The foreign exchangemarket is the “place” where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business. If you are living in the U.S. and want to buy cheese from France, either you or the company that you buy the cheese from has to pay the French for the cheese in euros (EUR). This means that the U.S. importer would have to exchange the equivalent value of U.S. dollars (USD) into euros. The same goes for traveling. A French tourist in Egypt can’t pay in euros to see the pyramids because it’s not the locally accepted currency. As such, the tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate.
The need to exchange currencies is the primary reason why the forex market is the largest, most liquid financial market in the world. It dwarfs other markets in size, even the stock market, with an average traded value of around U.S. $2,000 billion per day.
One unique aspect of this international market is that there is no central marketplace for foreign exchange. Rather, currency trading is conducted electronically over-the-counter (OTC), which means that all transactions occur via computer networks between traders around the world, rather than on one centralized exchange. The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney – across almost every time zone. This means that when the trading day in the U.S. ends, the forex market begins anew in Tokyo and Hong Kong. As such, the forex market can be extremely active any time of the day, with price quotes changing constantly.
Tuesday, December 22, 2009
Forex Trading History
Approximately 25 percent of large companies that are exposed to foreign currency fluctuations don't do anything to hedge their risk. Larger companies however do hedge in the currency markets.
For an US based company, when the dollar is strong during their reporting period, accounting for its foreign earned revenue can result in a negative performance. That's because foreign-currency denominated revenue will exchange for fewer dollars when converted and reflect negatively for the accounting period.
It has been estimated that 5-10% of the activity on the FORX market is done because of business hedging and government involvement. Governments and businesses need to convert one currency into another to buy and sell goods and services. The other 90-95% is pure speculation.
The foreign exchange markets have been the playground of governments, corporations, banks as well as high-profile traders such as Warren Buffet and George Soros. Many speculators have made consistent net profits. For instance, George Soros "broke the Bank of England" by shorting the pound and walked away with a cool $1-billion profit in a single day.
Since the currencies are traded 24 hours there are certain times that are more liquid than others for the various currency pairs. For instance, between the hours of 8 AM and 5 PM EST, New York accounts for about 15% to 17% of all FOREX transactions. On the other side of the globe, 10% of FOREX transactions take place between Tokyo's trading hours from 7 PM to 3 AM EST.
The way to make money in the FOREX market is by accurately predicting a price movement of a currency pair and investing right before and exiting right after. This usually happens a few times in a day.
Real day traders and professional traders predict moves, place their bet and move out of the trade. They do it several times a day, hence the name "day" traders. Huge companies like Goldman, Citi Group and JP Morgan Chase do this every single day. They employ thousands of professionals that do it for them.
The Wall Street Journal offers news wires and Market Watch services from Dow Jones online. You'll find complete currency data and comprehensive viewpoints to consider. Timely currency news is available to subscribers of the Wall Street Journal.
For an US based company, when the dollar is strong during their reporting period, accounting for its foreign earned revenue can result in a negative performance. That's because foreign-currency denominated revenue will exchange for fewer dollars when converted and reflect negatively for the accounting period.
It has been estimated that 5-10% of the activity on the FORX market is done because of business hedging and government involvement. Governments and businesses need to convert one currency into another to buy and sell goods and services. The other 90-95% is pure speculation.
The foreign exchange markets have been the playground of governments, corporations, banks as well as high-profile traders such as Warren Buffet and George Soros. Many speculators have made consistent net profits. For instance, George Soros "broke the Bank of England" by shorting the pound and walked away with a cool $1-billion profit in a single day.
Since the currencies are traded 24 hours there are certain times that are more liquid than others for the various currency pairs. For instance, between the hours of 8 AM and 5 PM EST, New York accounts for about 15% to 17% of all FOREX transactions. On the other side of the globe, 10% of FOREX transactions take place between Tokyo's trading hours from 7 PM to 3 AM EST.
The way to make money in the FOREX market is by accurately predicting a price movement of a currency pair and investing right before and exiting right after. This usually happens a few times in a day.
Real day traders and professional traders predict moves, place their bet and move out of the trade. They do it several times a day, hence the name "day" traders. Huge companies like Goldman, Citi Group and JP Morgan Chase do this every single day. They employ thousands of professionals that do it for them.
The Wall Street Journal offers news wires and Market Watch services from Dow Jones online. You'll find complete currency data and comprehensive viewpoints to consider. Timely currency news is available to subscribers of the Wall Street Journal.
Introduction to Forex Trading
The Foreign Exchange Market, better known as FOREX, is a worldwide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Daily exchanges are worth approximately $1.5 trillion (US dollars). In comparison, the United States Treasury Bond market averages $300 billion a day, and American stock markets exchange about $100 billion a day.
The Foreign Exchange Market was established in 1971 when fixed currency exchanges were abolished. Currencies became valued at 'floating' rates determined by supply and demand. The FOREX grew steadily throughout the 1970's, but with the technological advances of the 80's FOREX expanded from trading levels of $70 billion a day to the current level of $1.5 trillion.
Who Trades in FOREX?
The FOREX is made up of about 5,000 trading institutions such as international banks, central government banks (such as the US Federal Reserve), and commercial companies and brokers for all types of foreign currency. There is no centralized location of FOREX; major trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Paris, and Frankfurt. All trading is done by telephone or Internet.
Businesses use the market to buy and sell their products in other countries, but most of the activity on the FOREX is from currency traders who use it to generate profits from small movements in the market.
Even though there are many huge players in FOREX, it is accessible to the small investor thanks to recent changes in the regulations. Previously, there was a minimum transaction size and traders were required to meet strict financial requirements.
With the advent of Internet trading, regulations have been changed to allow large interbank units to be broken down into smaller lots. Each lot is worth about $100,000 and is accessible to the individual investor through 'leverage' loans extended for trading. Typically, lots can be controlled with a leverage of 100:1 meaning that US$1,000 will allow you to control a $100,000 currency exchange.
Advantages to Trading in FOREX
Liquidity - Because of the size of the Foreign Exchange Market, investments are extremely liquid. International banks are continuously providing bid and ask offers and the high number of transactions each day ensures there is always a buyer or a seller for any currency.
Accessibility - The market is open 24 hours a day, 5 days a week. The market opens Monday morning Australian time and closes Friday afternoon New York time. Trades can be done on the Internet from your home or office.
Open Market - Currency fluctuations are usually caused by changes in national economies. News about these changes is accessible to everyone at the same time--there can be no 'insider trading' in FOREX.
No Commission - Brokers earn money by setting a 'spread'--the difference between what a currency can be bought at and what it can be sold at.
How does it work?
Currencies are always traded in pairs: the US dollar against the Japanese yen, or the English pound against the euro. Every transaction involves selling one currency and buying another, so if an investor believes the euro will gain against the dollar, he will sell dollars and buy euros.
The potential for profit exists because there is always movement between currencies. Even small changes can result in substantial profits because of the large amount of money involved in each transaction. At the same time, it can be a relatively safe market for the individual investor. There are safeguards built in to protect both the broker and the investor, and a number of software tools exist to minimize loss.
The Foreign Exchange Market was established in 1971 when fixed currency exchanges were abolished. Currencies became valued at 'floating' rates determined by supply and demand. The FOREX grew steadily throughout the 1970's, but with the technological advances of the 80's FOREX expanded from trading levels of $70 billion a day to the current level of $1.5 trillion.
Who Trades in FOREX?
The FOREX is made up of about 5,000 trading institutions such as international banks, central government banks (such as the US Federal Reserve), and commercial companies and brokers for all types of foreign currency. There is no centralized location of FOREX; major trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Paris, and Frankfurt. All trading is done by telephone or Internet.
Businesses use the market to buy and sell their products in other countries, but most of the activity on the FOREX is from currency traders who use it to generate profits from small movements in the market.
Even though there are many huge players in FOREX, it is accessible to the small investor thanks to recent changes in the regulations. Previously, there was a minimum transaction size and traders were required to meet strict financial requirements.
With the advent of Internet trading, regulations have been changed to allow large interbank units to be broken down into smaller lots. Each lot is worth about $100,000 and is accessible to the individual investor through 'leverage' loans extended for trading. Typically, lots can be controlled with a leverage of 100:1 meaning that US$1,000 will allow you to control a $100,000 currency exchange.
Advantages to Trading in FOREX
Liquidity - Because of the size of the Foreign Exchange Market, investments are extremely liquid. International banks are continuously providing bid and ask offers and the high number of transactions each day ensures there is always a buyer or a seller for any currency.
Accessibility - The market is open 24 hours a day, 5 days a week. The market opens Monday morning Australian time and closes Friday afternoon New York time. Trades can be done on the Internet from your home or office.
Open Market - Currency fluctuations are usually caused by changes in national economies. News about these changes is accessible to everyone at the same time--there can be no 'insider trading' in FOREX.
No Commission - Brokers earn money by setting a 'spread'--the difference between what a currency can be bought at and what it can be sold at.
How does it work?
Currencies are always traded in pairs: the US dollar against the Japanese yen, or the English pound against the euro. Every transaction involves selling one currency and buying another, so if an investor believes the euro will gain against the dollar, he will sell dollars and buy euros.
The potential for profit exists because there is always movement between currencies. Even small changes can result in substantial profits because of the large amount of money involved in each transaction. At the same time, it can be a relatively safe market for the individual investor. There are safeguards built in to protect both the broker and the investor, and a number of software tools exist to minimize loss.
Handle Risks in Forex Trading
Forex Trading is a great opportunity to make money but the risks that lie beneath it are equally challenging. People therefore are reluctant to get involve in it. But what they don't realize is that risks are everywhere. Don't factories malfunction, or Stock market crash? Don't people lose their jobs when their companies are downsizing? So instead of losing out on the Forex trading Opportunity one would rather learn to deal with the risks. Wouldn't you agree? Learn to maintain your risk. And the best way to deal with risks in Forex trading is by way of educating oneself.
One of the best ways to minimize or avoid risks is to learn to identify a genuine Forex dealer. When you are trading in Forex market, you are 100% relying on the dealer's integrity for a getting you a fair deal. So be cautious about whom you are dealing with and do not forget to check the investment offer. Hire a trader whose business are legally regulated. This is the safest method to avoid forex scams, especially on the net.
Besides choosing the right Forex trader, learn to keep an eye on the ever fluctuating forex market and create a risk profile for yourself. This risk profile or placing of stop loss order will stop or prohibit the Forex dealer from taking risks that are beyond your financial means.
One more way to manage your risks is to trade without overleveraged. Forex dealers may suggest you to trade with high leverages since it mean more spread income for them. But don't fall prey to it unless you have in-depth knowledge and the risks involved. Of course there are bigger profits when you trade like that but even the losses are big and as a beginner you'd rather avoid gambling with your money and stick to risk management rules and learn to strike wise deals.
You can also put your skills on test by using the demo account which is provided free by dealers.
One of the best ways to minimize or avoid risks is to learn to identify a genuine Forex dealer. When you are trading in Forex market, you are 100% relying on the dealer's integrity for a getting you a fair deal. So be cautious about whom you are dealing with and do not forget to check the investment offer. Hire a trader whose business are legally regulated. This is the safest method to avoid forex scams, especially on the net.
Besides choosing the right Forex trader, learn to keep an eye on the ever fluctuating forex market and create a risk profile for yourself. This risk profile or placing of stop loss order will stop or prohibit the Forex dealer from taking risks that are beyond your financial means.
One more way to manage your risks is to trade without overleveraged. Forex dealers may suggest you to trade with high leverages since it mean more spread income for them. But don't fall prey to it unless you have in-depth knowledge and the risks involved. Of course there are bigger profits when you trade like that but even the losses are big and as a beginner you'd rather avoid gambling with your money and stick to risk management rules and learn to strike wise deals.
You can also put your skills on test by using the demo account which is provided free by dealers.
5 Steps for Successful Forex Trading
Looking to become a confident and successful Forex trader? The top 10% of all FOREX traders use the following steps and are of the few who actually make money. Many of these steps are obvious and simple, but when overlooked, new traders can lose money quickly. One quick thing to remember is to start slow and trade at your level.
Step 1 - Get Yourself Ready To Trade
In my experience, many traders fail to properly prepare to become a trader. A trader is a profession, one that many people have sought a college degree. As a trader, you have selected a work from home job. You'll need to be self-motivated, be a self-starter and enjoy working independently. Many have found that getting up in the morning and getting ready as if they were going to a job helps them get ready to get to work.
Step 2 - Look over your last few trades
A successful trader keeps a journal of their trades. In the beginning, you'll want to keep track of all of your trades. Be as specific as possible and track why you entered and exited a trade and if you were near support or resistance. As you keep a journal, you'll be able to identify your trading pattern. By identifying your pattern, you'll be able to recognize the same mistakes you have made in the past. You will also be able to recognize some trading trends, yours and the FOREX market's.
Step 3 - Fundamental and Technical Analysis
Technical analysis refers to anything that is related to price action. The price itself, formulas, patterns, etc. There many tools that you can use; different indicators and charts. Choose one and be consistent with the one that you use. Don't' use MACD one night and RSI the next. Also, be consistent in the length of your moving averages and don't switch between simple and exponential. Use what makes the most sense to you and don't over analyze. One tip: for sure use Fibonacci Lines.
Fundamental analysis refers to anything other than price action. In the world of trading our case it means news. I look to see what piece(s) of news are being released that day and from that information determine what kind of volatility to expect in the upcoming session. This also helps me to determine which support and resistance levels to expect.
Step 4 - Money Management
This step is all about setting up a good money management system. Choose how you want to increase your trade size and be consistent. Those who change their path day after day tend to experience failure.
This is often when traders begin trading beyond their level. The key is to not trade on a live account until you have consistently made money in a demo account. A rule of thumb is to have made a profit consistently for two weeks. And, it is not consistent if you made $9,000 one day but lost money the other 10 days.
Step 5 - Make the Trade!!!
Now you are ready to make your trade. There are a couple of things to remember. You have the done your homework and know what to expect and what to look for. It's important to be patient and wait for your opportunity. Once you see the opportunity, enter your trade and place your stop order immediately. Then, place your profit target.
Remember to keep your journal and you will gather very valuable information over time. This will help you to continue to improve your trading skills.
Step 1 - Get Yourself Ready To Trade
In my experience, many traders fail to properly prepare to become a trader. A trader is a profession, one that many people have sought a college degree. As a trader, you have selected a work from home job. You'll need to be self-motivated, be a self-starter and enjoy working independently. Many have found that getting up in the morning and getting ready as if they were going to a job helps them get ready to get to work.
Step 2 - Look over your last few trades
A successful trader keeps a journal of their trades. In the beginning, you'll want to keep track of all of your trades. Be as specific as possible and track why you entered and exited a trade and if you were near support or resistance. As you keep a journal, you'll be able to identify your trading pattern. By identifying your pattern, you'll be able to recognize the same mistakes you have made in the past. You will also be able to recognize some trading trends, yours and the FOREX market's.
Step 3 - Fundamental and Technical Analysis
Technical analysis refers to anything that is related to price action. The price itself, formulas, patterns, etc. There many tools that you can use; different indicators and charts. Choose one and be consistent with the one that you use. Don't' use MACD one night and RSI the next. Also, be consistent in the length of your moving averages and don't switch between simple and exponential. Use what makes the most sense to you and don't over analyze. One tip: for sure use Fibonacci Lines.
Fundamental analysis refers to anything other than price action. In the world of trading our case it means news. I look to see what piece(s) of news are being released that day and from that information determine what kind of volatility to expect in the upcoming session. This also helps me to determine which support and resistance levels to expect.
Step 4 - Money Management
This step is all about setting up a good money management system. Choose how you want to increase your trade size and be consistent. Those who change their path day after day tend to experience failure.
This is often when traders begin trading beyond their level. The key is to not trade on a live account until you have consistently made money in a demo account. A rule of thumb is to have made a profit consistently for two weeks. And, it is not consistent if you made $9,000 one day but lost money the other 10 days.
Step 5 - Make the Trade!!!
Now you are ready to make your trade. There are a couple of things to remember. You have the done your homework and know what to expect and what to look for. It's important to be patient and wait for your opportunity. Once you see the opportunity, enter your trade and place your stop order immediately. Then, place your profit target.
Remember to keep your journal and you will gather very valuable information over time. This will help you to continue to improve your trading skills.
Automated Forex Trading (in another discription)
It's clear that to be successful in Forex trading people must take a serious attention, especially in monitoring the fluctuated currency rates. People should be smart about when to buy and sell the currency. Without this, this business would only be a way to lose money. Here's a piece of information about an automated software, which will help you get success in Forex trading. The software is called Automated Forex Trading.
An automated Forex trading is a tool or a software that conducts the work of Forex trading system automatically. This software can predict the rise or the fall of the currency rates, so that you are able to trade automatically without having to monitor the Forex markets continuously. Using this tool, an individual trader will be able to keep up with all the data and news, the non-stop schedules of the Forex market, and take the right decision what to do best.
The software can perform complex calculations quickly and easily, analyze large volumes of historical data, and conduct opening and closing orders directly. Some other benefits you will get from tool are as follow: You'll have less stressful and more profitable trading. As the system is used to buy and sell on the Forex markets at any time of the day, you can enjoy optimal trade and get on with the rest of your life.
The software is one of the best ways to make money from currency trading. It can save plenty of time, work to take advantage of the 24 hour currency markets. This can be the best choice for ones who want to succeed in FX trading.
But to ensure that you actually get profits, you have to learn the system, and customize the tool depends on your needs. You must get equipped with basic knowledge of the software and some trading skills. Choose the automated software with best customer service and easy solutions to the problems of the program. Find the facts from the customers reviews about the software, including product features and benefits, or even information about the prices and guarantees.
An automated Forex trading is a tool or a software that conducts the work of Forex trading system automatically. This software can predict the rise or the fall of the currency rates, so that you are able to trade automatically without having to monitor the Forex markets continuously. Using this tool, an individual trader will be able to keep up with all the data and news, the non-stop schedules of the Forex market, and take the right decision what to do best.
The software can perform complex calculations quickly and easily, analyze large volumes of historical data, and conduct opening and closing orders directly. Some other benefits you will get from tool are as follow: You'll have less stressful and more profitable trading. As the system is used to buy and sell on the Forex markets at any time of the day, you can enjoy optimal trade and get on with the rest of your life.
The software is one of the best ways to make money from currency trading. It can save plenty of time, work to take advantage of the 24 hour currency markets. This can be the best choice for ones who want to succeed in FX trading.
But to ensure that you actually get profits, you have to learn the system, and customize the tool depends on your needs. You must get equipped with basic knowledge of the software and some trading skills. Choose the automated software with best customer service and easy solutions to the problems of the program. Find the facts from the customers reviews about the software, including product features and benefits, or even information about the prices and guarantees.
Forex Trader : How to Become a Forex Trader ?
If you want to know how to become a Forex trader from home and make a valuable second income, then this article will point you in the right direction; simply follow the 3 simple steps enclosed and you can get on the road to Forex trading success.
First lets start with a simple fact - 95% of all traders lose money but they don't lose because they can't learn to trade, they lose because they make fatal errors in their approach. For example, a huge group of traders think they can get rich by making no effort and following a cheap robot but if these worked 95% of traders wouldn't lose money. To win you need to work smart and this leads me to my first steps to success.
Get the right Education.
You don't need to work hard or even be clever, you just need to use a simple Forex trading strategy. You can educate yourself about the markets in a week or two but don't fall for the myth, you can predict the market, you can't. You are simply trading the odds in Forex and that means, using a Forex strategy based on the following:
A simple Forex Trading Strategy based on the Reality of Price Change.
Your strategy should be based on just a few rules and parameters and should be very simple because - if you make it to complicated, it will have to many elements to break. Keep it nice and simple and trade the reality of price change and don't try and predict where prices may go.
A good strategy to use to trade Forex markets (which we have written on in other articles) is to follow and hold long term trends by buying breakouts to new highs. All the big trends start from breakouts and continue from them so, its a simple and timeless, strategy to seek long term gains with.
Getting a system together which can make money is the easy part, the hard part of Forex trading is learning to apply it with discipline.
Learning to Apply it with discipline
All traders have losses and you will face weeks of losses, it happens to the best traders so it will happen to you. You need to be prepared for this and keep losses small.
Most traders get annoyed at this as it hurts their ego so, they run losses, change strategies, or quit and of course, they never achieve success. You have to ride these periods out with discipline until profits come again and then you need to run them. Most Forex traders win less than 50% of the time but they make huge gains long term, because they keep their losses small and run their profits.
It sounds easy to trade with discipline but when your losing money and feeling stupid, its hard to keep your emotions out of your trading. The way to achieve a disciplined mindset is to you get a good Forex education and have confidence in what your doing.
As you can see, anyone can become a Forex trader from home if they want too. If want to achieve success, all you need to do is get the right education, get a simple system and trade it with rigid discipline; If you can do this long term Forex trading success can be yours.
First lets start with a simple fact - 95% of all traders lose money but they don't lose because they can't learn to trade, they lose because they make fatal errors in their approach. For example, a huge group of traders think they can get rich by making no effort and following a cheap robot but if these worked 95% of traders wouldn't lose money. To win you need to work smart and this leads me to my first steps to success.
Get the right Education.
You don't need to work hard or even be clever, you just need to use a simple Forex trading strategy. You can educate yourself about the markets in a week or two but don't fall for the myth, you can predict the market, you can't. You are simply trading the odds in Forex and that means, using a Forex strategy based on the following:
A simple Forex Trading Strategy based on the Reality of Price Change.
Your strategy should be based on just a few rules and parameters and should be very simple because - if you make it to complicated, it will have to many elements to break. Keep it nice and simple and trade the reality of price change and don't try and predict where prices may go.
A good strategy to use to trade Forex markets (which we have written on in other articles) is to follow and hold long term trends by buying breakouts to new highs. All the big trends start from breakouts and continue from them so, its a simple and timeless, strategy to seek long term gains with.
Getting a system together which can make money is the easy part, the hard part of Forex trading is learning to apply it with discipline.
Learning to Apply it with discipline
All traders have losses and you will face weeks of losses, it happens to the best traders so it will happen to you. You need to be prepared for this and keep losses small.
Most traders get annoyed at this as it hurts their ego so, they run losses, change strategies, or quit and of course, they never achieve success. You have to ride these periods out with discipline until profits come again and then you need to run them. Most Forex traders win less than 50% of the time but they make huge gains long term, because they keep their losses small and run their profits.
It sounds easy to trade with discipline but when your losing money and feeling stupid, its hard to keep your emotions out of your trading. The way to achieve a disciplined mindset is to you get a good Forex education and have confidence in what your doing.
As you can see, anyone can become a Forex trader from home if they want too. If want to achieve success, all you need to do is get the right education, get a simple system and trade it with rigid discipline; If you can do this long term Forex trading success can be yours.
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