Thursday, January 24, 2008
Forex reserves' purpose
Reserves allow a central bank to purchase the issued currency, exchanging its assets to reduce its liability. The purpose of reserves is to allow central banks an additional means to stabilize the issued currency from excessive volatility, and protect the monetary system from shock, such as from currency traders engaged in flipping. Large reserves are often seen as a strength, as it indicates the backing a currency has. Low or falling reserves may be indicative of an imminent bank run on the currency or default, such as in a currency crisis. Central banks sometimes claim that holding large reserves is a security measure. This is true to the extent that a central bank can prop up its own currency by spending reserves. But often, very large reserves are not a hedge against inflation but rather a direct consequence of the opposite policy: the bank has purchased large amounts of foreign currency in order to keep its own currency relatively cheap.
Difference Between Spot and Futures in Forex
Before a description of retail trading, it is important to understand the difference between the Spot and Futures markets. Futures are generally based on contracts, with typical durations of 3 months. Spot, on the other hand, is a two-day cash delivery. While the Futures markets was created to hedge out risks and speculate on future market conditions, Spot was created to allow actual cash deliveries. Spot developed a two-day delivery date in order to give those transporting the actual cash a window of time to receive it. While in theory there still is a two-day delivery date imposed after a Forex transaction, this is effectively no longer used. Every day, at 5 pm EST (the predetermined end of the trading day) Spot positions are closed and then reopened. This is done in order to guarantee an unlimited timeline for delivery.
Tuesday, December 18, 2007
Factors affecting currency trading
The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses as much of
what is going on in the world at any given time as foreign exchange.
Economic factors
Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy
Economic conditions include:
Balance of trade levels : The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.
Inflation levels: Typically, a currency will lose value if there is a high level of inflation in the country or if inflation levels are perceived to be rising. This is because inflation erodes purchasing power, thus demand, for that particular currency.
what is going on in the world at any given time as foreign exchange.
Economic factors
Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy
Economic conditions include:
Balance of trade levels : The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.
Inflation levels: Typically, a currency will lose value if there is a high level of inflation in the country or if inflation levels are perceived to be rising. This is because inflation erodes purchasing power, thus demand, for that particular currency.
Saturday, November 17, 2007
Learn Forex Currency Trading Online
Forex is a true 24-hour market, open continuously from 5:00pm ET on Sunday to 5:00 pm on Friday. With three distinct trading sessions in the US, Europe and Asia, you can trade on your own schedule and immediately respond to breaking financial news, whether it will be morning, noon or night. So let's discuss some of the benefits that might make you want to go and learn Forex currency trading online.
There are many benefits and advantages to trading Forex. Here are just a few reasons why so many people are choosing this market: no commissions and exchange fees, direct trading with no middlemen, no fixed lot size, low transaction cost, a 24-hour market, no single entity (not even a central bank) can control the market, leverage, high liquidity, mini/micro trading, free demo accounts, news, charts, and analysis. Not to mention that you're your own boss, you decide which days you wish to work, and you don't have to deal with neither customers, nor employees.
How is it all possible? In spot Forex, brokers are compensated for their services through the bid-ask spread, so you don't need to pay any additional fees. The retail transaction cost (the bid/ask spread) is built into the bid/ask spread and is usually less than 0.1 percent under normal market conditions. Dealing spreads of as low as 3 pips (.0003) are now available in currency trading. This may sound compelling enough however, you must remember that to become a successful trader you will still need to seriously learn Forex currency trading online for at least 6 month.
You can also determine your own lot size which allows to trade even with small accounts, starting as low as $250. Because of leverage, in Forex, a small margin deposit can control a much larger total contract value. For example, Forex brokers offer 200 to 1 leverage (200:1), which means that, say, a $50 dollar margin deposit would allow a trader to buy or sell $10,000 worth of currencies and so on. But leverage is a double-edged sword that can sometimes result in large losses if used without proper risk management.
There are many benefits and advantages to trading Forex. Here are just a few reasons why so many people are choosing this market: no commissions and exchange fees, direct trading with no middlemen, no fixed lot size, low transaction cost, a 24-hour market, no single entity (not even a central bank) can control the market, leverage, high liquidity, mini/micro trading, free demo accounts, news, charts, and analysis. Not to mention that you're your own boss, you decide which days you wish to work, and you don't have to deal with neither customers, nor employees.
How is it all possible? In spot Forex, brokers are compensated for their services through the bid-ask spread, so you don't need to pay any additional fees. The retail transaction cost (the bid/ask spread) is built into the bid/ask spread and is usually less than 0.1 percent under normal market conditions. Dealing spreads of as low as 3 pips (.0003) are now available in currency trading. This may sound compelling enough however, you must remember that to become a successful trader you will still need to seriously learn Forex currency trading online for at least 6 month.
You can also determine your own lot size which allows to trade even with small accounts, starting as low as $250. Because of leverage, in Forex, a small margin deposit can control a much larger total contract value. For example, Forex brokers offer 200 to 1 leverage (200:1), which means that, say, a $50 dollar margin deposit would allow a trader to buy or sell $10,000 worth of currencies and so on. But leverage is a double-edged sword that can sometimes result in large losses if used without proper risk management.
Day trading forex market behaviour
Technology advances like the internet have spawned a new craze, where anyone with a secure internet connection ............
Technology advances like the internet have spawned a new craze, where anyone with a secure internet connection prepared to undertake a small amount of training can engage in trading foreign exchange on the forex market.
Just as a day trader will closely track stock price movements on the Dow Jones Industrial Average, all over the world forex traders monitor currency fluctuations in a similar fashion.
Forex traders have the aim of using the smallest amount of one currency, say the US dollar, to purchase another currency like the British Pound. If supply of the pound lessens in a busy market, it will cost more dollars to buy pounds, and the forex trader hopes to sell their pounds at a higher than their purchase price. In many respects, this type of trading behaviour is very similar to trading in stocks, where the aim of nearly all traders is to buy low and sell high.
The trading process works under a bid/ask system. In the above example, a forex trader might bid 10 dollars in return for 5.7 British pounds, and the seller of the pounds could be asking 11 dollars for the same amount of pounds. If the seller accepts the bid, the trader then hopes the pound continues to increase in price, so that when time comes to sell, they can get in excess of the 10 dollars initially paid.
As only registered traders have access to this auction process, most online speculators will trade through a bank or broking house. Such brokerages charge a commission for facilitating the trades, and forex traders should consider these transaction costs when calculating their selling offer when time comes to exit their position, as this will influence their profit margin.
Technology advances like the internet have spawned a new craze, where anyone with a secure internet connection prepared to undertake a small amount of training can engage in trading foreign exchange on the forex market.
Just as a day trader will closely track stock price movements on the Dow Jones Industrial Average, all over the world forex traders monitor currency fluctuations in a similar fashion.
Forex traders have the aim of using the smallest amount of one currency, say the US dollar, to purchase another currency like the British Pound. If supply of the pound lessens in a busy market, it will cost more dollars to buy pounds, and the forex trader hopes to sell their pounds at a higher than their purchase price. In many respects, this type of trading behaviour is very similar to trading in stocks, where the aim of nearly all traders is to buy low and sell high.
The trading process works under a bid/ask system. In the above example, a forex trader might bid 10 dollars in return for 5.7 British pounds, and the seller of the pounds could be asking 11 dollars for the same amount of pounds. If the seller accepts the bid, the trader then hopes the pound continues to increase in price, so that when time comes to sell, they can get in excess of the 10 dollars initially paid.
As only registered traders have access to this auction process, most online speculators will trade through a bank or broking house. Such brokerages charge a commission for facilitating the trades, and forex traders should consider these transaction costs when calculating their selling offer when time comes to exit their position, as this will influence their profit margin.
How Forex Trading Can Earn You A Living?
For your information, Forex Trading is the LARGEST market in the world. Yes! You read it right, it’s larger than stocks, future, options combined together. Forex Trading have over USD1.3 trillion per day and the amount is increasing now and then.
Forex Trading or currency trading or foreign exchange (short form for forex) simply means buy or sell a pair of currency. In forex trading, we buy or sell in a pair of currency. For example, in EUR/USD pair, if you’re buying this pair, you’re buying EURO while selling USD and the other way around.
The best thing about forex trading is that you earn no matter the market is up or down provided you are in the same side of the market movement.
You might be asking, is it easy to trade forex? Well, it’s simple yet not easy. However, if you have certain knowledge about it, you will have a handsome of profit. Warren Buffet gaining big profit in forex!
If you’ve been to bank or watch the business time tv news, you’ll notice that there are figures like 1.2345 up or down. That’s the price of currency pair. One move of the last digit (we called it “pip”) is either approximately $1 or $10. Everyday the average of the price move is around 70 to 130 pips.
Forex Trading or currency trading or foreign exchange (short form for forex) simply means buy or sell a pair of currency. In forex trading, we buy or sell in a pair of currency. For example, in EUR/USD pair, if you’re buying this pair, you’re buying EURO while selling USD and the other way around.
The best thing about forex trading is that you earn no matter the market is up or down provided you are in the same side of the market movement.
You might be asking, is it easy to trade forex? Well, it’s simple yet not easy. However, if you have certain knowledge about it, you will have a handsome of profit. Warren Buffet gaining big profit in forex!
If you’ve been to bank or watch the business time tv news, you’ll notice that there are figures like 1.2345 up or down. That’s the price of currency pair. One move of the last digit (we called it “pip”) is either approximately $1 or $10. Everyday the average of the price move is around 70 to 130 pips.
Tuesday, October 16, 2007
Online Forex Trading
The forex trading is generally done using fundamental analysis or technical analysis or combination of both. For short term trading (day trading, swing trading) technical analysis is the best. My trading style is to use below mentioned indicators -
1. Support and resistance levels - In Online forex trading support and resistance areas tell key areas from where the market direction generally reverses. The more number of times the market reverses from that point, the more stronger that area is. So, definitly if the resistance and support area is broken, the market continues going in that direction.
2. MACD - Moving Average Convergance & Divergance in online forex trading tells the momentem of the moving averages with respective to each other. When lets say that market is making higher highs, but MACD is not, that suggests that the market is losing its steam and may move in other direction.
3. Candlesticks - These are the units that indicate what markets may do next. As I mentioned in earlier post, there are books and books written on Candlesticks and its patterns.
4. Double bottom and double top - A variation ofsupport and resistance level. Generally when a market tests a support/resistance area twice, if it cannot break that area, it moves in the opposite direction. So generally when a double top/bottom are formed, its a good time to enter a trade.
1. Support and resistance levels - In Online forex trading support and resistance areas tell key areas from where the market direction generally reverses. The more number of times the market reverses from that point, the more stronger that area is. So, definitly if the resistance and support area is broken, the market continues going in that direction.
2. MACD - Moving Average Convergance & Divergance in online forex trading tells the momentem of the moving averages with respective to each other. When lets say that market is making higher highs, but MACD is not, that suggests that the market is losing its steam and may move in other direction.
3. Candlesticks - These are the units that indicate what markets may do next. As I mentioned in earlier post, there are books and books written on Candlesticks and its patterns.
4. Double bottom and double top - A variation ofsupport and resistance level. Generally when a market tests a support/resistance area twice, if it cannot break that area, it moves in the opposite direction. So generally when a double top/bottom are formed, its a good time to enter a trade.
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