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Forex Trading - A Quick Introduction

David — Wed, 24 Oct 2007 04:07:17 +0000

In case you were wondering, forex trading is nothing more than direct access trading of different types of foreign currencies. In the past, foreign exchange trading was mostly limited to large banks and institutional traders however, recent technological advancements have made it so that small traders can also take advantage of the many benefits of forex trading just by using the various online trading platforms to trade.

The currencies of the world are on a floating exchange rate, and they are always traded in pairs Euro/Dollar, Dollar/Yen, etc. About 85 percent of all daily transactions involve trading of the major currencies.

Four major currency pairs are usually used for investment purposes. They are: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc. This is how they look in the trading market: EUR/USD, USD/JPY, GBP/USD, and USD/CHF. As a note you should know that no dividends are paid on currencies.

If you think one currency will appreciate against another, you may exchange that second currency for the first one and be able to stay in it. In case everything goes as you plan it, eventually you may be able to make the opposite deal in that you may exchange this first currency back for that other and then collect profits from it.

Transactions on the FOREX market are performed by dealers at major banks or FOREX brokerage companies. FOREX is a necessary part of the world wide market, so when you are sleeping in the comfort of your bed, the dealers in Europe are trading currencies with their Japanese counterparts.

Therefore, it is reasonable for you to believe that the FOREX market is active 24 hours a day and dealers at major institutions are working 24/7 in three different shifts.

Clients may place take-profit and stop-loss orders with brokers for overnight execution.

Price movements on the FOREX market are very smooth and without the gaps that you face almost every morning on the stock market. The daily turnover on the FOREX market is somewhere around $1.2 trillion, so a new investor can enter and exit positions without any problems.

The fact is that the FOREX market never stops, even on September 11, 2001 you could still get your hands on two-side quotes on currencies. The currency market is the largest and oldest financial market in the world. It is also called the foreign exchange market, FX market for short. It is the biggest and most liquid market in the world, and it is traded mostly through the 24 hour-a-day inter-bank currency market.

When you compare them, you will see that the currency futures market is only one per cent as big. Unlike the futures and stock markets, trading currencies is not centered on an exchange. Trading moves from major banking centers of the U.S. to Australia and New Zealand, to the Far East, to Europe and finally back to the U.S. it is truly a full circle trading game.

In the past, the forex inter-bank market was not available to small speculators because of the large minimum transaction sizes and strict financial requirements.

Banks, major currency dealers and sometimes even very large speculators were the principal dealers. Only they were able to take advantage of the currency market’s fantastic liquidity and strong trending nature of many of the world’s primary currency exchange rates.

Today, foreign exchange market brokers are able to break down the larger sized inter-bank units, and offer small traders like you and me the opportunity to buy or sell any number of these smaller units. These brokers give any size trader, including individual speculators or smaller companies, the option to trade at the same rates and price movements as the big players who once dominated the market.

As you can see, the foreign exchange market has come a long way. Being successful at it can be intimidating and difficult when you are new to the game. This website will provide a comprehensive guide to help you become successful in the forex market.

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Managing The Inevitable Losses That Will Happen

David — Fri, 20 Jun 2008 12:56:17 +0000

A basic rule of Forex trading is to make your losses as little as possible. With minor losses, you can survive those times when the market moves against your interests, and be well placed for when the trend turns around. The one established method to accomplish the goal of making your losses small is setting your (...)
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Forex Trading Is All About The Spreads? - Part 2

David — Tue, 29 Apr 2008 12:36:21 +0000

You can go back and read Part 1 of this article here

Spreads should always be reckoned in conjunction with depth of book. Strangely enough, in the matter of economies of scale, Forex doesn’t even behave like most other markets. For example, on the inner-bank market, the larger the ticket size, the larger the spread is. (...)
Read the rest of Forex Trading Is All About The Spreads? - Part 2 (311 words)

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Forex Trading Is All About The Spreads? - Part 1

David — Tue, 29 Apr 2008 12:27:25 +0000

Forex is priced in relation to the currency rates between two different countries. When you make a deal in Forex, you buy one currency and sell another at the same time. You must buy/sell the opposite position, if you want to exit the trade. For instance, if you think the price of Euro is going to rise against the US Dollar. (...)
Read the rest of Forex Trading Is All About The Spreads? - Part 1 (464 words)

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Develop A Trading Strategy You Are Happy With

David — Tue, 29 Apr 2008 01:59:40 +0000

Successful traders develop schemes and perfect them over a specific time frame. Some traders will stick to one specific study or calculation, while some others rely on broad-spectrum analysis as a way to determine their trades. Experts always advice you to try using a combination of both fundamental and technical analysis. (...)
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Technical Analysis and Fundamental Analysis

David — Tue, 29 Apr 2008 01:52:01 +0000

As in the case of equity markets, there are two basic areas of strategy in the Forex market, namely technical analysis and fundamental analysis. Technical analysis is the most common strategy used by individual Forex traders. (...)
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How To Go About Choosing A Good Broker - Pt 2

David — Mon, 14 Apr 2008 11:22:13 +0000

Read Part 1 of this article here

If capital is not a problem for you, any broker who has a wide variety of leverage options can be chosen. Different options can be applied to vary the amount of risk you are likely to take. For example, if you are dealing with highly volatile currency pairs, less leverage may be preferable. (...)
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How To Go About Choosing A Good Broker - Pt 1

David — Mon, 14 Apr 2008 11:13:49 +0000

The first thing before getting started in Forex trading is to find and select the right broker to assist you in your venture. As in the case of any other market, there are so many brokers to choose from. Consider the following things in making your choice. (...)
Read the rest of How To Go About Choosing A Good Broker - Pt 1 (383 words)

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Forex Has Several Advantages Over Futures or Stocks

David — Mon, 14 Apr 2008 11:06:18 +0000

By putting up a little amount of margin, a Forex trader can control a big amount of the currency similar to stock speculation and futures. The margin requirements for Forex is about 1% whereas the margin requirements for trading futures are around 5% (...)
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So What Makes The Forex Market So Special?

David — Mon, 14 Apr 2008 11:02:25 +0000

Forex markets have some unique features that provide an incomparable potential for profitable currency trading in any market situation. A trader need not wait for the ‘opening bell’ as in the case of the exchange and has the opportunity to avail all fruitful market conditions at any time. (...)
Read the rest of So What Makes The Forex Market So Special? (359 words)

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