Forex Information

Price Action Forex Trading Strategies

2011-04-06T20:49:00.000-07:00

forex2011info

One very effective yet simple and easy to understand forex trading strategy is price action analysis, also known as price action trading. This is the art and skill of learning to analyze a “naked” or raw price chart with no lagging indicators. Essentially all we are taking into account with this forex trading strategy is a handful of naturally occurring and repetitive price patterns that form as result of daily price movement in the forex market.
We then combine these price patterns with confluent levels of support and resistance or retracement levels to “confirm” the setup. This method of trading has been used for literally centuries as the rice traders in Japan who created Japanese Candlestick charts used price action trading back in the 1700s.
This trading technique of setting your trade parameters and then taking a “breather” while you let the market do the work is something that many traders do not fully take advantage of. Experienced traders will agree that as a general rule there is a negative correlation between the amounts of time you spend analyzing your charts and the value of your trading account. In other words, the more time you spend staring at your charts and over analyzing them, the more money you are probably going to lose as a result of moving stop losses, or targets, or adding on to positions. Of course, a certain amount of educational screen time is needed for you to really understand the mechanics of price action setups and how to fully and effectively implement them in the course of daily market movement. However, above and beyond this level of screen time education, sitting there and just watching your trades unfold is generally only going to hurt you in the end.

Using price action setups to trade the market with is one of the best simple forex trading strategies because it allows you to maintain an objective mindset while trading the markets. This objective mindset is something that is crucial to your existence and success as a trader. Existence might seem a bit harsh, but if you become overly subjective and let your emotions and feelings rule your trading decisions, you WILL blow out your trading account faster that you realize and thus cease to exist as a trader. Many traders eliminate the possibility of even developing an objective trading mindset right from the very beginning by using complicated trading methods or fancy sounding trading programs that muddy up their charts and their minds.
article source
http://www.forextradingstrategies.org/price-action-trading-a-simple-forex-trading-strategy.php

How Forex Brokers Works

2011-04-06T20:43:00.000-07:00

Forex Market Structure

2011-04-06T20:33:00.000-07:00

forex

The forex is unique among financial markets in a number of ways. One of these is that it was not traditionally used as an investment vehicle. It had, and still maintains to some extent, a somewhat more utilitarian purpose. In today’s globalized economy, most businesses have some international exposure, creating the need to exchange one currency for another in order to complete transactions. For example, Honda builds its cars in Japan and exports them to the United States, where an eager American buyer exchanges his dollars for a brand new Honda. Some of this money has to make its way back to Japan to pay the factory workers that built the car, but first those dollars have to be exchanged for Japanese yen, since that is the currency the Japanese factory workers are paid in. Transactions such as this are facilitated by international banks and are done through a mechanism known as the foreign exchange market, or forex. Since banks are used to facilitate these cross-border transactions, they naturally want to be paid for their services.
This payment comes in the form of a bid/ask spread – offering to buy the desired currency at a slightly lower price than they are willing to sell it at, and pocketing the difference. Considering the fact that more than $3bn moves through the forex market daily, these seemingly small fees can add up to a significant sum.

Since the 1970’s most of the world’s major currencies have been on a (mostly) free-floating exchange mechanism, allowing for exchange rates to be determined by market forces, that is, supply and demand. I say “mostly” because there have been times when major central banks have intervened in the market to manipulate exchange rates by either buying or selling large amounts of their currency, but normally this only takes place in extreme situations. There are also other central banks that choose to manage their currencies much more strictly, but these are a minority in the developed world. So in most cases, this free-floating exchange rate mechanism allowed currencies to fluctuate against one another much more, and this in turn opened the door to speculation on the future movement of exchange rates. The banks’ intimate knowledge of the forex market, and their high level of capitalization allowed them to be the first to speculate in the forex market, and to significantly increase their profits by doing so. An unfortunate consequence of this speculation however was that liquidity at certain times became scarce, and some necessary transactions could not be completed. In order to solve this problem, banks turned to expanding the number of participants in the market to include non-banks, thereby generating sufficient order flow (liquidity distribution) to complete clients’ transactions, and also to profit from these newer and less knowledgeable market participants. These less experienced forex market participants first included large funds (such as the legendary Quantum Fund), but nowadays also include your local retail forex dealer.

Another unique feature of the forex market is that it is an over-the-counter (OTC) market, meaning that there is no central exchange (like a stock exchange) where transactions take place. Instead, top-tier transactions are made in the “interbank market”, which is a collection of the world’s largest money center banks, all free to trade currencies amongst each other at whatever rate they can agree on. Of course, it may be difficult to find your way around such a maze, so the brilliant minds at the leading banks developed the Electronic Broking System (EBS) to enable participants to easily see at what rates all the other participants are willing to deal at. A competing system was also developed by Reuters (D2). Today, one is preferred over the other mostly on the basis of which currency pair you want to trade, with EBS used mostly for EUR/USD, USD/JPY, EUR/JPY, USD/CHF and EUR/CHF, and Reuters D2 used for all other currency pairs. In 2006, EBS was acquired by ICAP. It should be noted that while these services provide a centralized structure for pricing information, they DO NOT constitute a centralized exchange. The forex is still very much an OTC market.

The 2nd tier of the market is made up of smaller bits of larger multinational institutions. This is when, for example, a bank branch in the US deals with another branch of the same bank in, say, Japan. So when you walk into your local branch and want to exchange currency, they will give you a quote which is not exactly representative of the interbank exchange rate. You are free to shop around for a better quote, and you would often be wise to do so, as rates can vary significantly from one bank to another.

Artcle source
http://www.forextradingzone.org/articles-Structure_of_the_Forex_market

New In Forex Trading?

2011-03-04T06:42:00.000-08:00

Getting Started
Client Terminal is a part of the online trading system. It is installed on the trader's computer and intended for:
receiving quotes and online market analysis
instant execution of orders
managing of open positions and pending orders;
various tools for technical analysis
writing of expert advisors, custom indicators, scripts
testing and optimizing trading strategies
For making a decision to trade, reliable on-line information is necessary. For that, quotes and news are delivered at the terminal in real-time. It is possible to analyze markets using technical indicators and line studies. Moreover, to ensure more flexible control over positions, several order types are built into the terminal allowing maximum flexibility.

Forex Central Banks

2011-03-04T06:30:00.000-08:00

National central banks play an important role in the foreign exchange markets. They try to control the money supply, inflation, and/or interest rates and often have official or unofficial target rates for their currencies. They can use their often substantial foreign exchange reserves to stabilize the market. Milton Friedman argued that the best stabilization strategy would be for central banks to buy when the exchange rate is too low, and to sell when the rate is too high — that is, to trade for a profit based on their more precise information. Nevertheless, the effectiveness of central bank "stabilizing speculation" is doubtful because central banks do not go bankrupt if they make large losses, like other traders would, and there is no convincing evidence that they do make a profit trading.

The mere expectation or rumor of central bank intervention might be enough to stabilize a currency, but aggressive intervention might be used several times each year in countries with a dirty float currency regime. Central banks do not always achieve their objectives. The combined resources of the market can easily overwhelm any central bank.Several scenarios of this nature were seen in the 1992–93 ERM collapse, and in more recent times in Southeast Asia.

Forex Broker Guide

2011-03-02T08:13:00.000-08:00

Forex broker:
Forex broker is the intermediary between the buyer and seller. Most Forex brokers are associated with large financial institutions and earn money by setting a spread between bid and ask prices.

How to Chose a Forex Broker in 2011:

Profitability rate: Speaking of regulation, this is a rather new metric, that is only available to US brokers. Brokers are now required to post the profitability rate of their customers. A broker with a higher profitability rate likely works harder to make his traders succeed. This can be done in terms of education, support or anything else.

Transparency: With the significant growth of forex social networks, transparency isn’t only a nice buzzword. Is our potential broker available on social networks such as Currensee or FXBees? If so, it’s a good sign, that he has less to hide.

Google Bad Reviews: Positive reviews can be tricky thing, but look up for genuine negative ones – Google the broker’s name with words such as “sucks” or “withdrawal” to see if clients had troubles with the broker, especially in the sensitive field of withdrawing money. Too many genuine complaints mean trouble.

Understanding Forex Quotes

2011-03-02T08:11:00.000-08:00

The Forex market can be a confusing place for beginner traders, and one of the sources of confusion is understanding Forex quotes.

A forex quote is a small bit of information, yet it’s packed with numbers that may not make sense to someone unfamiliar with the forex system. Here’s a simple explanation of how it works.

A Forex quote consists of a currency pair. Forex deals always involve simultaneously selling one currency and buying another, a bid price and an ask price. For example, one quote might read like this:

USD/JPY 125.25/75

The first currency is the base currency, and the other one is the quote currency. The value of the base currency is always 1, in this case, 1 U.S. dollar. The number tells you how many of the quote currency (the Japanese yen, in this case) you can buy with $1.

But what kind of number is 125.25/75? It’s actually forex abbreviation for two numbers: 125.25 and 118.75. The lower number is the bid price, the other is the ask price. The bid price is the price that dealers will buy the base currency for. The ask price is what dealers will sell it for.

So if the above were the current quote, it would mean right now, you could sell USD in exchange for 118.71 Japanese Yen per dollar. Or, if you preferred, you could buy USD at rate of 118.75 yen per dollar.

The difference between the bid price and the ask price in a forex quote is called the “spread,” and those tiny units are called “pips.” In our example, the spread for USD/JPY was four pips.

The spread is usually that small for the most commonly traded currencies, which means anything involving the U.S. dollar, Japanese Yen, Great British Pound, the Euro, Swiss franc or Australian dollar. In fact, thanks to the great competition in the forex trading market, some quotes will have spread of as little as one pip.

Of course, for less commonly traded currencies, the spread can be much greater. And even when the quote delivers a small spread, it adds up when you’re trading hundreds of thousands of units.

If you were dealing with 100 U.S. dollars, the difference between selling them for 11,871 yen and buying them for 11,875 yen wouldn’t be much at all, just four yen. But if it were 100,000 U.S. dollars, suddenly that four-pip spread means a 4,000-yen difference. So the spread in a quote is more important than its smallness would suggest.

Most Powerful Forex Tips For Beginners

2011-03-02T07:48:00.000-08:00

1 Forex trading is where traders speculate on the exchange rate between two currency pairs.

2 Traders buy and sell currencies hoping to realize a profit. In order to succeed in currency trading you will need a source of accurate and timely information. You'll need to familiarize yourself with a whole new language.

3 When you start currency trading you'll learn what a market trend is and how it will affect your trading. Trends move up, down and sideways. There are also trend classifications within market trends. These classifications are intermediate, short-term and long-term trend. You'll learn how to look at and understand basic trend lines, which is the most valuable trading. You'll learn about channel lines and support levels.

4 When you start trading Forex you'll be able to make sales online 24 hours a day, 7 days a week. Many online brokers offer commission free trading and you'll want to make sure that you have instant execution of your market orders.

5 A new addition to many currency trading online business sites is the ability to set up a free demo account. This is a good way to get practice about trading and learn about live quotes, charts and streaming news before you start investing with real money.

6 When you set up your Forex demo account it's a good time to test the software that the company offers. If you don't like the software program, contact the company and see how similar it is to the software program you would get if you signed a contract with them. If you don't like the software program try another broker. Also, decide if you want web based or client based software.

7 Web based software is housed on your brokers website, you won't have to install any software onto your computer. A web based software program will allow you to log in from any computer that has an internet connection. Client based software is loaded onto your computer, and can only be accessed from that computer, potentially limiting your usage.

8 Another thing you'll want to check before choosing an online broker is how quickly they respond to your need for help. Seeing how quickly they respond to your questions could be key in how they respond to customer needs. If you don't get a speedy and accurate reply you may not want to trust them with your business.

9 You'll need to have high speed internet connection in order to succeed in currency trading online. The currency trading market is a fast moving one and dial up internet access will not work well for this. Another consideration could be the location of the servers used by your broker. If your broker's servers are located quite a distance from you, say in another country, this could potentially slow down your transmissions.

10 Take you time and investigate online brokers. Talk with friends and family about their dealings with online Forex brokers. Take time and do a thorough evaluation of your options before you trust anyone with your money.

Where Forex Traders Begin?

2011-03-02T07:41:00.000-08:00

Most traders begin their trading career, whether consciously or subconsciously, visualizing "The Big One" - the one trade that will make them millions and allow them to retire young and live carefree for the rest of their lives. In forex, this fantasy is further reinforced by the folklore of the markets. Who can forget the time that George Soros "broke the Bank of England" by shorting the pound and walked away with a cool $1-billion profit in a single day? But the cold hard truth for most retail traders is that, instead of experiencing the "Big Win", most traders fall victim to just one "Big Loss" that can knock them out of the game forever.

Source(s):
www.investopedia.com

What Is Forex?Complete Guide For Beginners

2011-03-02T07:18:00.000-08:00

In Simple Words:
The simple sense of Forex (Forex currency exchange, Foreign Exchange) is simultaneous purchase and sale of the currency or the exchange of one country's currency for the one of another country. The world currencies do not have a fixed exchange rate and are always fluctuating being traded in the currency pairs like Euro/Dollar, Dollar/Yen an others. 85% of daily trades are taken by major currencies trading.

Investments usually deal with 4 major pairs: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc or EUR/USD, USD/JPY, GBP/USD, and USD/CHF used to sign these pairs accordingly. These major pairs are considered as Forex market's "blue chips". You will not receive any dividends on the currencies. Well known "buy low - sell high" gives the profit for currency trades.

In case you have a forecast that one currency would get higher to another you can exchange the second one for the first one and wait for the profit. If you are lucky to see the trades following your forecast you can make an opposite transaction and to exchange currencies back gaining the profit.

You Can Also Say What Forex Is:
An over-the-counter market where buyers and sellers conduct foreign exchange transactions. The Forex market is useful because it helps enable trade and transactions between countries, and it also allows an investment opportunity for risk seeking investors who don't mind engaging in speculation. Individuals who trade in the Forex market typically look carefully at a country's economic and political situation, as these factors can influence the direction of its currency. One of the unique aspects of the Forex market is that the volume of trading is so high, partially because the units exchanged are so small. It is estimated that around $4 trillion goes through the Forex market each day. also called foreign exchange market.

Read more: http://www.investorwords.com/2045/Forex.html#ixzz1FURVI8LE