Wednesday, December 19, 2007
More benefits
For new traders, brokers and other financial firms are greatly helpful to be trained in how to trade Forex and gain profit. Learning the ins and outs of the market can be fairly easy, if done so with the help of professional guidance and experts like an experienced broker or a professional financial firm. In addition, there are also other ways to get yourself accustomed to the ways of the Forex market, like opting for using free demo accounts during the initial period of trading. These accounts are available on net easily, and can be opened up to facilitate you, as a new trader, to get to know the market more. These practice accounts enable the new traders to trade with fake money, so as to not suffer real loss, in case of a bad deal.These practice accounts are an easy way to learn more about the currency crossing before opening and investing in a real account. Some of the real accounts also come with features helpful for the new traders, such as Mini Forex accounts. These accounts are great for the new traders to start off low. These enable a trader to make use of a lesser amount of money as their first investment. Using a smaller amount for an initial investment decreases the risk of losing a great amount of money in case the trader gets into a bad deal. Another reason why people opt for Forex to cross currencies is that foreign exchange with Forex gives its traders a higher leverage. Such high ratio of leverage allows the trader to trade for a huge amount of money, without actually needing to have it in cash. This helps the traders to make larger profits while maintaining their loss risk to as lowest as possible. In such situations, an investor can invest can invest $100 and make a deal for as much as $100,00 worth an amount. This increases the profits of the trader while keeping his loss to am minimum. The Forex market being one of the world’s biggest financial markets and making a trade of more than $1.5 trillion US dollar everyday, is a highly liquid market. With such a huge amount of trade going on in the market each day, traders and investors at Forex enjoy a large amount of flexibility. The Forex enables its traders and investors to move from one investment to another, never allowing them to get stuck at a deal. Being an “over the counter” market, traders and investors have the choice to trade Forex using different means of communication too. Be it Internet or telephone, a trader can suit himself when it comes to trading currencies. Using internet, traders can fix their exit points through stop-loss order and take-profit order, by which, if the trade is not going according to their expectations, they can set the trading platform to stop the trade and close the deal, thus facilitating the trader to lose less money. Another advantage of using Forex for trading currencies or currency crossing is that Forex is a 24 hours market. Being always open an accessible to a trader, it is easier for an investor to trade any time feasible to him/her. While in a stock market, it is not an option with the trader to choose a trade timing that suits him, with Forex, he can very easily devote time to his business or job, while keeping the rest of his free time to trade sitting at home. Forex does not have a closing time and is open 24 hours, 5.5 days a week. This is not true of the foreign exchange currency. Trading or crossing currencies with Forex can also facilitate the traders and investors to trade with a minimum risk, in both, rising and falling markets. Such is not the case with Stock markets, in which, the traders can only trade when the market is on rise. This is also amongst the major benefits provided by Forex to its investors. The Forex traders and investors are capable of making large profits with their deals, no matter whether a currency price is rising or falling. Currency crossing in the correct direction, keeping in mind the past trends of the market can always enable a trader to make profits.
Benefits of Currency Crossing through Forex
A trader or a non trader, anyone who has a little bit knowledge about Forex trading would have surely wondered within themselves, the need for exchanging currencies. And if so, then why through Forex? First of all, let’s talk about the need to exchange currencies or cross currencies. Let’s take the example of a businessman, who needs to conduct oversees or international deal with a supplier. Now, he needs to pay the supplier in foreign currency. What he owns for now are US dollars and what he needs to trade are Japanese yens. So, the trader would want to do so through Forex. Many investors opt for Forex to trade currencies and make a profit. At Forex, a particular currency can be bought at a low exchange price, and then, once its prices rise up, can be sold off in the market to gain profit. When an investor or individual wants to trade one type of currency for another, it is called exchanging currency, or crossing currency. Currency crossing is the main goal of trading on the Forex. Exchanging or crossing currencies through Forex is one of the most advantageous ways to making profit for many investors. The Forex, unlike any other financial market, is extremely volatile and liquid, with much over 1.5 trillion $US being traded in it everyday. Although all the currencies are traded at Forex, some of the currencies manage to be on top of the list and are most traded for. These are the Euro, US dollar and the Japanese yen. If new to the trading business, learning to trade foreign exchange, can be exciting yet, time consuming and tough during initial times. To trade successfully in the Forex market, it is vital to be aware of the ways of market. Its flows, its rise and falls, its jargon and its past patterns and trends. It is a complicated procedure at times, to learn trading Forex. The major factor than can work in your advantage is to gain as much knowledge of the Forex trade as you can, thoroughly working on learning how things work in here. Also need to be known are the various advantages and disadvantages of trading Forex, as this will help you prepare yourself for what can come next. You should always weigh properly, the benefits of Forex because of which, you are planning to enter the market and trade, at the first place.
Introduction to Trading Forex
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 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 1.5 trillion every day. This is more than one hundred times the daily trading on the NYSE (New York Stock Exchange). Most forex trading is speculative, with only a few percent 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 OutrightsFor 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 MarginTrading 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 $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?
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 liquidityThe 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 commissionsThe 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 LeverageLeverage (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 marketsSince 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 U.S. 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 and take your profits. The opposite trading scenario would occur if the EURUSD appreciates.
Important Forex Trading Terms
SpreadThe 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 va 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.
Trading Scenario – Trading Rising PricesIf you believe that the Euro will strengthen against the dollar you'll want to buy Euro now and sell it back later at a higher price.
• You buy Euro
We quote EURUSD at Bid 0.9875 and Ask 0.9878, which means that you can sell 1 Euro for 0.9875 USD or buy 1 Euro for 0.9878 USD .In this example you buy Euro 100,000, at the quote price of 0.9878 (ask price) per Euro.
• The market moves in your favor
Later the market turns in favour of the Euro and the EURUSD is now quoted at Bid 0.9894 and Ask 0.9896.
• Now you sell your Euro and get the profit
You sell Euro at a Bid price of 0.9894.
• The profit is calculated as follows
Sell price-buy price x size of trade (0.9894 minus 0.9878) multiplied by 100.000 = USD 140 Profit (Note that the profit or loss is always expressed in the secondary currency)
Trading Scenario – Trading Falling Prices If, on the other hand, you believe that the Euro will weaken against the dollar, you'll want to sell EURUSD .
• You sell Euro
We quote EURUSD at a Bid price of 0.9875 and Ask price of 0.9880 and you decide to sell Euro 100,000 at a Bid price of 0.9875.
• The market moves in your favour
The Euro weakens against the dollar and the EURUSD is now quoted at bid 0.9744 and ask 0.9749.
• Now you buy back your Euro
You buy EUR at an ask price of 0.9749.
• Your Profit/loss is then
Sell price-buy price x size of trade (0.9875 minus 0.9749) multiplied by 100.000 = USD 1260 Profit Remember that trading EUR 100,000 as we have done in our examples, does not mean that you have to put up Euro 100,000 yourself. On a 2% margin means that you have to deposit 2.0% of Euro 100,000, which is Euro 2,000 on margin as a guarantee for the future performance of your position.
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 1.5 trillion every day. This is more than one hundred times the daily trading on the NYSE (New York Stock Exchange). Most forex trading is speculative, with only a few percent 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 OutrightsFor 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 MarginTrading 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 $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?
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 liquidityThe 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 commissionsThe 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 LeverageLeverage (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 marketsSince 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 U.S. 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 and take your profits. The opposite trading scenario would occur if the EURUSD appreciates.
Important Forex Trading Terms
SpreadThe 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 va 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.
Trading Scenario – Trading Rising PricesIf you believe that the Euro will strengthen against the dollar you'll want to buy Euro now and sell it back later at a higher price.
• You buy Euro
We quote EURUSD at Bid 0.9875 and Ask 0.9878, which means that you can sell 1 Euro for 0.9875 USD or buy 1 Euro for 0.9878 USD .In this example you buy Euro 100,000, at the quote price of 0.9878 (ask price) per Euro.
• The market moves in your favor
Later the market turns in favour of the Euro and the EURUSD is now quoted at Bid 0.9894 and Ask 0.9896.
• Now you sell your Euro and get the profit
You sell Euro at a Bid price of 0.9894.
• The profit is calculated as follows
Sell price-buy price x size of trade (0.9894 minus 0.9878) multiplied by 100.000 = USD 140 Profit (Note that the profit or loss is always expressed in the secondary currency)
Trading Scenario – Trading Falling Prices If, on the other hand, you believe that the Euro will weaken against the dollar, you'll want to sell EURUSD .
• You sell Euro
We quote EURUSD at a Bid price of 0.9875 and Ask price of 0.9880 and you decide to sell Euro 100,000 at a Bid price of 0.9875.
• The market moves in your favour
The Euro weakens against the dollar and the EURUSD is now quoted at bid 0.9744 and ask 0.9749.
• Now you buy back your Euro
You buy EUR at an ask price of 0.9749.
• Your Profit/loss is then
Sell price-buy price x size of trade (0.9875 minus 0.9749) multiplied by 100.000 = USD 1260 Profit Remember that trading EUR 100,000 as we have done in our examples, does not mean that you have to put up Euro 100,000 yourself. On a 2% margin means that you have to deposit 2.0% of Euro 100,000, which is Euro 2,000 on margin as a guarantee for the future performance of your position.
Monday, December 17, 2007
A Pioneer in Currency Trading Shares his Vast Knowledge in New Coursebook
pioneer in currency trading shares his vast knowledgeThe Forex Trading Course is a practical, hands-on guide to mastering currency trading. This book is designed to build an aspiring trader's knowledge base in a step-by-step manner-with each major section followed by a thorough question-and-answer section to ensure mastery of the material. Written in a straightforward and accessible style, The Forex Trading Course outlines a practical way to integrate fundamental and technical analysis to identify high probability patterns and trades; and reveals how to develop a trading plan and appropriate strategies for different size trading accounts; how to control emotions and use emotional intelligence to improve trading performance; and much more. Filled with in-depth insight and practical advice, The Forex Trading Course will prepare readers for the realities of currency trading, and help them evolve and achieve success in this dynamic market.The Forex Trading Course is a practical, hands-on guide to mastering currency trading. The workbook is designed to build an aspiring traders knowledge in a step-by-step manner with each major section followed by a thorough question-and-answer section to ensure mastery of the material. The major sections include:(1) an explanation of the economic forces driving the currency market and how a trader should interpret events to develop a fundamental outlook(2) how to use technical analysis to time trades(3) how to master and control emotions that are involved in trading(4) how to develop a trading plan and appropriate strategies for different sized trading accounts(5) how to prepare completely for the realities of trading, prior to putting money at risk.The goal of the book is to give a trader the knowledge and experiences required to be completely prepared to trade.About the author:Abe Cofnas has been the forex trading columnist for Futures magazine since 2001. He formed one of the first Web-based interactive training sites devoted to forex trading—in 2001 as well. Cofnas is also the founder of a forex education and entertainment company.
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