm ET). There is a twice-daily fix for gold and a daily fix for silver in London that helps set reference points for intraday prices. Settlement is very similar to forex settlements.

Who trades spot gold and silver, and why?

There are many different reasons that drive investors to trade spot gold and silver:

* Speculation on the price based on the use of fundamental and or technical analysis
* Creating a balanced, diversified asset allocation model for an overall investment portfolio
* Applying risk management as a hedge against market volatility and financial crises caused by economic, political or social turmoil.

source: http://www.forex.com/learn-gold.html

About Technical Analysis

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:33:00 +0000

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What is Technical Analysis?

Technical analysis attempts to forecast future price movements by examining past market data.

Most traders use technical analysis to get a "big picture" on an investment's price history. Even fundamental traders will glance at a chart to see if they're buying at a fair price, selling at a cyclical top or entering a choppy, sideways market.

Technical analysts make a few key assumptions:

* All market fundamentals are reflected in price data. Moods, differing opinions, and other market fundamentals need not be studied.

* History repeats itself in regular, fairly predictable patterns. These patterns, generated by price movements, are called signals. A technical analyst's goal is to uncover a current market's signals by examining past market signals.

* Prices move in trends. Technical analysts believe price fluctuations are not random and unpredictable. Once an up, down or sideways trend has been established, it usually will continue for a period.

Get in and get out - at the right time

Traders rely on price charts, volume charts and other mathematical representations of market data (called studies) to find the ideal entry and exit points for a trade. Some studies help identify a trend, while others help determine the strength and sustainability of that trend over time.

Technical analysis can add discipline and minimize emotion in your trading plan. It can be hard to screen out fundamental impressions and stick with your entry and exit points as planned. While no system is perfect, technical analysis helps you see your trading plan through more objectively and dispassionately.

Price chart types

Bar charts
The most common type of chart showing price action. Each bar represents a period of time - a "period" as short as 1 minute or as long as several years. Over time, bar charts show distinct price patterns.

Candlestick charts
Instead of a simple bar, each candlestick shows the high, low, opening and closing price for that period of time it represents. Candlestick patterns provide greater visual detail as they develop.

Point & figure charts
Point & figure patterns resemble bar chart patterns, except Xs and Os are used to mark changes in price direction. Point & figure charts make no use of time scale to associate a certain day with a certain price action.

Technical indicator types

Trend
Trend indicators smooth price data out, so that a persistent up, down or sideways trend can be easily seen. (Examples: moving averages, trend lines)

Strength
Strength indicators describe the intensity of market opinion on a certain price by examining the market positions taken by various market participants. Volume or open interest are the basic ingredients of strength indicators.

Volatility
"Volatility" refers to the magnitude of day-to-day price fluctuations, whatever their directional trend. Changes in volatility tend to anticipate changes in prices. (Example: Bollinger Bands)

Cycle
Cycle indicators indicate repeating market patterns from recurrent events such as seasons or elections. Cycle indicators determine the timing of a particular market pattern. (Example: Elliott Wave)

Support/resistance
Support and resistance describes the price levels where markets repeatedly rise or fall and then reverse. This phenomenon is attributed to basic supply and demand. (Example: Trend Lines)

Momentum
Momentum indicators determine the strength or weakness of a trend as it progresses over time. Momentum is highest when a trend starts and lowest when the trend changes.

When price and momentum diverge, it suggests weakness. If price extremes occur with weak momentum, it signals an end of movement in that direction. If momentum is trending strongly and prices are flat, it signals a potential change in price direction. (Example: Stochastic, MACD, RSI)

source: http://www.forex.com/forex_tech_analysis.html

Forex Technical Analysis

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:32:00 +0000

Technical analysis is one of the two methods of analyzing Forex; fundamental analysis is the other. These two methods are very important in the Forex trading by forecasting the variations of the Forex market, prediction of the price and the movement of the market. Although technical analysis and fundamental analysis differ greatly, they both predict a price or movement. In this article, Forex technical analysis will be analyzed in detail.

Technical analysis is a method of forecasting price movements and future market trends through the study of past market action which take into account price of instruments, volume of trading and open interest in the instruments. Unlike fundamental analysis, technical analysis is focused with what has actually happened in the Forex market, rather than what should happen. There are certain technical analysis tools such as the relative strength index (RSI), which is a price-following oscillator that ranges between 0 and 100; the Elliott waves method, which deals in the prediction of the market movement by the study of wave patterns over a period of time; the parabolic SAR methodology, in which the prices are examined and compared to stop and reversal numbers which are an indication of entry points and exit points for any Forex trade; the stochastic oscillator, which shows the over bought or oversold currencies on a scale of 0- 100%; and gaps, which denotes the spaces on the bar chart that none of the trading takes place.

Technical analysts are confident that historical performance of stocks and markets denote future performance. They use charts and other tools to identify patterns that can suggest future activity. They do not attempt to measure a security's intrinsic value. They study the price and volume movements. And they create charts from that data. A technical analyst would rather sit on a bench in a certain mall and watch people going into the store. He decides basing on the activity of people going into each store. But if he is a fundamental analyst, he would rather go to each store and study the products on sale. Later he decides whether to buy or not. In other words, technical analysts disregard the intrinsic value of the products in the store. From the point of view of technical analyst, anyone can gain the profit by posing himself in the trend direction. Consequently, they use different patterns in order to create the price chart that will suit the future market and the price would follow the pattern.

In summary, Forex technical analysis focuses on what actually happens in the market. The charts are based on market action involving price, volume and open interest. It is always focused with the pricing and time factors rather than the factors affecting the market. Thus technical analysts study the effects, not the cause of market movement.

source: http://www.forexfloor.com/technical-analysis.html

Forex Trading Basics

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:28:00 +0000

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There are many reasons for the popularity of foreign exchange trading, but among the most important are the leverage available, the high liquidity 24 hours a day and the very low dealing costs associated with trading.

Of course many commercial organisations participate purely due to the currency exposures created by their import and export activities, but the main part of the turnover is accounted for by financial institutions. Investing in foreign exchange remains predominantly the domain of the big professional players in the market - funds, banks and brokers. Nevertheless, any investor with the necessary knowledge of the market's functions can benefit from the advantages stated above.

In the following article, we would like to introduce you to some of the basic concepts of foreign exchange trading. If you would like any further information, we suggest that you sign up for a FREE Membership on this website, where you will be able to exchange views with other Forex traders and get answers to any questions you might have.

Margin Trading

Foreign exchange is normally traded on margin. A relatively small deposit can control much larger positions in the market. For trading the main currencies, Saxo Bank requires a 1% margin deposit. This means that in order to trade one million dollars, you need to place just USD 10,000 by way of security.

In other words, you will have obtained a gearing of up to 100 times. This means that a change of, say 2%, in the underlying value of your trade will result in a 200% profit or loss on your deposit. See below for specific examples. As you can see, this calls for a very disciplined approach to trading as both profit opportunities and potential risks are very large indeed. Please refer to our page Forex Rates & Conditions for current Spreads, Margins and Conditions.

Base Currency and Variable Currency

When you trade, you will always trade a combination of two currencies. For example, you will buy US dollars and sell euro. Or buy euro and sell Japanese yen, or any other combination of dozens of widely traded currencies. But there is always a long (bought) and a short (sold) side to a trade, which means that you are speculating on the prospect of one of the currencies strengthening in relation to the other.

The trade currency is normally, but not always, the currency with the highest value. When trading US dollars against Singapore dollars, the normal way to trade is buying or selling a fixed amount of US dollars, i.e. USD 1,000,000. When closing the position, the opposite trade is done, again USD 1,000,000. The profit or loss will be apparent in the change of the amount of SGD credited and debited for the two transactions. In other words, your profit or loss will be denominated in SGD, which is known as the price currency. As part of our service, Saxo Bank will automatically exchange your profits and losses into your base currency if you require this.

Dealing Spread, but No Commissions

When trading foreign exchange, you are quoted a dealing spread offering you a buying and a selling level for your trade. Once you accept the offered price and receive confirmation from our dealers, the trade is done. There is no need to call an exchange floor. There are no other time-consuming delays. This is possible due to live streaming prices, which are also a great advantage in times of fast-moving markets: You can see where the market is trading and you know whether your orders are filled or not.

The dealing spread is typically 3-5 points in normal market conditions. This means that you can sell US dollars against the euro at 1.7780 and buy at 1.7785. There are no further costs, commissions or exchange fees.

This ensures that you can get in and out of your trades at very low slippage and many traders are therefore active intra-day traders, given that a typical day in USDEUR presents price swings of 150-200 points.

Spot and forward trading

When you trade foreign exchange you are normally quoted a spot price. This means that if you take no further steps, your trade will be settled after two business days. This ensures that your trades are undertaken subject to supervision by regulatory authorities for your own protection and security. If you are a commercial customer, you may need to convert the currencies for international payments. If you are an investor, you will normally want to swap your trade forward to a later date. This can be undertaken on a daily basis or for a longer period at a time. Often investors will swap their trades forward anywhere from a week or two up to several months depending on the time frame of the investment.

Although a forward trade is for a future date, the position can be closed out at any time - the closing part of the position is then swapped forward to the same future value date.

Interest Rate Differentials

Different currencies pay different interest rates. This is one of the main driving forces behind foreign exchange trends. It is inherently attractive to be a buyer of a currency that pays a high interest rate while being short a currency that has a low interest rate.

Although such interest rate differentials may not appear very large, they are of great significance in a highly leveraged position. For example, the interest rate differential between the US dollar and the Japanese yen has been approximately 5% for several years. In a position that can be supported by a 5% margin deposit, this results in a 100% profit on capital per annum when you buy the US dollar. Of course, an even more important factor normally is the relative value of the currencies, which changed 15% from low to high during 2005 – disregarding the interest rate differential. From a pure interest rate differential viewpoint, you have an advantage of 100% per annum in your favour by being long US dollar and an initial disadvantage of the same size by being short.
Please refer to our page Forex Rates & Conditions for current Spreads, Margins and Conditions!

Such a situation clearly benefits the high interest rate currency and as result, the US dollar was in a strong bull market all through 2005. But it is by no means a certainty that the currency with the higher interest rate will be strongest. If the reason for the high interest rate is runaway inflation, this may undermine confidence in the currency even more than the benefits perceived from the high interest rate.

Stop-loss discipline

As you can see from the description above, there are significant opportunities and risks in foreign exchange markets. Aggressive traders might experience profit/loss swings of 20-30% daily. This calls for strict stop-loss policies in positions that are moving against you.

Fortunately, there are no daily limits on foreign exchange trading and no restrictions on trading hours other than the weekend. This means that there will nearly always be an opportunity to react to moves in the main currency markets and a low risk of getting caught without the opportunity of getting out. Of course, the market can move very fast and a stop-loss order is by no means a guarantee of getting out at the desired level.

But the main risk is really an event over the weekend, where all markets are closed. This happens from time to time as many important political events, such as G7 meetings, are normally scheduled for weekends.

For speculative trading, we always recommend the placement of protective stop-lossorders. With Saxo Bank Internet Trading you can easily place and change such orders while watching market development graphically on your computer screen.

source: http://www.forextrading.com/articles/ForexBasics.aspx

Forex Fundamental Analysis

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:27:00 +0000

In order to make Forex trading strategy, most Forex traders rely on analysis such as fundamental analysis. Forex Fundamental Analysis is a type of market analysis that uses market trends to determine the future value of a particular currency in the FX market. Fundamental analysis gives us an overview of currency movements based on economic, political, environmental, other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument. Forex fundamental analysis strategies require a basic understanding of supply and demand since it provides information how political and economical events influence the currency market. It is about looking at the intrinsic value of an investment. In other words, its application entails looking at the economic conditions that affect the valuation of a nation's currency.

The basis of fundamental analysis is mainly on the political and economic changes as these can frequently affect currency prices. Thus, traders are most likely to gather information from news sources to determine unemployment forecasts, political ideologies, economic policies, inflation, and growth rates. Traders keep an eye on the figures and statements given in speeches by important politicians and economists, as well as announcements related to United States economy and politics. Speeches from prominent people like the Chairman of the Federal Reserve Bank of USA, Secretary of Treasury, President of the Federal Reserve Bank of San Francisco and so on.

It is known that if there is a decrease in supply but the level of demand remains the same, there will be an increase in market prices. On the other hand, if there is an increase in supply, it produces the opposite effect. Thus, fundamental analysts study the supply and demand for the country's currency, products or services, quality management, government policies, past and forecast of performance, future plans and all the economic indicators like Gross Domestic Product (GDP), industrial production, interest rates, international trade, CPI, durable goods orders, PPI, PMI and retail orders. When all data is gathered from these studies, the analysts will construct a model that will check the current and estimated value of a currency against another. Analyst will then decide whether the currency ought to rise or fall after estimating the intrinsic value and comparing it to the current exchange rate.

In summary, Forex fundamental analysis focuses on what ought to happen in a market. Factors involved in price analysis include supply and demand, seasonal cycles, weather, and government policy. Thus, the fundamentalist studies that cause of market movement. Fundamental analyst needs to know a particular market intimately. In practice, traders use fundamental analysis in conjunction with technical analysis to determine a Forex trading strategy, fundamental analysis is considered to be the opposite of technical analysis.

source: http://www.forexfloor.com/fundamental-analysis.html

FOREX Trading System

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:25:00 +0000

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Want a good Forex Trading System? Searching for a good forex trading system? If you're anything like me, you've been probably exposed to a number of Forex trading systems haven't you? Most of those trading systems are 100% mechanical in their nature. You know the drill: "if A and B happen, do C... if not, do D instead". They basically tell you exactly what to do and when to do it, which is all good but... the problem is that you do not know what you are actually basing your trading decisions on! Pulling the trigger without know the "why?" factor always gets me a bit nervous. Here's the good news though: You can now learn Forex as a trader instead as a system-follower!Forex Trading System
Luckily for all of us who enjoy old-school trading, there's a fantastic learning program now available where everything related to Forex trader is taught: chart-reading, trend analyzing, stop loss placement, profit takings, news announcements, trading psychology... absolutely everything!!! And you know what's best? it's all taught over live videos! cool ey? If you want to actually learn how to trade Forex, trust me on this one: you don't want to miss this out!Let's see a small snippet of the type of learning you will get in forex trading:Forex Trading System Many folks have asked repeatedly the following particular question regarding Money Management: "If I spot a crystal-clear, mint-perfect, extraordinarily high-probability setup... is it OK to increase my usual lot size for that very trade?" I remember one guy who had even developed a rather unique Money Management system under which he'd rank his trade setups from 1 to 5 points: 1 being a low quality setup with a high degree of risk, and 5 being an A-setup with absolutely all the ducks falling in line.

FOREX For Beginners

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:21:00 +0000

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1. Purpose of trading
The purpose of trading on any market is to buy low and sell high. The foreign currency market FOREX is no exception. The goods traded on this market are rates of currencies of different countries. As any other goods the currencies have their prices.

To settle transactions between businesses located in different countries, governments, speculative transactions and so forth, banks around the world execute currency trades on FOREX market. Depending on various trade, economical and other parameters, interest rates, central bank policies, time of the day, preferences and anticipations of the market players, and many other causes, the rates, that is prices, of currencies stay in ceaseless motion.

Your task as a trader is to determine the trend of the rate and buy an appreciating currency or sell a depreciating one, and then take your profits through execution of a reverse transaction.

And, at last, you will have a special trading account allowing you to buy and sell desired currencies. Despite of having US dollars in your account, you may start your trading from selling deutchemarks or japanese yens not concerning yourself with not having bought them in advance.

2. Some codes, numbers and definitions.
Each currency is assigned a three-letter code. For example, US dollar is coded - USD (United States Dollar), euro is coded EUR (EURo), Swiss frank is coded CHF (Confederation Helvetica Franc), Japanese yen is coded JPY (JaPanese Yen), British pound is coded GBP (Great British Pound). The currency codes are defined by ISO-4217 standard. Usually they are formed as a two-letter ISO-3166 country code and the first letter of currency name. There are a few exceptions most notable being the euro (EUR).

Currency rates are equal to ratios of currency units of different countries relative to each other. The rates are represented by 6-letter words composed of two three-letter currency codes. The first position is occupied, as a rule, by the code of a more expensive currency. The rates are expressed in units of the second currency per unit of the first one. For example, rates USDCHF (USD-CHF) show the number of Swiss franks in one US dollar, but rates GBPUSD (GBP-USD) show the number of US dollars having to be paid for one British pound. More detailed information on the codes of financial instruments may be found in this table.

3. How to read quotes.
> The rates are usually expressed as five-digit numbers. For example, USDJPY = 121.44 means that 1 US dollar is valued at 121.44 Japanese yens (i.e. they are willing to pay you that many yens for one US dollar while you are buying or selling). At the same time, GBPUSD = 1.6262 means that 1 British pound is valued at 1.6262 US dollars. Generally, if the rate XXXYYY = Z, it means that one unit of XXX is worth Z units of YYY.

When the rate has changed, for example USDJPY = 121.44 to USDJPY = 121.45 or GBPUSD = 1.6262 to 1.6263, they say that the rate has moved 1 point. As it follows from the information above, yen in this example has DEPRECIATED by 1 point, but the pound has APPRECIATED, also by 1 point.

While watching the charts, you should keep in mind that only euro (EURUSD), British pound (GBPUSD) and Australian dollar (AUDUSD) charts reflect real movements of the rates of these currencies (that is, chart going up, means increasing price), as growth (that is, charts moving up) mean decreasing rates (prices) for the other currencies.

Sometimes quotes are given as a pair, for example 121.44/49. It is a BID/ASK pair: the first number is BID, then the two last figures of ASK. Knowing that ASK is always higher than BID and that the spread is under 100 points, the full ASK real prices can always be defined. In this example ASK = 121.49.

4. BID and ASK prices.
It is known, that every transaction is executed at a rather well defined and concrete price, while the table Quote Spread Sheet lists three prices for each currency, for example:

Forex Quote Spread

Each of the participants of FOREX market enters each trade as either a SELLER or a BUYER of a particular currency. In so doing, the seller offers the currency at a higher price, for example GBPUSD at 1.6325, while the buyer bids for it at a lower price, for example, GBPUSD at 1.6322. The seller's price is called ASK and the buyers price is called BID accordingly. This is why, if you anticipate GBPUSD to appreciate (your GBPUSD chart to go up), then you should decide to buy the pound when it is low to sell it high later. You can BUY only from a seller offering it at the price equal to ASK. Should you be selling the pound (this operation is called SELL), the buyer will bid at a price equal to BID for it (this holds true for all currencies). The obvious conclusion is that if you have OPENED a position (the operation is called OPEN), that is you have executed BUY GBPUSD, and want to CLOSE it immediately (the operation is called CLOSE), that is to sell the pounds you have just bought, then you could do it only at a loss, similar to what would happen at any currency exchange booth. Consequently, to make a profit you should let the rate move in the anticipated direction more than the difference between BID and ASK. The third number is called LAST, which is an average of last BID and ASK on Forex.

As described in the section 3 above, currencies with a direct quote only appreciate when the chart goes up. Currencies with inverse quote depreciate when the chart goes up. Considering an upward movement on the chart, BUY operation would be confusing if it's profitable for some currencies but not for the others. To clear the confusion, the BUY operation for currencies with inverse quote, like USDJPY, was altered. BUY for USDJPY and the like buy not the currency itself, like JPY but it buys the US dollars instead, selling the other currency. For example, BUY USDCHF at 1.4500 buys 100,000 US dollars for 145,000 swiss franks. Thus, the BUY operation is always profitable when the chart goes up, SELL is always profitable when the chart goes down.

OPEN BUY (up) is executed at the ASK, CLOSE - at the bid BID; OPEN SELL (down) – at the BID, CLOSE - at the ASK.

5. STOP and LIMIT orders.
Let us get aquainted with some useful trading tools allowing us to protect ourselves from unforeseen losses to certain degree and take the expected profits.

These are STOP and LIMIT. For a previously opened position an instruction may be entered at any moment (during the working days) to close it, if the rate reaches a preset level. For example, you have opened a position expecting the rate to go up (on the chart). To protect yourself from significant losses if the rate moves down, especially in such a situation when you don't have or are about to lose control of the market, you should enter a STOP, that is set a price at below its current value at which your position should be closed with no further instructions.

Similarly, if you have opened a down position, then you should specify a price above its current value. In this case you should bear in mind that if the STOP is set too closely to the current rate value, then a random rate fluctuation may close a correctly open position at a loss, but if it is set too far, then the losses could become unreasonably high. LIMIT is a rate value that you set at which the position should be closed with a profit, that is the value of the LIMIT should always be above the current level, if you play long, and below it, if you play short.

source: http://forextradings.org/forexbeginners-en-fx_beginners.html

Introduction To FOREX

noreply@blogger.com (Admin) — Tue, 25 Aug 2009 08:13:00 +0000

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Foreign Exchange

This short introduction explains the basics of trading Forex online, a brief explanation of the markets and the major benefits of trading Forex online. There are also two scenarios describing the implications of trading in a bear as well as a bull market to better acquaint you with some of the risks and opportunities of the largest and most liquid market in the world.

As an additional aid for those who are new to Forex, there is also a glossary at the bottom of this text which explains some of the terms used in connection with currency trading.
Overview
Foreign exchange, Forex or just FX are all terms used to describe the trading of the world's many currencies. The Forex market is the largest market in the world, with trades amounting to more than USD 3 trillion every day. Most Forex trading is speculative, with only a low percentage of market activity representing governments' and companies' fundamental currency conversion needs.

Unlike trading on the stock market, the Forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. Trading takes place directly between the two counterparts necessary to make a trade, whether over the telephone or on electronic networks all over the world. The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution of trading centres means that the Forex market is a 24-hour market.

Trading Forex

A currency trade is the simultaneous buying of one currency and selling of another one. The currency combination used in the trade is called a cross (for example, the euro/US dollar, or the GB pound/Japanese yen.). The most commonly traded currencies are the so-called “majors” – EURUSD, USDJPY, USDCHF and GBPUSD.

The most important Forex market is the spot market as it has the largest volume. The market is called the spot market because trades are settled immediately, or “on the spot”. In practice this means two banking days.

Forward Outrights
For forward outrights, settlement on the value date selected in the trade means that even though the trade itself is carried out immediately, there is a small interest rate calculation left. The interest rate differential doesn't usually affect trade considerations unless you plan on holding a position with a large differential for a long period of time. The interest rate differential varies according to the cross you are trading. On the USDCHF, for example, the interest rate differential is quite small, whereas the differential on NOKJPY is large. This is because if you trade e.g. NOKJPY, you get almost 7% (annual) interest in Norway and close to 0% in Japan. So, if you borrow money in Japan, to finance the trade and buying NOK, you have a positive interest rate differential. This differential has to be calculated and added to your account. You can have both a positive and a negative interest rate differential, so it may work for or against you when you make a trade.

Trading on Margin
Trading on margin means that you can buy and sell assets that represent more value than the capital in your account. Forex trading is usually conducted with relatively small margin deposits. This is useful since it permits investors to exploit currency exchange rate fluctuations which tend to be very small. A margin of 1.0% means you can trade up to USD 1,000,000 even though you only have USD 10,000 in your account. A margin of 1% corresponds to a 100:1 leverage (or “gearing”). (Because USD 10,000 is 1% of USD 1,000,000.) Using this much leverage enables you to make profits very quickly, but there is also a greater risk of incurring large losses and even being completely wiped out. Therefore, it is inadvisable to maximise your leveraging as the risks can be very high. For more information on the trading conditions of Saxo Bank, go to the Account Summary on your SaxoTrader and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary.

Why Trade Forex?

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24 hour trading
One of the major advantages of trading Forex is the opportunity to trade 24 hours a day from Sunday evening (20:00 GMT) to Friday evening (22:00 GMT). This gives you a unique opportunity to react instantly to breaking news that is affecting the markets.
*
Superior liquidity
The Forex market is so liquid that there are always buyers and sellers to trade with. The liquidity of this market, especially that of the major currencies, helps ensure price stability and narrow spreads. The liquidity comes mainly from banks that provide liquidity to investors, companies, institutions and other currency market players.
*
No commissions
The fact that Forex is often traded without commissions makes it very attractive as an investment opportunity for investors who want to deal on a frequent basis.
Trading the “majors” is also cheaper than trading other cross because of the high level of liquidity. For more information on the trading conditions of Saxo Bank, go to the Account Summary on your SaxoTrader and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary.
*
100:1 Leverage
Leverage (gearing) enables you to hold a position worth up to 100 times more than your margin deposit. For example, a USD 10,000 deposit can command positions of up to USD 1,000,000 through leverage. You can leverage the first USD 25,000 of your investment up to 100 times and additional collateral up to 50 times.
*
Profit potential in falling markets
Since the market is constantly moving, there are always trading opportunities, whether a currency is strengthening or weakening in relation to another currency. When you trade currencies, they literally work against each other. If the EURUSD declines, for example, it is because the US dollar gets stronger against the euro and vice versa. So, if you think the EURUSD will decline (that is, that the euro will weaken versus the dollar), you would sell EUR now and then later you buy euro back at a lower price. In case that the EURUSD indeed declines, then you can take your profit. The opposite trading scenario would occur if the EURUSD appreciates.

Important Forex Trading Terms

*
Spread
The spread is the difference between the price that you can sell currency at (Bid) and the price you can buy currency at (Ask). The spread on majors is usually 3 pips under normal market conditions. For more information on the trading conditions at Saxo Bank, go to the Account Summary on your Client Station and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary.
*
Pips
A pip is the smallest unit by which a cross price quote changes. When trading Forex you will often hear that there is a 3-pip spread when you trade the majors. This spread is revealed when you compare the bid and the ask price, for example EURUSD is quoted at a bid price of 0.9875 and an ask price of 0.9878. The difference is USD 0.0003, which is equal to 3 “pips”.

On a contract or position, the value of a pip can easily be calculated. You know that the EURUSD is quoted with four decimals, so all you have to do is cancel out the four zeros on the amount you trade and you will have the value of one pip. Thus, on a EURUSD 100,000 contract, one pip is USD 10. On a USDJPY 100,000 contract, one pip is equal to 1000 yen, because USDJPY is quoted with only two decimals.

source: http://www.forextrading.com/articles

History Of FOREX

noreply@blogger.com (Admin) — Mon, 24 Aug 2009 01:59:00 +0000

Brief history of Forex trading

Initially, the value of goods was expressed in terms of other goods, i.e. an economy based on barter between individual market participants. The obvious limitations of such a system encouraged establishing more generally accepted means of exchange at a fairly early stage in history, to set a common benchmark of value. In different economies, everything from teeth to feathers to pretty stones has served this purpose, but soon metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value.

Originally, coins were simply minted from the preferred metal, but in stable political regimes the introduction of a paper form of governmental IOUs (I owe you) gained acceptance during the Middle Ages. Such IOUs, often introduced more successfully through force than persuasion were the basis of modern currencies.

Before World War I, most central banks supported their currencies with convertibility to gold. Although paper money could always be exchanged for gold, in reality this did not occur often, fostering the sometimes disastrous notion that there was not necessarily a need for full cover in the central reserves of the government.

At times, the ballooning supply of paper money without gold cover led to devastating inflation and resulting political instability. To protect local national interests, foreign exchange controls were increasingly introduced to prevent market forces from punishing monetary irresponsibility.

In the latter stages of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The Bretton Woods Conference rejected John Maynard Keynes suggestion for a new world reserve currency in favour of a system built on the US dollar. Other international institutions such as the IMF, the World Bank and GATT (General Agreement on Tariffs and Trade) were created in the same period as the emerging victors of WW2 searched for a way to avoid the destabilising monetary crises which led to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that partly reinstated the gold standard, fixing the US dollar at USD35/oz and fixing the other main currencies to the dollar - and was intended to be permanent.

The Bretton Woods system came under increasing pressure as national economies moved in different directions during the sixties. A number of realignments kept the system alive for a long time, but eventually Bretton Woods collapsed in the early seventies following president Nixon's suspension of the gold convertibility in August 1971. The dollar was no longer suitable as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.

The following decades have seen foreign exchange trading develop into the largest global market by far. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.

But the idea of fixed exchange rates has by no means died. The EEC (European Economic Community) introduced a new system of fixed exchange rates in 1979, the European Monetary System. This attempt to fix exchange rates met with near extinction in 1992-93, when pent-up economic pressures forced devaluations of a number of weak European currencies. Nevertheless, the quest for currency stability has continued in Europe with the renewed attempt to not only fix currencies but actually replace many of them with the Euro in 2001.

The lack of sustainability in fixed foreign exchange rates gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates, in particular in South America, looking very vulnerable.

But while commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have found a new playground. The size of foreign exchange markets now dwarfs any other investment market by a large factor. It is estimated that more than USD 3,000 billion is traded every day, far more than the world's stock and bond markets combined.

source : http://www.forextrading.com/articles/History.aspx