http://wwwforex-trading.com How to trade foreign currencies Mon, 23 Nov 2009 19:29:26 +0000 http://wordpress.org/?v=2.8 en hourly 1 http://wwwforex-trading.com/2009/10/07/understand-your-currencies/ http://wwwforex-trading.com/2009/10/07/understand-your-currencies/#comments Wed, 07 Oct 2009 17:03:15 +0000 admin http://wwwforex-trading.com/2009/10/07/understand-your-currencies/ In the forex markets, it is important to understand the nature of the currencies you are trading. It is worth knowing the characteristics of the currency pairs, since each of them exhibit distinct identities. There is a fact that most of the currencies might exhibit similar movement patterns, which can help a trader confirm price movements. Trader can look at two pairs of currencies that have almost similar or completely opposite price movement patterns to get better predictions. Let take an example of the close relation between the EUR/USD & USD/CHF.

The price movements of these two currency pairs are absolute mirror images. In short, they have an inverse relationship. If EUR/USD is rallying, then USD/CHF should have downward movement, and vice-versa.

How can traders take advantage of this? The most obvious fact is that one must not trade both the currencies at the same time. If one is long the EUR/USD, logically one should not be long the USD/CHF at the same time, since the USD/CHF would have a downward movement.

Neither is it wise to take opposing trades on these two pairs, because if the trade goes wrong, then the trader would incur losses in both the trades (although the trader also might have double profit if the trade goes right, but anyway, in forex trading, we focus on how to not get loss first).

Ideally, one should trade either of the two pairs. The best way to take advantage of this fact is to cross-check a trade by looking for confirmation factors on the other pair. If a trader is planning to take a long position in the EUR/USD, he can look for a similar short setup on the USD/CHF. If such an opposite setup is present in the USD/CHF, it only adds further credence to his long EUR/USD trade. It is just a check.

There are other currency pairs also which exhibit a close relation. This fact serves as a good rule of thumb to estimate the movement of the particular currency. Thus it is worth studying these relationships to gain a higher edge in the market. As you know, sometimes a basic knowledge can also serve as a turning point between failure and success.

Visit his site http://www.profitguideforex.com/ for more details





By: David Chia ]]> http://wwwforex-trading.com/2009/10/07/understand-your-currencies/feed/ 0 http://wwwforex-trading.com/2009/09/19/forex-trading-currency-exchange-tutorial/ http://wwwforex-trading.com/2009/09/19/forex-trading-currency-exchange-tutorial/#comments Sat, 19 Sep 2009 17:01:06 +0000 admin http://wwwforex-trading.com/2009/09/19/forex-trading-currency-exchange-tutorial/ So, you want to learn how to trade currency on the foreign exchange market? The process of trading currencies appears very straight-forward on the surface; but, there is more to it than meets the eye.

The currency trading tutorial you’re about to receive here will give you a basic idea of how things works. However, you must keep in mind that this tutorial is only scratching the surface. The Forex market is complex, fast-paced and requires serious further study if you wish to trade successfully.

Now that we have that disclaimer out of the way, let’s begin by looking at the fundamental unit involved in every trade: the ‘currency pair’.

What are currency pairs?

Currency pairs are units of 2 currencies involved in a foreign exchange trade. For example, if you want to sell U.S. dollars to buy Euros, you would look at the exchange rate quoted for the EUR/USD currency pair. Or, if you wanted to sell Euros to buy U.S. dollars, you would look at the exchange rate quoted for the USD/EUR currency pair.

You might thinking: “Aren’t they the same thing?” Well, they almost are, but you must look at the correct pair, in the correct order, based on the currency being purchased.

There are two reasons for doing this:

First, it is easier to calculate the results of your exchange in terms of how much of the base currency you can purchase with your ‘quote’ currency. Your base currency is the currency you intend to buy, and the quote currency is the currency you intend to sell in exchange for the base.

When quoting an exchange rate, your broker will list the base currency first in the pair, and the quote currency second.

This means that when you see a pair like EUR/USD, you are seeing the cost of 1 Euro in U.S. Dollars. An exchange rate quote of EUR/USD = 1.4436 means that 1 Euro costs $1.4436 in U.S. Dollars.

Likewise, the USD/EUR pair indicates the cost of 1 U.S. Dollar in terms of Euros. An exchange rate of USD/EUR = 0.6834 would mean that 1 U.S Dollar costs 0.6834 Euro.

The second reason for looking at the correct buy/sell ordered pair is that you’ll want to know the difference between the ‘bid price’ (exchange rate) and the ‘ask price’ (what the market makers want for the currency).

The difference between bid price and ask price make up what is known as ‘the spread’. Forex traders are subject to spreads when opening or closing trades in the buying position.

In other words, you are always subject to a spread when you buy, regardless of whether you are opening or closing the trade.

Open buy -> spread

Close sell -> no spread

Open sell -> no spread

Close buy -> spread

Let’s say that you want to buy the EUR/USD pair. The bid price is 1.4436. The ask price may be something like 1.4440. You must pay the spread of 0.0004 in order to do the trade.

Those are the basics of a currency trade, but there are other factors to take into consideration. In order to make a profit on currency exchanges, you must also know how

to calculate the cash value of exchange rate fluctuations in terms of ‘basis points’ – or, in Forex jargon – ‘pips value’.

This currency trading tutorial will not cover pips values, but it is a concept you should investigate further if you want to master the basics of trade on the foreign exchange.





By: Daniel J. Clarke ]]> http://wwwforex-trading.com/2009/09/19/forex-trading-currency-exchange-tutorial/feed/ 0 http://wwwforex-trading.com/2009/07/16/managed-forex-accounts-eurusd-outlook-2008-23/ http://wwwforex-trading.com/2009/07/16/managed-forex-accounts-eurusd-outlook-2008-23/#comments Thu, 16 Jul 2009 17:56:44 +0000 admin http://wwwforex-trading.com/2009/07/16/managed-forex-accounts-eurusd-outlook-2008-23/ What Rate Cuts Can Be Expected

The US Fed has not exactly been forthcoming in its rate cuts; rather, it lowered rates very reluctantly in 2007. It has given only what the currency markets have already priced in. The basic reason for their hesitation is the desire to contain inflation ? the very same concern that weighs heavily on all other central banks in the world. The Fed wants to make certain inflation remains under control. Doing that has been more difficult because of the high energy prices coupled with the weaker dollar. Thankfully, indications of energy prices reaching $100 per barrel are no longer in circulation.

The market expects the Fed to further ease interest rates another 25 to 50bp lower; however, this is not the only option. They may want to further explore their other options, including the Term Auction Facility they introduced in December. But these options, including a cut in the discount rate, are limited especially since LIBOR rates have remained at high levels. Even as late as December, Treasuries posted one-day increases that were the highest seen in the last three years.

Who Else Might Make A Play

In the final two months of 2007, the crumbling markets were shored up by massive investments from sovereign funds. Temasek Holdings, owned by Singapore, invested $4.4 billion in Merrill Lynch; state-owned Abu Dhabi Investment Authority plowed $7.5 billion into Citigroup; and, China Investment Corporation invested $5 billion in Morgan Stanley. Sovereign wealth funds have been in existence since the mid-twentieth century. From an estimated $500 billion total size in 1990, these funds are now thought to be worth $3 trillion. The states of Norway, Singapore, the U.A.E., Saudi Arabia, Kuwait and China have between them an estimated $2 trillion available for immediate spending. Given eight more years, these funds may have total capital of $12 trillion, continuously built up from their natural resources and foreign exchange reserves. Investments from sovereign wealth funds have ? and probably will continue ? to be significant factors in helping the US financial markets recover.

How the 2008 US Presidential Elections May Affect Financial Markets

The historical trend shows more bullishness for the US dollar when Republicans gain leadership than Democrats. Whether this trend will hold depends on how close the 2008 elections will turn out. The Stock Traders Almanac makes the general observation that election years show modestly positive growth in the US stock market. In the last five decades, election years have shown a 9.2% average gain in the Dow Jones index.





By: Andre Miller ]]> http://wwwforex-trading.com/2009/07/16/managed-forex-accounts-eurusd-outlook-2008-23/feed/ 0 http://wwwforex-trading.com/2009/05/04/understand-your-currencies-2/ http://wwwforex-trading.com/2009/05/04/understand-your-currencies-2/#comments Mon, 04 May 2009 19:35:08 +0000 admin http://wwwforex-trading.com/2009/05/04/understand-your-currencies-2/ In the forex markets, it is important to understand the nature of the currencies you are trading. It is worth knowing the characteristics of the currency pairs, since each of them exhibit distinct identities. There is a fact that most of the currencies might exhibit similar movement patterns, which can help a trader confirm price movements. Trader can look at two pairs of currencies that have almost similar or completely opposite price movement patterns to get better predictions. Let take an example of the close relation between the EUR/USD & USD/CHF.

The price movements of these two currency pairs are absolute mirror images. In short, they have an inverse relationship. If EUR/USD is rallying, then USD/CHF should have downward movement, and vice-versa.

How can traders take advantage of this? The most obvious fact is that one must not trade both the currencies at the same time. If one is long the EUR/USD, logically one should not be long the USD/CHF at the same time, since the USD/CHF would have a downward movement.

Neither is it wise to take opposing trades on these two pairs, because if the trade goes wrong, then the trader would incur losses in both the trades (although the trader also might have double profit if the trade goes right, but anyway, in forex trading, we focus on how to not get loss first).

Ideally, one should trade either of the two pairs. The best way to take advantage of this fact is to cross-check a trade by looking for confirmation factors on the other pair. If a trader is planning to take a long position in the EUR/USD, he can look for a similar short setup on the USD/CHF. If such an opposite setup is present in the USD/CHF, it only adds further credence to his long EUR/USD trade. It is just a check.

There are other currency pairs also which exhibit a close relation. This fact serves as a good rule of thumb to estimate the movement of the particular currency. Thus it is worth studying these relationships to gain a higher edge in the market. As you know, sometimes a basic knowledge can also serve as a turning point between failure and success.

Visit his site http://www.profitguideforex.com/ for more details.





By: David Chia ]]> http://wwwforex-trading.com/2009/05/04/understand-your-currencies-2/feed/ 0 http://wwwforex-trading.com/2009/04/30/fx-trading-101-1-what-is-fx-trading/ http://wwwforex-trading.com/2009/04/30/fx-trading-101-1-what-is-fx-trading/#comments Thu, 30 Apr 2009 20:09:19 +0000 admin http://wwwforex-trading.com/2009/04/30/fx-trading-101-1-what-is-fx-trading/ Firstly lets talk about what investing in foreign exchange means. It does not mean buying foreign currency and keeping it up until it fairs well in value. Converting the money you have and holding it till it appreciates in value can take you only so far, usually you may gain about a few dollars over a period of an year by doing that. Then what does it mean? It means actively trading currency in a foreign currency market place or and exchange.

Before going into details, lets see how a FX market really works. In FX markets there is no concept of buying a currency, there is always an exchange of currencies, one being bought and the other being sold. Lets take this to a level that we are all comfortable with; You’d usually ‘buy dollars’, but what we actually do is exchange the local currency we have into USD at the current market rate. Lets assume the dollar is at 105 local currency units now, we’ll spend 210/= and buy 2US$ and will keep the dollars with us. If the dollar rises to 110/=, our investment has also appreciated. To make use of the appreciation, we have to re-sell the dollar at 110/= and we would have made a profit of 10/= on the transaction. Now look at this from a purely external point of view. Intially the investor gives out some currency to buy another sort. Then when the rate rises, he sells what he originally bought and buys back the depreciated currency. The difference in the rate he bought at and sold at, is his profit.

In a forex market, you’ll trade something thats called a currency pair. This will look something like EUR/USD. If you buy this, you will actually exchange the USD that you have with Euros. When you’ve bought a currency pair, its called opening a position. But just because the Euro went up, you cant benefit from it. You have to convert it back to the original USD to compare the profit. So how would you do this? You have to exchange the EUR you have to USD, i.e. you close the position that you opened. Lets take an example: In current market the value of the EUR/USD is about 1.57 i.e. each Euro is worth 1.57 times the USD. Lets say you have 157 USD, you exchange this for a 100 EURs (i.e. you open a position by buying the EUR/USD pair). Tomorrow, the EUR/USD rate might turn out to be 1.5730, the EUR has gained slightly. Let say that you close the position now, you have 100 EURs which converts to 157.30 USD, you’ve gained 30 cents on your investment. See? pretty easy.

You may ask how this is any different to buying foreign currency and holding it till it goes up. The reason is because with a bank, you can only exchange the local currency with the majors (USD, EUR, JPY, GBP). Lets say the Dollar started appreciating against the GBP; you really cant do anything about it. (eg: USD is say 105/= and say GBP is somewhere around 200/=, you have local currency with you and all of a sudden USD starts going down all the way to 100/=. The effective rate of GBP/USD at the beginning was 1.9047 at the end of the event, the rate is 2.00. If you could trade the GBP/USD pair, you could have made a profit on this. But you cant cos you have only local currency. Well yes, you could convert the money to USD and then to GBP and wait till it goes up and … bit of a process yes?) In a forex dealing place, the conversion will automatically done for you; You can deposit your money in USD and actually trade a pair like EUR/JPY.

Well what you’ve just read through is all a lie. But its an important lie to get introduced into dealing in forex markets. To be fair, the above sums up the principle of a forex dealing place; It will help you to understand how the profit and loss taking really happens. But thats not how it operates.

Like everything else, forex rates are also based on the demand for the currency. And also like in most of the international markets, the currency rates are determined by large traders who do transactions worth several millions of dollars per trade. When you buy USD from a local bank, they sell you the dollars they’ve bought from the international market. This is exactly what a forex dealing exchange does. (i.e. This is what a forex dealing exchange for normal people like you and me does. I have no idea how exactly the bigger deals work out); they channel all the orders from their user base into dealing places for large banks.

We know that with an exchange place we will be trading currency pairs. The rate of the currency pair would typically be expressed in five numbers.

Eg:

GBP/USD = 1.9825

USD/JPY = 106.38

The smallest change possible for each pair is known as a pip. (i.e. for GBP/USD this is 0.0001, for USD/JPY this is 0.01)

In most exchanges, each lot of the traded currency is in lots of 10,000. Thus, if you buy 1 lot of GBP/USD at 1.9825, you are actually buying 10,000 GBP. The amount of USD you spent for this is 10,000*1.9825 = 19,825 USD. Let’s say you hold the currency pair till the rate goes up to 1.9830. You will close out the position by selling the GBP and buying the USD. Thus you will sell out 10,000 GBP and buy USD. This would yield 19,830 USD; the rate of the currency increased by 5 pips and your profit increased by 5$. If each lot was 100,000 units of the currency, then for the same 5 pip increase, the profit would be 50$. For any currency pair that looks like X/USD this is the case.

Let’s look at the USD/JPY pair now. Pair is at 106.38 and you buy it, i.e. you buy 10,000 USD by spending Japanese Yen. Now that’s a problem right? Cos you deposited the money in USD but definitely you don’t have any JPY. Not a problem. The exchange knows that what you’ll do is opening up a position and later closing it. Thus you’ll buy some USD spending the JPY you don’t have and buy back the JPY later. So the exchange will settle the net cash amount for you without bothering to look whether you have JPY or not. So lets say you buy the USD/JPY pair for 106.38, you buy 10,000 USD spending JPY. If you had JPY, what would be the worth of it? You’d spend 10,000*106.38 JPY to open the position. Now let’s say the currency pair rises to 106.48 and you close the position. What you’d technically do is to sell out the 10,000 USD and buy back the JPY. The amount of JPY that you’d receive would be 10,000*106.48. Thus your JPY worth has gone up by 1,000. If you convert this to USD, it would be a net gain worth 1,000/106.48 = 9.39$. What the exchange does is to pay out this 9.39$ to you. There is no need to convert your dollars to anything or whatever. Every one is happy.

Obviously, its not easy to calculate the gains or losses on a non USD denominated currency pair (like USD/JPY or AUD/EUR). Thus the brokers (the correct name for ‘exchanges’) publish lists of ‘pip costs’. It tells you how much of a gain or loss you’d make if the pair moved by one pip.

Now in this example we saw that the traded value of each pair is worth several thousands of dollars. Obviously a normal individual would not have access to that amount of money. This is where leverage comes in. The brokers let you play with money that is much more than what you have, this is known as leverage. Typically a forex broker would offer leverages from 50:1 to 200:1. What does this mean? This means that to do a trade worth 10,000$, with a 50:1 leverage, you need only 200$. With a 200:1 leverage, you can do the same trade for 50$.

This may look very lucrative, but it means that you are also at a large risk. Lets say you put 50$ for a 200:1 leveraged trade. The maximum loss you could make is 50$ (as the broker will not allow you to make a loss for more than what you have. If that becomes the case, a ‘margin call’ will fire and most probably your position will be automatically closed. This is done as a safety mechanism for the broker to not to have clients running large losses and not covering them.) To lose 50$, your currency pair needs to lose 50 pips. In the currency markets 50 pip move can happen in a matter of few hours. Now lets say you had a leverage of 50:1, then you would need 200$ to do the trade and even with a 50 pip loss, you’d still have 75% of your investments left. If you are dealing with large leverages, its necessary to have a large percentage of your deposit not allocated in a trade to make sure you don’t lose out on price spikes. (We’ll talk about this later on another topic where I plan to talk on how to play with currencies).





By: Kulendra Janaka ]]> http://wwwforex-trading.com/2009/04/30/fx-trading-101-1-what-is-fx-trading/feed/ 0 http://wwwforex-trading.com/2009/04/22/the-leader-in-stocks/ http://wwwforex-trading.com/2009/04/22/the-leader-in-stocks/#comments Wed, 22 Apr 2009 18:21:58 +0000 admin http://wwwforex-trading.com/2009/04/22/the-leader-in-stocks/ Forex is unfaltering marked as a foreign market plea. Forex is moving on to pass one of the most in demanding trade industries on the stock market. Forex is notoriously dubbed FX, or currency polemic. Forex constitutes the processes of selling pairs of currencies between countries. Buying pairs of currencies in units takes place in the stock market exchange too. Buyers may mound in USD/EUR currencies depending on the ideology that the US decree deflates the EUR (European) dollar. Tradesmen may hustle currencies in pairs, e.g. EUR/USD, USD/JPY. In this particular, the seller is venturing that the US dollar will depreciate the Japanese Yen dollar. Alternatively, the Europe dollar will depreciate the US dollar. Currently the EUR dollar has a steeper price tag than the US buck. Therefore, the EUR/US pair’s stockmen are likely to bid on.

Forex trading is one of the larger stock investment companies. Currency is exchanged in pairs with foreign smooth companies, government, convenient banks, central banks, financial orgs, and so forth. Retailers may buy or flog pairs of currency, insider dealing with smaller banks and brokers; nevertheless to say retailers are at a higher imperil of loss.

Forex cabal options make up, EUR, USD, GBP, JPY, etc. Two of the largest ventured currencies in Forex markets are the pair of USD/EUR, EUR/USD, and the USD/JPY. For stockmen to base their buys on currencies, the trader might factor currency and the cost of currencies. For example, if a stockman believed that the currencies (JPY), Japan Yen would decline, then he may buy currencies in pairs, such as USD/JPY. If he credits that his US dollar authorizes depreciation, then he may reverse trading choices and sell the JPY/USD currencies.

Japan is one of the larger inside stocks spenders running alongside the United States of America. This plays are extensive part in your purposiveness to buy or sell in Forex cabal. In conspectus, Forex trading is a play against, hit where one lives operator hope to gain from their investments.

Forex insider trading works blending to other exchange markets. That is traders must open an account. Once the trader frees up his mind, the account you have the option to buy or sell in the Forex stock market.

Traders often avoid manage accounts. Not so long ago CNN Television reported more than seventy counterfeit behaviors that came from straightaway rubrics of accounts. In summary, stay away from dwarf foreign currency exchanging. Distinct smaller banks and brokers i.e. reported on the CNN channel stated that investors lost millions of dollars.

Forex trading is a budding stock industry. Having a full understanding of Forex trading, can spare you clamor and assist you when you savor to buy and pitch in Forex stocks?





By: John Weise ]]> http://wwwforex-trading.com/2009/04/22/the-leader-in-stocks/feed/ 0 http://wwwforex-trading.com/2009/04/12/managed-forex-accounts-eurusd-outlook-2008-13/ http://wwwforex-trading.com/2009/04/12/managed-forex-accounts-eurusd-outlook-2008-13/#comments Sun, 12 Apr 2009 09:47:32 +0000 admin http://wwwforex-trading.com/2009/04/12/managed-forex-accounts-eurusd-outlook-2008-13/ The US dollar was the big story in 2007 — if you were selling it. Compared to 2001, the value of the dollar has gone down by 40 percent against the euro. And values at the beginning compared to the ending of 2007 were significantly down: the dollar was down about 13 percent versus the euro, 10 percent versus the yen, and 8.5 percent versus the pound sterling. Its value was at such a record low that supermodels and popular rappers made public their preference for getting paid in Euro, no dollars, please. The US dollar did stop skidding towards the end of 2007, but the question now becomes: has the dollar bottomed out or will the slide continue in 2008?

Why the Dollar Weakened in 2007

The dollar seemed so weak in 2007 because the rest of the global economy continued to grow even as US growth stalled, due in part to steady demand from the Middle East, China and India markets. Countries acted more independently, as illustrated by the Australian central bank’s decision to increase rates to stave off inflation at precisely the time the US Federal Reserve was cutting interest rates. Before December in fact, interest rate cuts happened only in the US. In short, some sort of decoupling occurred in the global economy, and this was a key factor to the strengthening of the other currencies and the weakening of the US dollar.

There are signs, as we begin 2008, that the phenomenon will no longer obtain this year and the global economy will again move more closely in step. In the latter half of 2007, economic growth in the UK and Canada slowed down indicating that the two countries were being weighed down by the weak US economy. In addition, the shock waves of the US subprime mortgage crisis have also shaken the financial markets of many countries, particularly the UK, where growth in the past years has depended on housing, mortgages, and the public sector. There are also signs of strain in the Eurozone, notwithstanding the ECB’s hawkish position on monetary policy. The pressure to reduce rates will increase if growth continues to weaken further in the US or in other countries. The pressure already forced the UK Bank of England to cut rates in December and more cuts are forecast for 2008.

Interest rate cuts will be the thing to watch in the currency market. The US Fed has already lowered interest rates 100bp in 2006 and another reduction will be more in line with expectations; but if the Eurozone begins to lower rates, this would be a significant departure from current policy, which could signal a major change in the outlook for the euro.

Where US Economy Is Going

The big question is whether or not the US economy is going into a recession, which would seriously impact global growth. Majority of the American public thinks the economy is already in recession, according to polls released in December. Public perceptions notwithstanding, economists think otherwise. A Business Week survey on 54 economists in December showed that the group believes the country will reflect a 2.1 percent growth by the end of 2008 (it registered 2.6 percent growth in 2007). They believe that although the first half of 2008 will be difficult, consumer spending will not stop, albeit more restrained. Fundamentally, the forecast of no recession rests on the assumption that the Federal Reserve will continue its round of rate cuts. Although financial losses in the subprime sector will continue, consumer confidence will depend largely on the Federal Reserves actions to support economic recovery.





By: Andre Miller ]]> http://wwwforex-trading.com/2009/04/12/managed-forex-accounts-eurusd-outlook-2008-13/feed/ 0