?What Drives Traders to Forex Markets

With the Forex market being the biggest financial market on the globe, it is no wonder millions of people are drawn to it. When it comes to investing, currency trading it where it’s at right now. It is one of the fastest growing investment forms to date. It is important to note however that although the Forex is called a “market” by name, it is not a traditional “market”. All trading is done over the telephone or via computers. There is no central location for the trading in any country. It is actually a cash inter-bank or inter-dealer system formed in 1971. This was the time when floating exchange rates came about. The Forex is huge today, with over 3.5 trillion levels exchanged each day. It is clearly one of the most popular forms of trading worldwide.

Availability

One of the best features of the Forex market is that it never closes. This is a system that takes place all day long, every day of the year. There are people in every country that are waiting to trade. You could wake up at 2 in the morning, no matter where you are, and expect to find trading occurring in full force. The availability of the market is something that is very appealing to some people. When dealing with foreign currency, there is no other way. The market must remain open for 24 hours because of the time differences and such. Traders capitalize on the wide range of trading time and appreciate that aspect of the Forex. With other markets that close daily, there is sometimes a sense of anxiety about what may or may not happen overnight. This is not an issue with the Forex market.

Excitement

Along with its never ending trading, the Forex is attractive to many traders because of the excitement it can bring. Trading is something that can be very exciting and the Forex offers never ending excitement for those willing to partake. The Forex market is so large, with $1.5 to $3.5 trillion dollars per day, that it allows nearly perfect liquidity. The size alone makes this market a joy ride for traders. If you are looking for endless excitement, you will be glad to know that you can certainly find it in the Forex market. Unlike the other markets, the Forex is great because you can enjoy that excitement all day long. You won’t have to deal with the anxieties that occur with other markets after closing time. You can know that no matter what, the Forex will be open and you will be able to deal with business as needed. This adds a fun element to trading with the Forex, which can be removed by stress in other markets.

It’s For Everyone

In previous times, the market was only for the rich. One had to typically place at least a $1million cash deposit down with the bank to even begin trading. This made it difficult for anyone but rich people to trade. Today however, the Forex is open to smaller scaled traders as well. Most of the traders are actually doing so from home. Lower margin requirements are very attractive to the smaller traders. They allow them to participate with the larger traders on the same scale, but at a more equal position. With the Internet thriving year after year, home based traders can get in with the larger traders via their computer, which was not always the case. Before, only large traders could even access the Forex at any level. Today, the Forex is for everyone.

As you can see, the Forex market is one that offers excitement, availability, and opportunity. These three reasons are what draw millions of people to the Forex each day. It is something that once you try it, you will not want to stop. The opportunities are endless, which is why the Forex is a popular topic in business schools today. If you are interested in learning this market, check with your local college to see if there are any classes offered about the topic. You will need to be aware of the rules and regulations before you begin trading. Once you have the information you need, jump on in and start trading right away!

The truth of the matter is that forex trading may or may not be right for you. True, Forex trading is popular but that doesn’t mean that you have what it takes to be a successful Forex trader.

Now I’m not trying to burst anyone’s bubble and be negative about trading….I just want to be on of the few people in the world of trading who will actually level with you. Just understand that there is more to successful Forex trading than meets the eye.

Please don’t be pulled in by the amazing trading results you see advertised. Most of these are designed to pull you in and not to make you successful. Actually some of the vendors may actually think they are designing Forex trading systems to make their clients successful. Unfortunately many of these trading system vendor possess only a rudimentary idea of what a truly successful trading system is. All They can tell you is what they know. Sadly what most of them know is either insufficient or just plain wrong.

Stay tuned here as we will have an opportunity to review various Forex trading systems and separate the boys from the men. At the end of the series you’ll know more about what a good Forex trading system looks like than 90% of the people trying to sell them.

The ForexExaminer Team

?Top Ten Basic Terms in Forex Trading and Their Definitions

Forex refers to the foreign currency exchange market, the world’s largest financial trading market. Some terms that help a person understand Forex trading include:

Bid ??” to buy

Ask ??” to sell

Liquidity ??” financial ease of transaction, i.e. cash

Trading volume ??” the amount traded

Bid/ask spread ??” the difference between the proposed buying price and the actual selling price

OTC ??” over the counter

Exchange rate ??” the difference between currency values; for instance, a Canadian dollar is valued at .86 of a US dollar

Hedge funds ??” large mutual funds companies that control vast amounts of money and are able to manipulate the value of a currency through speculation

Central bank ??” the national bank of a nation, which usually exerts control over the value of that currency

Forex trading is in essence the investment in the currency of one country. Large international corporations that do business in many nations find value in keeping their cash reserves in a variety of nations, and holding their funds in a variety of ways. For example, a US company may have a percentage of its working capital in US dollars, but if it does quite a bit of business in Europe may also find it beneficial to keep a percentage of its money in Euros, in European banks. Many individual investors over the years have discovered that there is profit to be made in investment and speculation in the currency or forex markets.

As an example, during the 1970’s the German deutchmark was changing rapidly in value. It was worth anywhere from 1.7 marks to the US dollar to 2.5 US marks to the dollar. When the mark was worth 2.5 it was beneficial to spend dollars buying marks, since the mark would buy more goods or services at that rate. When the mark was only worth 1.7 to the dollar there was less incentive.

The forex market itself is not unified. There are many small forex markets specializing in trading various currencies. The most commonly traded currencies in forex trading are the US dollar, the Australian dollar, the British pound sterling, the Japanese yen, and the European Euro. The values of these currencies will vary depending on the market in which an investor is looking, so there is really no such thing as a single, unified dollar rate, but instead there are several dollar rates, which are different according to the market where the trade is occurring. The major cities in which trades occur are London, New York and Tokyo. This covers a 24 hour clock. When Asian trading ends, European trading beings, and when European trading ends, then American trading opens. Of course when American trading ends, it is time for Asian trading to open again, and so on.

The most commonly traded currency is the US dollar, involved in 89% of all trades. This is followed by the Euro involved in 37% of all trades, then by the yen in 20% and the pound in 17%. The fastest rising currency in trade is the Euro, but the US dollar is still widely considered the anchor point, and the currency to watch to judge how others will react. Differences in value of currencies come form the daily news. Changes n gross domestic product growth, in inflation, interest rates, budget and tirade deficits, surpluses and other economic conditions will cause changes in currency values. Investors and traders for this reason follow the news very closely. In fact, there are 24 hour cable news channels and many web sites devoted to news of value to currency traders.

It wasn’t long ago that the nation of Iran removed its currency from European investment banks. In anticipation of rising world tensions they removed their currency to become less vulnerable to freezing of their assets and to economic warfare, of which forex trading could be a part. The forex market is very susceptible to rumors. In fact the central banks of some countries have at times manipulated the value of their currency by spreading rumors about hikes in interest rates and other economic news that could have an impact on the value of the currency. When this news is false it is called a dirty float.

Introduction to Technical Analysis – 1

FOREX analysis is divided into two types: Fundamental and Technical. Fundamental analysis attempts to predict movements in currencies by examining current political and economic events. Technical analysis uses historical economic data to predict movements in the FOREX. These two articles will examine the principles of technical analysis and the tools involved.

Basic Principles

Technical analysis is based on three assumptions:

1 – Price movements are a result of all market forces combined. Things that can affect currency prices include political events, economic conditions, supply and demand, seasonal variations and weather conditions. The technical analyst, however, is not concerned with the reasons for market movement, but rather, the movements themselves.

2 – Currency prices follow trends. Many market patterns have been recognized as having predictable consequences.

3 – Price movements follow historical trends. FOREX data has been collected for over 100 years and patterns have emerged over time. These patterns are based on human psychology and the way people react to certain sets of circumstances.

Is Technical Analysis Necessary?

Most FOREX day traders rely heavily on technical analysis and may use fundamental analysis to support their trading strategy. A major advantage of technical over fundamental analysis is that it can be applied to many different markets and currencies at the same time. Fundamental analysis requires in-depth knowledge of the political and economic conditions of a certain country; therefore it is less likely that any one trader can do proper fundamental analyses on more than a few countries.

The beginner trader may be put off by the seeming complexity of technical analysis and wonder if it is necessary for FOREX trading. As with any investment, FOREX trading requires a strategy. Although any strategy is possible, technical analysis is a proven method for predicting movements in the FOREX. Does that mean it’s a sure thing? Nothing is 100% certain, and currency prices are affected by a variety of forces. This is why many traders use a combination of technical and fundamental analysis to plot their trading strategies.

Availability

Every FOREX online broker should provide access to a wide variety of charts for technical analysis. Some charting software is available free of charge while in-depth professional charts may carry a monthly fee. Charts can be viewed by various time scales and provide detailed information about price movements as well analytical overlays. Charts can be zoomed in to the tick level or zoomed out to see the broad picture over a period of months or years. Charts are updated in real time.

FOREX charts may be available on your broker’s web site or may be included as part of their trading software.

Before beginning in FOREX trading it is a good idea to become accustomed to market behaviour by following charts for a period of time and studying their movements and learning about trends. Many brokers provide practice accounts that can be used by beginners to place ‘paper’ bids – no real money is exchanged. These practice accounts familiarize the beginning trader with FOREX charts and market movement while at the same time allowing him to become acquainted with the trading software a particular broker uses.

Part 2 of this article will look at the various kinds of charts and technical indicators.

FOREX Training

Knowledge is the key to successful FOREX trading. The knowledgeable trader has greater awareness of how the market moves and more chances of making profitable transactions. Without knowledge you are shooting in the dark. You may succeed on a few deals but the odds are that you are going to lose in the long run.

Thankfully there’s lots of information available about the FOREX and how to trade. You can find hundreds of web sites with useful advice and there are just as many books about all aspects of FOREX trading. If self-learning is not your style, there are training courses available that guide you step-by-step through the intricacies of Foreign Exchange.

If you have the time and the inclination, you can find all the facts you need on the Internet or in your public library. The problem with Internet sources, however, is that the information is generally unstructured. You may find bits and pieces of useful data, but finding a source that presents it in a step-by-step fashion is more difficult.

Study courses, on the other hand, present their material in a logical and structured manner that aids in understanding FOREX trading. The investment involved in a FOREX course may well worth the time saved in seeking out similar information on your own. There are courses available for both beginners and intermediate traders.

The cost of a FOREX course varies from free to $1000 or more. As with most things, you get what you pay for. Free Internet courses may give you the basics needed to begin trading, but usually omit the in-depth training needed to analyze charts and plot trading strategies.

There are two basic types of study courses. You can attend a class with a group of people, or you can sign up for an online course that is taken over the Internet. Classes are available in most major cities. You can attend a class to learn the basics or sign up for more advanced courses if you are an experienced trader. The advantage of these courses is that you get personalized attention – any questions you have can be answered directly by the instructor. The disadvantage is that you must follow the class schedule – if you miss one class it can’t be made up at a later time.

Seminars are also a possibility for learning about FOREX. Seminars are usually aimed at experienced traders, but if you know the basics you could benefit from a 1 or 2 day seminar. These are available in most major cities, and you could expect to see seminars offered every couple of months. They are usually conducted by well-known FOREX professionals who can offer new insights and strategies in FOREX trading.

If you prefer to study at your own pace you should investigate online FOREX courses. You can log on to a website any time of the day or night and go through the course material as you see fit. If you have any questions, you can usually communicate with an instructor by email. Responses could take anywhere from minutes to days.

A variation of online courses is CDROM courses. These are done on your computer, but you order the study materials from a company and they arrive by mail. There may be little after market service offered with CDROM learning materials. If you have questions you may not be able to contact an instructor for answers. However, each company has their own policy about this, so find out what their service provides before putting down your money.

Other types of home training include video lessons. These can be watched in the comfort of your living room and are similar to attending a FOREX training seminar.

The best kind of FOREX training can be with an individual trainer or mentor. This would be someone with many years of FOREX experience who can offer insights and strategies learned through the course of conducting thousands of transactions. FOREX mentors usually charge a lot of money – thousands of dollars is not unheard of. Whether the cost is worth it is up to the individual to decide. Working with a master trader can provide valuable insight into the psychology of FOREX trading.

Forex from Home

You can trade Forex from home with relative ease. Trading Forex from home is one of the most popular ways day traders and small investors are able to reach their investment goals from the privacy and comfort of their own home. If you are interested in trading Forex from home, here are some tips.

Trading Forex from home is incredibly simple. There are plenty of brokers that enable you to trade in real time with great features. Finding a Forex broker is relatively simple, however you should put lots of thought into which features you would like, the information they provide their members and the ease of use of their trading software.

Trading Forex from home is relatively easy once you have your computer set up and a broker picked out. Before you start to trade Forex with actual money, it is important to know all the ins and outs of trading Forex as well as how to conduct research and use your brokers Forex trading software. Many brokers allow you to try simulation trading. A simulation trading environment is where you can trade in real time foreign currencies with the actual software and features. The only difference between simulation and real trading is that with simulation software you don’t have trade real money. This can be an excellent tool to learn how to trade Forex from home.

Finding information from home regarding Forex is also very easy with the help of Forex forums, broker trading resources and Forex charts. Many investors use the Forex forums to find out about new tools, spot trends in the market and hear commentary on new products or forecasts. You can also find loads of information at your broker’s site. Most brokers usually offer great charts to track currencies and plenty of articles that can fill you in on information that can help you trade. So follow the above suggestions to trade Forex from home.

Analyzing Forex Data

If you are into trading Forex, then you probably take analyzing Forex data very seriously. Most Forex investors choose their trades each day by going over lots of information, charts and opinions in order to analyze Forex data. Here are some great tips and resources for analyzing Forex data.

Analyzing Forex data can be easy if you have and utilize the right tools. Most Forex brokerages supply their traders with a wealth of information and many tools in order to analyze their Forex data and make well educated and prudent trades. Just like any other investment vehicle, Forex does have risks involved and you can lose your money very easily if you make ill conceived trades, analyze your Forex data the wrong way, or hit a patch of bad luck.

A great resource to use when analyzing Forex data are specialized Forex charts, Forex reports, and opinions written about the Forex trading market. Many people also look to Forex simulation platforms to test out their Forex analysis process. On simulation platforms, you can trade real time, just like normal, except you don’t have to wager real money. This way you can test your systems, strategies and analysis.

Not only do Forex brokerages give you great resources, but they try to educate their traders on how to use them properly. For instance you can read online tutorials on how to use certain tools, how to analyze data, and how data can be viewed. There are many great ways to learn how to analyze Forex data, however, you have to learn how to use it to your advantage.

?Failsafe Facts to Guarantee Failure in Forex Trading

Forex trading ??” it’s one of the most exciting new ‘games’ in town. The stakes are variable enough that almost anyone can play, and the potential winnings are high enough to tempt even the most conservative into the running. There’s something romantic and dashing about trading in money ??” a cachet that stock, bonds and mutual funds just don’t have. With trillions of dollars changing hands everyday, it seems like everyone’s got a fail-safe method that will make you rich overnight. Here are nine failsafe facts that will guarantee that you fail in forex trading.

There is a failsafe method to make money on every trade.

Just like there’s no such thing as a free lunch, there’s no such thing as a failsafe method. You WILL lose money on some trades, it’s inevitable. Expecting to always win is a guarantee that you will hang on to trades long past the point that an experienced trader would have found an out.

You don’t need to know anything about the market to make money in it.

Not knowing your playing field is a sure way to hit every bump and hole in it. It’s not enough to read a few articles from your dealer. You need to make a concentrated effort to understand the forces that drive the market so you’ll know the best times to make a move.

You can play a winning game by making frequent trades with small profits.

If your goal is to make a few hundred dollars a day, you may be ahead of the game, but you’re seriously limiting your profit potential. The only people getting rich on frequent tiny trades are the dealers taking commission on them.

You don’t need a plan to make money in the currency market ??” making money IS a plan.

Trading without a well-thought out plan is like jumping out of a plane without a backup chute. Your plan is what keeps your eye focused on your goal, and gets you through the inevitable losses. Currency trading isn’t a short-term game, but most new traders (95%) quit within the first year because they didn’t have a plan to follow.

If you stick with a losing trade long enough, it will turn around.

Sticking with a losing trade is a good way to lose more money. When a deal isn’t going the way that you expected, it’s hard to admit that you were wrong and get out ??” but it’s the best way to avoid losing even bigger money. Winning on one trade isn’t going to make you rich overnight. Consistently knowing when to get out ??” whether it’s to cut your losses or grab your winnings ??” is the way to be a successful currency trader.

Where there’s smoke, there’s fire.

Rumors are just that ??” rumors ??” 99% of the time. If you want to win at the game, base your trades on reality, not hearsay. On the other hand, rumors can alert you to look at what’s really happening and make a decision based on the movement that you see.

The more currencies you trade, the better your chances are of scoring a big profit.

The more you know about a currency, the easier it is to predict how and when it will move. The more intimately you understand the way it behaves, the better your chances are of consistently making successful trades in that currency. If you’re trying to focus on too many different currencies, you’ll be spreading yourself too thin to really get to know any one of them.

Thinking long-term and trading short-term is a sure way to make money in the long run.

That’s one of those logical fallacies that sound good on the surface. Look at it more closely though. If you’re trading in the short term, then you need to keep your eyes on the short term rather than trading to what you think the market will be in a week. Today is today ??” if you make your best trade today every day, you’ll consistently be ahead of the game.

The way to make money in forex is to always have a trade in motion.

Sometimes there just isn’t a trade that’s going to profit you. Making a trade just to make a trade is a sure way to do yourself no good ??” and possibly a great deal of harm.

FOREX Trading Systems

Almost every online FOREX broker has a software package for their clients to make transactions and get information about market prices. Due to the relative maturity of online trading there is a consensus among FOREX brokers about what clients need in terms of software tools. There are two main classes of FOREX software – web based and client based.

All FOREX software needs to provide up-to-the-second market information. The fast moving pace of the FOREX demands real-time data delivery for making decisions about when to enter and exit the market. FOREX dealers claim their software performs well with a minimum of delay, but in fact there can be a number of factors that could delay data transmission.

Internet connection speed and distance from the broker’s servers are the two main factors that can slow down data transmission. FOREX traders should have a reasonably modern computer and a high speed Internet connection to take full advantage of the FOREX software offered by their broker. It may also pay to choose a broker in the same area as you live. Traders in Bangkok who deal with brokers in Ohio may experience delays – especially during volatile market conditions.

Web Based or Client Based?

Web based software is on the broker’s website – you don’t have to install any software on your computer. Client based software requires you to download and install the software package used by your broker. Which is better? More and more brokers are offering web based client software for reasons of convenience, safety and reliability. Web based software allows you to log on to your account from any computer – you can make trades from any location that has an Internet connection. Client based software, on the other hand, restricts you to making trades from just one computer.

Besides the convenience, web based software offers greater security. Data is secured with high-strength encryption making it impossible for outside parties to access during transmission. Client based software is also secured during transmission but there are more possibilities for data loss from the trader’s computer. Viruses and hackers may be able to access valuable financial data stored in a home or office computer.

Features

FOREX software needs to access real-time quotes and offer a means to enter and exit the market. Even the most basic packages offer these functions. Current quotes can be seen for most currency pairs and the software allows you to buy or sell at market prices or enter and exit the market using stops or limits. Ideally, trading software should have integrated charting functions with a variety of viewing functions.

Basic software packages should be offered free of charge, but many brokers also have more advanced packages available for a monthly fee. Some of the features you could expect to see in advanced software include the ability to trade directly from the chart and full analytical functions.

Technology

The backbone of FOREX software is a series of data servers that allow you to connect to your broker’s web site and make transactions. Servers operated by the FOREX broker need to be reliable and secure for maintaining data integrity and assuring accurate transaction processing. Servers are subject to power outages and natural disasters, so to ensure maximum uptime, the broker should operate at least two sets of servers in separate locations. Brokers should also offer regular data backups to guarantee the integrity of their customer’s financial data in case of server failure.

?The World Makes the Forex Market Go Round

You may wonder if it’s possible to day trade currencies along with trading stocks. Yes, it is possible to day trade currencies as well as trading stocks. In case you have ever wondered how the foreign exchange market, or Forex, works, here is an overview of some of the markets basic features.

First and foremost there are the foreign exchange rates, which is the proportional value of two currencies. To be more specific, it’s the required quantity of one particular currency to sell or buy a unit of another currency. There are two methods used to express a foreign exchange rate. The most common method would express the amount of foreign currency that is needed to buy one U.S. dollar. For instance, if a foreign exchange quote expressed as USD/CND at 1.4300, this means that one U.S. dollar can be exchanged for 1.43 Canadian dollars, and vise versa.

The second method is when the foreign exchange rate is expressed under the terms that the USD amount can be exchanged for one unit of a foreign currency. For instance, if a quote of CND/USD at 0.6700 means that one Canadian dollar can be exchanged for the same 0.6700 USD. When the USD is not used to convey an exchange rate, then the “cross rate” term is used to convey the proportional values between the two currencies. For instance, if the quote is DEM/SFR at .7000, this means that on German Mark can be exchanged for only .7 Swiss Francs.

Basis points are normally when the foreign exchange rate is expressed by a whole number followed by four decimal points. For example, 0.0001 is called a basis point. Therefore, if an exchange rate rises from 1.4550 to 1.4590, then the currency is said to have changed by 40 basis points.

The forex market is used to invest in other countries or even to buy foreign products. Sometimes individuals or firms who wish to buy foreign currencies or products, may need to get hold of some of the currency, beforehand, from the country in which they wish to do business with. Also, the exporters may require payment for services or goods in their own currency, or in USD, which is accepted throughout the world.

In the Forex market, a majority of selling and buying of foreign currencies throughout the world is taken place, mostly by the large commercial banks, who are the major traders in the forex market. With five major institutions based throughout the world in New York, London, Frankfurt, Zurich and Tokyo, the forex market is considered the largest financial market in the world by far, with the multitude of trading volumes exceeding 1.5 trillion USD on most days.

Consisting primarily of world wide network interbank traders who are connected together by computers and telephone lines, forex traders are incessantly negotiating prices among one another. These artful negotiations normally ensue in a market bid, or asking price, for a specific currency which is then introduce continuously into computers to be displayed on official quote screens. When the forex exchange rates are quoted between banks, this is called “Interbank Rates.”

The foreign exchange spreads are when the exchange rates in the forex market are cited as a two tier “bid” or “ask” rate. For instance, when a USD and a DEM is cited as 1.6000/15, the forex trader who cites this exchange rate is agreeing to buy the DEM’s at 1.6000 and sell them at 1.6015. The “spread” is the actual difference between cites of purchase and cites of sale and also illustrates the profit expected from the transaction for the forex trader. The “spread” may vary comprehensively on any specific currency, all depending on the currency’s strength or weakness, and even it’s past history or prospective volatility.

Many individuals may not be able to get hold of some foreign currencies at forex rates unless they become licensed traders through forex. Instead, those individuals may be able to come across foreign currency through a commercial bank, which may charge the individuals with either a commission or a higher spread than those reigning in the forex market. Sometimes these commercial banks will even charge individuals both commission and higher spread as to enable the bank to make a reasonable profit from the transaction.