quarta-feira, 21 de maio de 2008

Forex Money Management

Forex money management is one of the most important things you can learn before you actually begin making live trades.The money management principles discussed here will teach you how to avoid the costly mistakes many new traders make, often to the degree that they lose their entire investment on the first handful of trades.Psychology is really the most important factor to money management in forex. You have to be able to separate yourself from any emotional attachment you may have to your money. This is not very easy to do, but it works and it can be done.If you allow yourself to become emotional on a trade, you will not exit the trade properly, and this could mean holding on to a trade when you should have let it go, or letting go before the trade had a chance to turn profitable.First and foremost, you should consider leverage and risk. It is advisable that you never risk more than two percent of your account balance on any trade. However, some go further and allow for as much as ten percent, but never more than that. This gives you the ability to withstand market fluctuations, and if the trade goes bad, you still have money to try again. You should never operate under the assumption that you will profit from every trade. You should also plan for losses. Therefore, most traders will tell you that the best thing to do is to keep your gains large and your losses small. Develop your trading strategy around this idea.Keep track of your gains and losses. Keeping accurate and detailed records of your account activity will allow you to see whether or not the strategy is working, or if it needs to be re-built.Never go blindly into trading without a way to keep track of results. You will lose all of your funds and never understand why it happened.Finally, it is highly advisable that you first practice a strategy on a demo account. Nearly all brokers offer a virtual account whereupon you make trades in real-time, but with imaginary money, so nothing is risked. This is the best way to test a strategy before you put your real money on the line.However, be careful, once again, of the psychology of trading. When you play with fake money, nothing is risked. When real money is on the line, you must not get emotional. If you do, you will find yourself with very different results, most likely losses, than you had with the demo account.

The Stock Market Index

How can you tell where you are if you don't know where you've been?
That's the question that spurred Charles H. Dow (1851 - 1902) over a century ago to devise a simple way to chart the progress of the stock market.
Each stock exchange has at least one "index" for measuring day-to-day as well as long-term activity. These indexes (or indices) are samplings of the stocks trading on their respective exchanges.
Indices are used to measure and compare general market performance, but some are more representative of the overall market than others.
Indices tend to have different biases and this should be kept in mind when making comparisons. For example, most indexes are weighted towards large companies, and may not accurately indicate how small and medium-sized firms are faring.
Charles H. Dow first unveiled his industrial stock average on May 26, 1896. At that time the stock market was not highly regarded.
Stocks were not considered as safe investments because speculators and corporate raiders did their best to stage-manage prices. Stocks moved on tips and gossip because solid information was hard to come by.
Today, stocks are considered as sound investment instruments. The circle of investors has widened to millions of everyday working people. Information to guide them in their investment decisions is abundantly available.
The Dow Jones Industrial Average played a role in bringing about this tremendous change. One hundred years ago, people found it difficult to keep track of the daily rising, falling or treading water volatility of prices.
Charles Dow devised his stock average to make sense out of this confusion. He compared his average to placing sticks in the beach sand to determine, wave after successive wave, whether the tide was coming in or going out.
If the average's peaks and troughs rose progressively higher, then a bull market prevailed; if the peaks and troughs dropped lower and lower, a bear market was on.
It seems simplistic nowadays with myriad market indicators, but late in the Nineteenth Century it was like turning on a powerful new beacon that cut through the fog!
The average provided a convenient benchmark for comparing individual stocks to the course of the market and comparing the market with other indicators of economic conditions
The index differentiates the stock market's long-term trends from short-term fluctuations and provides the means for the ordinary investor to follow the broad market.
Weighting the Indices
An index may also be classified according to the method used to determine its price.
In a price weighted index such as the Dow Jones Industrial Average, the price of each component stock is the only consideration when determining the value of the index.
Thus, price movement of even a single security will heavily influence the value of the index even though the dollar shift is less significant in a relatively highly valued issue, and moreover ignoring the relative size of the company as a whole.
In contrast, a market-value weighted or capitalization-weighted index such as the Hang Seng Index factors in the size of the company.
Thus, a relatively small shift in the price of a large company will heavily influence the value of the index.
In a market-share weighted index, price is weighted relative to the number of shares, rather than their total value.
Traditionally, capitalization or share-weighted indices all had a full weighting i.e. all outstanding shares where included.
Recently, many of them have changed to a float-adjusted weighting which helps indexing.

Forex Guide

The Forex market is a massive market involving over $1trilion dollars traded every day, offering outstanding opportunities for the intrepid private investor.By timing investments correctly, and by using the leveraged nature of Forex investments to one’s advantage, the private investor can enjoy substantial gains on the back of a relatively modest cash outlay. While Forex is huge, easily dwarfing other global markets such as equities and commodities, private investors make up a tiny proportion of this market.This is because central bankers, commercial and investment banks, and hedge funds such as the Quantum fund, which is managed by George Soros, all speculate with billions of dollars on a regular basis.The private investor, therefore, faces formidable competition and just as there are opportunities for substantial profits, losses can be equally dramatic.Since all currencies are priced relative to each other, an increase in the value of one currency means that, by definition, another currency must have fallen in value. This makes the Forex market inherently more risky than other markets, which are expected to produce long term growth in value.The Forex market is also relatively new, only emerging after the collapse of the Bretton Woods system of fixed exchange rates in 1971.According to the trade association, International Financial Services London, average daily global turnover in traditional foreign exchange market transactions totalled $2.7 trillion in April 2006. This ranks the Forex market at several times the size of the combined daily turnover of the world's equity markets.

Reading The Money Markets

While lending rates in the UK are set by the Bank Of England, and revised as and when applicable at their regular monthly meetings, there are a few indicators to help forecast any imminent interest rate changes. While to the public eye these interest rate decisions happen overnight, upon further investigation the markets are very much in tune with potential changes.

As well as the economic outlook for the UK, which is more of a longer term indicator for interest rate movements, it is the currency and the money market which will give you the best short term indicator.

FOREX: Money Markets

The money markets are basically the commercial side of the financial industry, the area where lenders and borrowers are brought together. Via a number of different means, the money markets are very sensitive to what is going on at ground level with regards to the economy, outlook, prospects, etc.

These means include, rumblings form contacts at the Bank of England and actual lending transactions from the Bank Of England - which seem to follow certain patterns prior to interest rate changes.

Seasoned market observers are able to read the signs, and you will very often see “money market rates” moving away form Base Rates, and indicating the future direction of rates.

Currency Markets

Currency markets are basically the basis for UK companies trading abroad, and foreign companies trading in the UK. These rates can have a major impact on local currency denominated profits when UK companies convert back to sterling and overseas companies convert back their own currency.

While the majority of figures which are announced in the UK press refer to the UK economy, overseas inward and outward investment is vital to the success of the domestic UK economy. It is therefore vital the currency rates are supported in order to arrive at the “correct” optimum level. The level which allows UK companies to be competitive overseas, and also encourages foreign investment into the UK.

Just like the money markets, the currency markets are also very sensitive to actual and potential changes in UK base rates, and currency rates are often prone to movement ahead of changes - offering another useful indication.

To the naked eye it may seem that interest rate changes are decided at each monthly meeting, when in fact they have probably been materialising for months, only requiring final confirmation. The transparency of economic data now a days has allowed a number of market observers to develop an understanding of the signs associated with interest rate changes.

Why trade in foreign currency exchange market?

Why trade Forex instead of stocks, futures, commodities, or options? Why more and more people nowadays started trading Forex at home? Perhaps the list of advantages in Forex trading has the answer.

In this chapter of Forex 101 Classroom, we will take a look on advantages in Forex trading.

Advantages in Forex currency trading

Equal Prospective in Rising or Falling Market Trend

There is no structural bias to the market and there are no restrictions on short selling in FX market. Trading in Forex gives you an equal prospective in rising and falling market.

As trades are always done in pair of currency pairs, Forex traders can always find chance to make money in anytime, regardless on the fall or rise period of one single country currency.

Trade Forex 24 hours a day

Forex market never sleeps. In Forex trading, you do not need to wait the market to open, you can always response to world latest movement and news immediately.

Every Sunday 5.00pm in New York, Forex market starts its week from Sydney, followed by Tokyo, Singapore, Hong Kong, London, and New York. In Forex tradng, you can always response to the market trend a lot faster than in any other trading market.

Also, with the flexibility of Forex market trading time, you can work on your trade in Forex during your free time. This means you can start small and work as part time trader before going full time on FX trading.

High Leverage Margin

Forex brokers offer trade margin of 50, 100, 150, or even 200 to 1 of trade margin.

Forex traders often find themselves controlling a huge sum of money with little cash outlay on the table. For example, a $1,000 in a 150:1 Forex account will gives you the purchase power of $150,000 in the currency market.

While certainly not for everyone, the substantial leverage available from online currency trading firms is a powerful, moneymaking tool. Rather than merely loading up on risk as many people incorrectly assume, leverage is essential in the Forex market.

This is because the average daily percentage move of a major currency is less than 1%, whereas a stock can easily have a 10% price move on any given day.

Table below demostrate how a high trading margin can impact on the trades ROI.

FOREX-Euro hits 1-month high vs dollar on oil, rates

OKYO, May 22 (Reuters) - The euro hit a one-month high against the dollar on Thursday after the Federal Reserve cut its 2008 growth forecast and crude oil's surge to fresh record highs fuelled fears of the U.S. economy falling into stagflation.

The dollar, as well as the euro and other high-yielding currencies, also took a hit against the yen as global stock markets tumbled on soaring oil prices, prompting risk aversion among investors and unwinding of carry trades.

"With the Dow stock average falling sharply for two days in a row, investors have felt reluctant to take risks," said a trader at a Japanese bank.

He said that now is the time for investors to buy back the yen after they used the low-yielding currency to pick up high yielders such as the New Zealand dollar.

Although minutes of the Fed's April 29-30 policy meeting, that landed on Wednesday, highlighted worries about U.S. inflation and signaled more interest rate cuts were unlikely, it was insufficient to halt the dollar's slide.

After crude oil climbed in the previous session, oil extended gains on Thursday to rise above $135 CLc1 for the first time.

The U.S. dollar dipped 0.2 percent to a one-week low of 102.78 yen on electronic trading platform EBS, extending falls below 102.97 yen touched overnight.

The euro rose as far as $1.5802 on EBS, its highest since April and closing in on a record peak above $1.60 hit last month.

Fed Minutes Suggest Pause In Rate Cuts

The Federal Reserve hinted in the minutes from its April FOMC meeting that it will not be cutting rates again in the near future, although it expects weak economic times ahead. The minutes, released Wednesday, include higher employment and higher inflation forecasts in part from surging commodity prices. The Fed also lowered its growth forecast, although it suggested the worst of the credit crunch may have passed.

In the minutes from the April meeting, which took place on the 29th and 30th, the Fed said that only a significant weakening of the economic outlook should move policy makers to further cut rates. In April Bernanke & Co. cut 25 basis points off the federal funds rate, bringing it to 2 percent. For the third consecutive meeting the decision to cut rates was not unanimous, with Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser dissenting in favor of no change. The minutes revealed that the decision to cut was a "close call."

Lingering problems in the housing and credit markets along with soaring energy prices contributed to the cut in the Fed's growth forecast. In February, the Fed had forecast gross domestic product growth between 1.3 and 2 percent. The Fed slashed that forecast at the April meeting, now predicting GDP growth between 0.3 percent and 1.2 percent in 2008.

They are also expecting higher unemployment, between 5.5 percent and 5.7 percent this year. Previously, the upper end of the Fed's forecast had unemployment set at 5.3 percent.

Rather than continue to lower interest rates, the Fed will wait and see the impact of its rate cuts - which has lowered the federal funds rate by 325 basis points since September - combined with the economic stimulus. Inflation was clearly an area of concern, as rising food and energy prices that have boosted headline inflation threaten to trickle down to push up core inflation.

Inflation is now expected in the range of 3.1 to 3.4 percent this year, a full percentage point higher than the old forecast of between 2.1 percent to 2.4 percent in 2008.

"Most members viewed the decision to reduce interest rates at this meeting as a close call," the minutes read. "Although downside risks to growth remained, members were also concerned about the upside risks to the inflation outlook, given the continued increases in oil and commodity prices."

In keeping with recent comments from several Federal Reserve officials, the FOMC expects that economic activity will pick up in the second half of the year. Although many have predicted that the pick-up will still leave growth quite sluggish, by 2009 the Fed is expecting the impact of its interest rate cuts and the economic stimulus to normalize GDP.

Dollar Suffers Broadly As Oil Hits $133, Fed Minutes Offer Bleak Outlook

The dollar remained in retreat versus a basket of major currencies on Wednesday as US stocks slumped and oil prices surged above $133, fueling inflation fears.

The minutes of the April FOMC meeting revealed Wednesday afternoon that the Federal Reserve saw weak economic times ahead including higher unemployment and higher inflation in part from surging commodity prices, but it suggested it remain on hold even in the face of negative growth.

The greenback plunged to a new monthly low against the euro, moving closer to its record trough from earlier this year. The dollar dropped to 1.5776 by 3 pm ET, down more than a penny from its early levels. The buck has been on the defensive against the euro this week amid speculation the interest rate gap between the US and euro zone will not narrow in the near future.

Germany's business climate index unexpectedly climbed to 103.5 in May from 102.4 in April, the Munich-based IFO research institute revealed Wednesday. Economists had expected the index to drop to 102 in the month of May.

The dollar stayed near a 2-week low from the previous session against the sterling, giving back its early gains to close near 1.97. The minutes of the Bank of England's May rate-setting session showed that the Monetary Policy Committee voted 8-1 to maintain the bank rate at 5%. The session was held on May 7 and 8.

The minutes said most members were of the view that a rate cut in May would make it more difficult to keep inflation expectations in line with target.

The dollar continued to backtrack versus the yen, slipping to a week and a half low of 103. Against its Canadian counterpart, the dollar plunged to a 2-month low of .9817, hurt especially by soaring oil prices. The greenback also came under heavy pressure versus the Swiss franc, dropping to a monthly low of 1.0262.

What Is More Important In Forex Than Making Money?

I haven't been able to make any progress monetarily in about a month. I'm up about 4% this month but breaking my account balance all-time high has been a struggle. I'm pretty much stuck where I was around this time last month. I'm not all that concerned and shouldn't be considering I was preaching patience a couple of days ago. It's just that everytime I open my trading platform, the account balance is just staring me in the face.

It's more important that I progress as a risk-aversed trader. For newer traders, it's very important for you to understand that learning methods to control your risk should be a priority. Making gains monetarily is obviously important but making gains and strides elsewhere are more important. When I first started trading mostly with demo accounts, I had some unbelievably profitable trades but my strategies were random and my risk and leverage too high. A lot of this is just pure luck and not going to take you to the next level. Your account balance shouldn't be used as a guage for success. Some questions to ask yourself to guage your success may be:

Have you managed to minimize your risk and maximize your reward?

Have you maintained consistency?

Have you been able to control your emotions?

Have you developed a complete trading system that you've been able to follow without deviation?

If you haven't been profitable, have you at least been able to turn those gushing drawdowns into slow bleeders?

If you're new to trading forex or have been trading for a couple of years, the #1 goal is to stay in the game as long as you can. I've talked to many traders over the years and many of them have been in and outers. They'll jump in head first, blow up multiple accounts, and jump out never to be heard from again. There are other traders I've known who couldn't consistently turn a profit and instead turned into mentors or forex marketers. Heed caution... There are also others who couldn't stand the non-regulation of forex and went back to trading futures or stocks. There are a couple traders still around since I started but I can count them on one hand. It takes years to become a trader and I can't even say that for certain. I'm still not there but I'm still around and giving myself at least 5 years. If it doesn't work out for me or you after 5 years, just think of the countless people who have gone to college and have never entered into the field of their degree.

Forex Market

Trading information for beginners

If you’re a new to the forex (foreign exchange) market, you probably have a lot of questions. Making money in a global currency market is an exciting prospect; you’re probably wondering how, and what you need to get started. A lot of information on the internet is geared toward the knowledgeable trader who has at least experienced the stock market. Not everyone has the benefit of Wall Street experience. We are here to help you out if you’re not all that stock savvy and don’t have a financial background.

So, what is foreign currency exchange?

The basic term, foreign currency exchange, is used to explain the exchange of one country’s currency for another’s. If you’ve every traveled out of the country, you probably cashed in your American dollars to find that the trade was nowhere near equal. Forex is the same thing on a much larger scale – it’s similar to the market except it deals in liquid assets at all times. It’s the process of buying and selling cash from nations around the world.

How can foreign currencies be traded?

Currency exchanges can be handled on three different levels. You will need to use a broker or a brokerage firm that allows trades through one of the following:

• The Commodity Futures Trading Commission (CFTC)
• Securities and Exchange Commission (SEC)

There is also what is called the off-exchange (over-the-counter) market. An example of this would be that you return from your vacation from Canada and trade your cash in for American dollars. This is only on a retail level or corporate level. Off-exchange trading is subject to very limited regulatory oversight.

How much money do I need to trade Forex?

It depends on the Forex dealer. Brokers concentrated in the Forex market can set their own minimum accounts and are allowed to set their own fees and rate schedules. You’ll need to ask your dealer how much money it’s going to cost you initially.

Many dealers will require a security deposit (a “margin”) to cover future transaction fees. When you choose a broker, make sure that you look over the fees and schedules carefully before you deposit any money. It is important to understand your broker’s capabilities, as well, before handling any transactions through their firm.


These are just a few basic facts about the Forex market to get you started. Trading foreign currencies can be an exhilarating experience when you’ve begun making money, but it is important to get an education before you start out. This website has a wealth of information for the new Forex trader, including tips and strategies. It is highly encouraged that you read up to explore the possibilities of trading in a worldwide environment.

Learn Forex Market

Forex market - the interbank international exchange market. Banks of the different countries are trading among themselves in currencies of the different countries. But the total volume of these operations is huge, in day he exceeds 3 billion US dollars! It also is Forex market! Forex market reminds the Internet - he belongs to nobody, nobody can operate it.

Exchange-traded Forex futures contracts were introduced in 1972 at the Chicago Mercantile Exchange and are actively traded relative to most other futures contracts. Forex futures volume has grown rapidly in recent years, but only accounts for about 7% of the total foreign exchange market volume, according to The Wall Street Journal Europe (5/5/06, p. 20).

The foreign exchange (currency, or Forex, or FX) market exists wherever one currency is traded for another. It is by far the largest market in the world, in terms of cash value traded, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. Retail traders (small speculators) are a small part of this market. They may only participate indirectly through brokers or banks and may be targets of Forex scams.

Market size and liquidity

The foreign exchange market is unique because of the following featuries:

- trading volume,

- the extreme liquidity,

- the large number of, and variety of, traders,

- geographical dispersion,

- long trading hours - 24 hours a day (except on weekends).

- the variety of factors that affect exchange rates,

Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to the BIS study Triennial Central Bank Survey 2004

- $600 billion spot

- $1,300 billion in derivatives, ie

- $200 billion in outright forwards

- $1,000 billion in Forex swaps

- $100 billion in FX options.

There is little or no 'inside information' in the foreign exchange markets. Exchange rate fluctuations are usually caused by actual monetary flows as well as by expectations of changes in monetary flows caused by changes in GDP growth, inflation, interest rates, budget and trade deficits or surpluses, and other macroeconomic conditions. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time.

On the spot market, according to the BIS study, the most heavily traded products were:

- EUR/USD - 28 %

- USD/JPY - 17 %

- GBP/USD (also called cable) - 14 %

and the US currency was involved in 89% of transactions, followed by the euro (37%), the yen (20%) and sterling (17%). (Note that volume percentages should add up to 200% - 100% for all the sellers, and 100% for all the buyers). Although trading in the euro has grown considerably since the currency's creation in January 1999, the foreign exchange market is thus still largely dollar-centered. For instance, trading the euro versus a non-European currency ZZZ will usually involve two trades: EUR/USD and USD/ZZZ. The only exception to this is EUR/JPY, which is an established traded currency pair in the interbank spot market.

The main trading centers are in London, New York, and Tokyo, but banks throughout the world participate. As the Asian trading session ends, the European session begins, then the US session, and then the Asian begin in their turns. Traders can react to news when it breaks, rather than waiting for the market to open.

Why Forex?: A world of Opportunities

The foreign exchange market is the world’s largest financial market, but it wasn’t always accessible to any interested trader. Remember, forex trading is not conducted on a regulated exchange and as a result, there are additional risks associated with forex trading. In the past, access to foreign exchange of currencies was limited to banks, hedge funds, major currency dealers and the occasional high net-worth individual. But smaller financial institutions wanted to take advantage of the many benefits forex offered over other markets, including its tremendous liquidity, 24-hour access 5.5 days of the week and the strong trending nature of currency exchange rates.

It was this entrepreneurial vision of the smaller financial institutions and the evolution of the Internet that made forex accessible at a retail level. These institutions, including GFT, combined the accessibility of the Internet and fast and efficient proprietary software with accurate pricing, charting abilities, technical indicators and news feeds, which allowed any interested speculator open access to trade currencies. From 2002 to 2005 the practice of trading forex has grown threefold and this growth curve continues still. So read more about the benefits of using GFT and our access the world’s largest, fastest, most exhilarating market.
What is Forex?

You may already be aware of some of the benefits offered by the currency market. It is the fastest, largest and most liquid market in the world, but that is only the beginning of its advantages. As a very basic explanation, forex is the simultaneous buying of one currency and selling of another in order to seek gaining a profit (or accruing a loss).

Today, almost anyone with the appropriate appetite for risk and an understanding of market trends and analysis can trade currencies online with GFT. There are many benefits of trading forex versus other types of financial markets, many benefits to choosing GFT as your forex dealer and much to learn if you’re new to currency trading. Just click a link below to start improving your knowledge, and you’ll be well on your way to reaching your full potential in the foreign exchange market.

Forex currencies

Most Forex exchanges invariably involve the U.S. dollar against a different currency, as the American economy remains the biggest. Other currencies serve as the base for trade as well, such as the Japanese Yen, the British Sterling, the Swiss Franc, and the German mark. Each country's market has its own particular properties.

Euro came up to take the place of the German mark. The latter was the foundation. The European central bank has replaced the Bundesbank that has lost its past significance after the former East Germany came to reconsolidation.

The feature of the Japanese yen is its instability in some previous years. The greatest rise of this currency has happened in October 1998 when the dollar has suffered 15% reduction against the Japanese yen within a number of days.

The Swiss franc is sometimes called "a safe heaven" fulfilling the same function as the dollar does. It is called like this because of the neutrality and independent policy pursued by Switzerland, its economy isolation and banking system privacy.

The British pound has always had significance for the international exchange markets but it mostly hasn't been stronger than other currencies. This trend has changed vice-versa lately and the British pound has become one of the most important and attractive currencies in Europe. It was the first currency that Forex market dealt with through cables crossing the Atlantic, that's why the term "cable" has appeared.

European currencies had a number of crises because of the attempts to adjust their rates towards one another artificially. French frank and German mark used to create the basis for the Continental European currencies and formed the European currency stem. The stability was useful for the Benelux countries. Considerable fluctuations around this stem were seen in the currencies of rest of the Europe, Mediterranean and Scandinavian countries in particular. Great alterations have come to foreign exchange trading after the European common currency has appeared in 2001. A number of European banks were forced to make their trading assets reconsideration after the currencies of the countries taking part in the unification were fixed relative one another at the beginning of 1998. Still the Euro appearance is not thought to be harmful for the foreign exchange markets health. The Euro being weak has turned into mark and made non-participating European currencies less stable and more affective to speculative forces. It gives prospects for sterling along with the Swiss franc to turn into the most important European currency market.

Exotic currencies have a severe risk together with an ability to gain very high possible profits. The weak but fixed currencies can be sought much in order to carry out speculative attacks on them that may lead the countries involved to wide depreciation and economical difficulties. A number of developing currencies try to peg their currencies to the US dollar exchange rates to bring the monetary officials to order and force currency holders not to resort to devaluations. In most of the cases it's impossible to fix the exchange rates due to indiscipline and it mostly leads to considerable depreciation. These devaluations often cause high possible profit but within the stable periods investors mostly hold the currencies due to high interest rates.

Forex market shouldn't have solid technical aspects grasp while dealing with foreign exchange market especially at emerging markets due to their riskiness. Inability to gain a protection against the risks of these markets can be very harmful at the outlook of the commercial companies. South East Asian and South American markets seem to be the most interesting but it doesn't exclude African Continent and Eastern Europe possibility to become important markets in future.

Forex carries out its trading through Lots which is the equivalent of the dollar. The "margin" means that while the value of one lot is $1,000 you can accordingly have a control of $100,000 within the currency.

Currency trading in the Forex market is usually carried out in pairs. The notation of each pair shows the rates at which its currencies are being traded. The ABC/XYZ format is always used to show the notation. Here ABC/XYZ doesn't correspond any currency pair but it shows the possible notation. ABC symbolizes the currency of one country whether XYZ shows the currency of another one.

It's impossible for the currency to be traded by itself. For instance to make sense of the trade with JPY it must be compared to any other currency but never traded by itself. This process forms the core of the Forex market.

Here are some of the creal and common symbols used in the Forex market:

* USD - The US Dollar
* EUR - The currency of the European Union "EURO"
* GBP - The British Pound
* JPN - The Japanese Yen
* CHF - The Swiss Franc
* AUD - The Australian Dollar
* CAD - The Canadian Dollar
* NZD - The New Zealand Dollar

The most commonly traded currencies are referred to as the 'Majors':

* US Dollar (USD)
* Japanese Yen (JPY)
* Euro (EUR)
* British Pound (GBP)
* Canadian Dollar (CAD)
* Australian Dollar (AUD)
* Swiss Franc (CHF)

Most commonly traded currency pairs are:

* EUR/USD which stands for Euro / US Dollar
* USD/JPY which stand for US Dollar / Japanese Yen
* GBP/USD which stands for British Pound / US Dollar
* USD/CAD which stands for US Dollar / Canadian Dollar
* AUD/USD which stands for Australian Dollar/US Dollar
* USD/CHF which stands for US Dollar / Swiss Franc
* EUR/JPY which stands for Euro / Japanese Yen

Numerator and Denominator

The higher fraction is supposed to be the Numerator while the Denominator corresponds its lower part. For example, in the EUR/USD pair EUR would act as a Numerator being the first or the top, whether USD being after or below is known as Denominator.

The basic currency is usually the Numerator whether Denominator is a counter currency.

Thus, when you would like to buy a currency and you'll place the corresponding "BUY" order dealing with the EUR/USD on the Forex platform you are considered to be selling the USD and buying EUR. "LONG" is the name for buying process.

On the contrary, if you would like to sell the pair you mean that you are buying the USD and selling the EUR. This is called "SHORT" along with the same stock market process when you first sell any stock, currency or commodity trying to buy it later at a lower brice, that means you use short-selling.

In case you would like to sell or buy a currency pair you're going to sell or buy its Numerator (base currency or the top one), so that the base currency should be dealt vise-versa when you're selling a currency pair.

While trading, the base currently is always bought and the counter one is sold. Selling any pair you just specify the currency for sale and the one to buy. Finally the transaction is equal. The absence of any restrictions while short selling is an advantage of the Forex market. Another plus is that both market rise and fall bring profit. You can earn in Forex at any trends directions whether the stock marked should rise in order to give profit.

Forex News Trader

How do the majority of profitable Forex traders truly profit in the FX market? One way… they trade the news!

Forex News Trader was developed to give traders the edge they need to learn how to trade based on economic news events from around the world. The same edge the institutions use to make hundreds of millions and even billions of dollars in profit each year.

Forex News Trading will provide you with the information you need to give you a true insider’s understanding of the Forex markets. You will feel confident in your trading, and never doubt your trades again.

Does this mean you will win every trade? No, of course not, but armed with the knowledge Forex News Trader will provide you, you will never be afraid to take that next trade - as the odds will now be tipped in your favor.

Each and every month there are a tremendous number of news releases for the Off Exchange Retail Foreign Currency Market (FOREX). Many of these events and announcements move the markets considerably. But how do you properly capitalize on these moves? Get it wrong and you could be wiped out. Get it right and you can be in a small group of trading elite, consistently pulling pips out of the market each and every week.

Our Forex Trading goal is to provide our visitors with the best trading strategies available. We work exclusively with Forex brokers who specialize in news trading, and also include extensive reviews on the best in the business. Any relevant and helpful information related to Forex news trading can be found on this site.

There are many trading methods that exist to help you succeed as a trader, but there also many factors you need to consider before you execute your trades. Each news event moves differently. What we do is provide you with techniques and systems on how to trade these major news events. How can you maximize your gains and limit your loses? Not easily done, unless you truly know what you are doing.
Forex News Trader will teach you the moves you need to make. In volatile or fast moving markets, such as news trading events, it is imperative to be completely focused and on top of your game. You need to constantly learn new styles and techniques if you want to stay ahead.

Whether you profit, or end up like the other 95% of traders, depends on your ability, knowledge, patience, and how the market moves that day. With such a large world market there are numerous opportunities to pull profits on a consistent basis.

If you’ve spent thousands of dollars to learn strategies that do not work - you are not alone. In fact, in a recent poll of over 5,000 active traders, the majority have spent over $3,500 on education. Some people drop more money into Forex courses then into their own trading account. We offer insider strategies that will give you a huge edge to succeed in the Forex market.

Forex Signals

Whether you are a beginner or a seasoned trader, we have a service to fit your needs. Do you have a hard time understanding when to get in the market, or is your exit points that need help? There are hundreds of forex signals services on the market, but most are not worth a dime. We only work with the best. We screen them with the strictest parameters - ensuring their performance is real.

These signal providers may send signals by e-mail, voice, cell phone, or a live trading room. We will provide you with a list of the best Forex services available to best suit your trading needs.

Some traders prefer an auto trade type of system which does the trading for you, like FX-System Center, an excellent way to go. We work with a number of providers of auto-trade services which include state of the art software that will execute trades in the Forex market for you. You can learn to trade many different styles throughout the trading day. You can join live chat sessions with live calls in voice chat rooms with professional traders and learn how to trade the Forex market yourself. The options are all available, and now you know where to look.

Market makers

What is a Market Maker?
(Lexical)A Market Maker is the counterparty to the client. The Market Maker does not operate as an intermediate or trustee. A Market Maker performs the hedging of its clients' positions according to its policy, which includes offsetting various clients' positions, hedging via liquidity providers (banks) and its equity capital, at its discretion.

Who are the Market Makers in the Forex industry?
Banks, for example, or trading platforms (such as Easy-Forex™), who buy and sell financial instruments at the market. That is contrary to intermediates, which represent clients, basing their income on commission.

Do Market Makers go against a client's position?
By definition, a Market Maker is the counterparty to all its clients' positions, and he always offers a two-sided quote (two rates: BUY and SELL). Therefore, there is nothing personal with the trading conduct between the Market Maker and the customer. Market Makers regard the total positions of their clients as a whole, same goes for banks and other market makers in the Forex market. They offset between clients' opposite positions, and hedge their net exposure according to authorities' guidelines and their risk management policies.

Do market makers and clients have a conflict of interest?
Market makers are not intermediates, neither portfolio managers, nor advisors who represent customers (while earning commission), but rather they buy and sell goods to the customer. By definition, the Market Maker always provides a two-sided quote (the sell and the buy price), hence maintains neutrality as for the client. Banks do that, same with merchants in the markets, who buy goods and sell it to customers. The relationship between the trader (the customer) and the Market Maker (the bank; the trading platform; Easy-Forex™; etc.) is simply based on fundamental market forces: supply and demand.

Can a Market Maker influence market prices against clients' position?
Definitely not, because the Forex market is the nearest to being a "perfect market" (as defined by economics theory). This is the biggest market today, reaching a daily volume of 3 trillion dollars throughout the globe. That means that there is no single participant in the market, banks and governments included, who can consistently push the price in a certain direction.

What is the main source of earnings to Easy-Forex™?
Being a Market Maker, the major source to earnings is the spread between the bid and the ask prices. Accordingly, Easy-Forex™ maintains neutrality (as for the direction of any or all deals made by its traders), since the leading source for its income is the spread it earns.

How do Market Makers manage their exposure?
The way most Market Makers hedge their exposure is to hedge on bulk. They aggregate all clients' positions and pass some, or all, of their net risk to their liquidity providers. Easy-Forex™ hedges its exposure in a similar fashion, in accordance to authorities' instructions and its risk management policy.
As for liquidity providers, Easy-Forex™ works in cooperation with world's leading banks which provide liquidity to the Forex industry: UBS (Switzerland) and RBS (Royal Bank of Scotland).

Beginning Forex Tradin

In the mid '90's many beginners like us stepped into the brave new world of online Foreign Currency Exchange trading, a frontier that had recently become open to the self-trader. Today, now that it is becoming more well known, beginners and experience investors alike are flocking to Forex Trading -- the largest, most profitable, most liquid and fastest growing trading market in the world.

Take all the time you need to learn this trading new skill well -- practice everything you learn with a demo account (i.e. with demo play-money in it) before you consider going 'live' with your own money. Whether you are here to develop a skill for generating money or just developing a new interest, we think you will enjoy, as we did, discovering the exciting frontier of forex.

Our only insistent word of advice is never trade with money that you can not afford to lose.

Forex: Technical Analysis

One of the underlying tenets of technical analysis is that historical price action predicts future price action. Since the forex is a 24-hour market, there tends to be a large amount of data that can be used to gauge future price activity, thereby increasing the statistical significance of the forecast. This makes it the perfect market for traders that use technical tools, such as trends, charts and indicators. (To learn more, see Introduction to Technical Analysis and Charting Your Way To Better Returns.)

It is important to note that, in general, the interpretation of technical analysis remains the same regardless of the asset being monitored. There are literally hundreds of books dedicated to this field of study, but in this tutorial we will only touch on the basics of why technical analysis is such a popular tool in the forex market.

As the specific techniques of technical analysis are discussed in other tutorials, we will focus on the more forex-specific aspects of technical analysis.

Technical Analysis Discounts Everything; Especially in Forex
Minimal Rate Inconsistency
There are many large players in the forex market, such as hedge funds and large banks, that all have advanced computer systems to constantly monitor any inconsistencies between the different currency pairs. Given these programs, it is rare to see any major inconsistency last longer than a matter of seconds. Many traders turn to technical analysis because it presumes that all the factors that influence a price - economic, political, social and psychological - have already been factored into the current exchange rate by the market. With so many investors and so much money exchanging hands each day, the trend and flow of capital is what becomes important, rather than attempting to identify a mispriced rate.

Trend or Range
One of the greatest goals of technical traders in the FX market is to determine whether a given pair will trend in a certain direction, or if it will travel sideways and remain range-bound. The most common method to determine these characteristics is to draw trend lines that connect historical levels that have prevented a rate from heading higher or lower. These levels of support and resistance are used by technical traders to determine whether or not the given trend, or lack of trend, will continue.

Generally, the major pairs - such as the EUR/USD, USD/JPY, USD/CHF and GBP/USD - have shown the greatest characteristics of trend, while the currency pairs that have historically shown a higher probability of becoming range-bound have been the currency crosses (pairs not involving the U.S. dollar). The two charts below show the strong trending nature of USD/JPY in contrast to the range-bound nature of EUR/CHF. It is important for every trader to be aware of the characteristics of trend and range, because they will not only affect what pairs are traded, but also what type of strategy should be used. (To learn more about this subject, see Trading Trend Or Range?)

Graph created by E-Signal.
Figure 1

Graph created by E-Signal.
Figure 2

Common Indicators
Technical traders use many different indicators in combination with support and resistance to aid them in predicting the future direction of exchange rates. Again, learning how to interpret various technical indicators is a study unto itself and goes beyond the scope of this tutorial. If you wish to learn more about this subject, we suggest you read our technical analysis tutorial.

A few indicators that we feel we should mention, due to their popularity, are: Bollinger bands, Fibonacci retracement, moving averages, moving average convergence divergence (MACD) and stochastics. These technical tools are rarely used by themselves to generate signals, but rather in conjunction with other indicators and chart patterns.

For more on technical analysis and the forex, take a look at the following articles: Using Bollinger Band "Bands" To Gauge Trends, Trading Double Tops And Double Bottoms, Introducing The Bearish Diamond Formation, Keep An Eye On Momentum and Consolidation - Trade The Calm, Profit From The Storm.

Forex: Ready To Trade?

So, you think you are ready to trade? Make sure you read this section to learn how you can go about setting up an account to trade in the forex along with what factors you should be aware of before you take this step. We will then discuss how to trade and the different types of orders that can be placed.

Opening A Forex Brokerage Account
Trading the forex is similar to the equity market because individuals interested in trading need to open up an account. Like the equity market, each forex account and the services it provides differ, so it is important that you find the right one. Below we will talk about some of the factors that should be considered when selecting a forex account.

Leverage
Leverage is basically the ability to control large amounts of capital, using very little of your own capital; the higher the leverage, the higher the level of risk. The amount of leverage on an account differs depending on the account itself, but most use a factor of at least 50:1, with some being as high as 250:1. A leverage factor of 50:1 means that for every dollar you have in your account you control up to $50. For example, if a trader has $1,000 in his or her account, the broker will lend that person $50,000 to trade in the market. This leverage also makes your margin, or the amount you have to have in the account to trade a certain amount, very low. In equities, margin is usually at least 50%, while the leverage of 50:1 is equivalent to 2%.

Leverage is seen as a major benefit of the forex, as it allows you to make large gains with a small investment. However, leverage can also be an extreme negative if a trade moves against you because your losses also are amplified by the leverage. With this kind of leverage, there is the real possibility that you can lose more than you invested - although most firms have protective stops preventing an account from going negative. For this reason, it is vital that you remember this when opening an account and that when you determine your desired leverage you understand the risks involved.

Commissions and Fees
Another major benefit of forex accounts is that trading within them is done on a commission-free basis. This is unlike equity accounts, in which you pay the broker a fee for each trade. The reason for this is that you are dealing directly with market makers and do not have to go through other parties like brokers.

This may sound too good to be true, but rest assured that market makers are still making money each time you trade. Remember the bid and ask from the previous section? Each time a trade is made, it is the market makers that capture the spread between these two. Therefore, if the bid/ask for a currency is 1.5200/50, the market maker captures the difference (50 basis points).

If you are planning on opening a forex account, it is important to know that each firm has different spreads on currency pairs traded through them. While they will often differ by only a few pips (0.0001), this can be meaningful if you trade a lot over time. So when opening an account make sure to find out the pip spread that it has on currency pairs you are looking to trade.

Other Factors
There are a lot of differences between each forex firm and the accounts they offer, so it is important to review each before making a commitment. Each company will offer different levels of services and programs along with fees above and beyond actual trading costs. Also, due to the less regulated nature of the forex market, it is important to go with a reputable company. (For more information on what to look for when opening an account, read Wading Into The Currency Market. If you are not ready to open a "real money" account but want to try your hand at forex trading, read Demo Before You Dive In.)

How to Trade
Now that you know some important factors to be aware of when opening a forex account, we will take a look at what exactly you can trade within that account. The two main ways to trade the currency market is the simple buying and selling of currency pairs, where you go long one currency and short another. The second way is through the purchasing of derivatives that track the movements of a specific currency pair. Both of these techniques are highly similar to techniques in the equities market.The most common way is to simply buy and sell currency pairs, much in the same way most individuals buy and sell stocks. In this case, you are hoping the value of the pair itself changes in a favorable manner. If you go long a currency pair, you are hoping that the value of the pair increases. For example, let's say that you took a long position in the USD/CAD pair - you will make money if the value of this pair goes up, and lose money if it falls. This pair rises when the U.S. dollar increases in value against the Canadian dollar, so it is a bet on the U.S. dollar.

The other option is to use derivative products, such as options and futures, to profit from changes in the value of currencies. If you buy an option on a currency pair, you are gaining the right to purchase a currency pair at a set rate before a set point in time. A futures contract, on the other hand, creates the obligation to buy the currency at a set point in time. Both of these trading techniques are usually only used by more advanced traders, but it is important to at least be familiar with them. (For more on this, try Getting Started in Forex Options and our tutorials, Option Spread Strategies and Options Basics Tutorial.)

Types of Orders
A trader looking to open a new position will likely use either a market order or a limit order. The incorporation of these order types remains the same as when they are used in the equity markets. A market order gives a trader the ability to obtain the asset at whatever price it is currently trading at in the market, while a limit order allows the trader to specify a certain entry price. (For a brief refresher of these orders, see The Basics of Order Entry.)

For traders that already hold an open position, a take-profit order can be used to lock in profit. Say, for example, that a trader is confident that the GBP/USD rate will reach 1.7800, but is not as sure that the rate could climb any higher. A trader could use a take-profit order, which would automatically close his or her position when the rate reaches 1.7800, locking in their profits.

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Another tool that can be used when traders hold open positions is the stop-loss order. This order allows traders to determine how much the rate can decline before the position is closed and further losses are accumulated. Therefore, if the GBP/USD rate begins to drop, an investor can place a stop-loss that will close the position (for example at 1.7787), in order to prevent any further losses.

As you can see, the type of orders that you can enter in your forex account are similar to those found in equity accounts. Having a good understanding of these orders is critical before placing your first trade.

If you want to read more, see these frequently asked questions How does the forex market trade 24 hours a day?, Why is currency always quoted in pairs? and What is the value of one pip and why are they different between currency pairs?

Forex: The Conclusion

While this tutorial only represents a fraction of all there is to know about forex, we hope that you've gained some insight into this topic. We also encourage those of you who are interested in potentially trading in the forex market to learn more about the complexities and intricacies that make this market unique.

Let's recap:

* The forex market represents the electronic over-the-counter markets where currencies are traded worldwide 24 hours a day, five and a half days a week. The typical means of trading forex are on the spot, futures and forwards markets.
* Currencies are "priced" in currency pairs and are quoted either directly or indirectly.
* Currencies typically have two prices: bid (the amount that the market will buy the quote currency for in relation to the base currency); and ask (the amount the market will sell one unit of the base currency for in relation to the quote currency). The bid price is always smaller than the ask price.
* Unlike conventional equity and debt markets, forex investors have access to large amounts of leverage, which allows substantial positions to be taken without making a large initial investment.
* The adoption and elimination of several global currency systems over time led to the formation of the present currency exchange system, in which most countries use some measure of floating exchange rates.
* Governments, central banks, banks and other financial institutions, hedgers, and speculators are the main players in the forex market.
* The main economic theories found in the foreign exchange deal with parity conditions such as those involving interest rates and inflation. Overall, a country's qualitative and quantitative factors are seen as large influences on its currency in the forex market.
* Fundamental analysis forex traders view currencies and their countries like companies, thereby using economic data to gain an idea of the currency's true value.
* Technical analysis forex traders look at currencies no differently than any other asset and, therefore, use technical tools such as trends, charts and indicators in their trading strategies.
* Unlike stock trades, forex trades have minimal commissions and related fees. But new traders should take a conservative approach and use orders, such as the take-profit or stop-loss, to minimize losses.

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