Thursday, July 20, 2006

Take some Forex profit for yourself

Currency market, FX and the Forex market are some common abbreviations for the Foreign Exchange market. Actually it is the largest financial market in the world, where money is sold and bought freely. In its present condition the market was launched in the seventies, when free exchange rates were introduced, and only the participants of the market determine the price of one currency against the other proceeding from demand and supply. As far as the freedom from any external control and free competition are concerned, the market is a perfect market.

With a daily turnover of over 1.5 trillions of dollars, the Foreign Exchange market conducts more than three times the aggregate amount volume of the United States Equity and Treasury markets combined. The Forex market is an over-the-counter market where buyers and sellers conduct foreign exchange business using different means of communication.

This market has no central physical location or central exchange. Because of that it trades continuously on a 24-hour basis, as each time-zone has its hours, with moving from one time zone to the next, across each of the world’s major financial centers every day. Trillions of dollars of foreign exchange activity takes place every day. From 1997 to the end of 2000, daily trading volume surged approximately from US$5 billion to US$1.5 trillion and more (according to various recent studies it has touched $1.7 trillion per day and dwarfs all other markets for trading in size and volume). It is really difficult, if not impossible; to determine an absolutely exact number because trading is not centralized on an exchange. But one thing is for sure that the Forex market continues to grow at a phenomenal rate.

Sunday, July 16, 2006

Forex Rule

I’ve been in the FOREX trading market for a long time, and I’ve managed to learn a thing or two about the world of trading. There are a few more important and a few less important rules, but there is a golden rule that I can’t stress out its importance enough.

You have to know your limits and determine a right Stop-Loss order. When you place a Stop-Loss order, right along with your entry order, via your online trading platform, you've automatically prevented a potential loss from "running" too far.

Before initiating any trade, if you haven't already figured out at what point you would be wrong and would want to cut your loses or, at the very least, reevaluate your position from the sidelines, then you shouldn't be putting on the trade in the first place.

Show us a FOREX trader who doesn't use stop loss orders and we'll show you someone who loses a lot of money.

I’ve met a lot of traders who said something like: “hey, I put a stop loss order and I still lost a lot of money.”. my first question to these traders was: “did you move you stop-loss order?” almost all of the time the answer was yes.

What most FOREX traders don’t know is that when you move your stop-loss once, it’s like a barrier broken - you try and convince yourself that you can turn this losing position to a winning one. You absolutely can’t do that - you have to embrace your losses - they will be an integral part of your trading career even if it’s going to be a successful one.

Tuesday, July 11, 2006

Forex brokers

For those trading in the Forex field, a broker is a good idea. Brokers are professionals when it comes to trading in the market and their experience is priceless, especially to the new trader. When it is time to find a broker, there are several factors to consider. One thing to look for when choosing a broker is to go with someone that offers low spreads. The spread is calculated in pips, or the difference between the price at which currency can be purchased and the price it can be sold at any given time. Because brokers do not charge a commission, they will make their money off of the spreads, or the difference. Usually, when the deposit is bigger, you get a better spread - you ought to keep that in mind.

Here is something very important to remember. When looking at a broker, look for one that is backed by a big financial institution. Bankers are generally associated with large banks or other types of financial institutions. If a broker is not with a large bank, keep looking. Making sure that the broker is properly registered and backed by a large bank or institution ensures that you are getting a reliable broker that is experienced in trading on the Forex.

When looking for a broker, check to be certain that the broker has access to the latest research tools and data. It is important that brokers understand and have access to charts, graphs, news and data that are in real time. This will ensure that the broker is making wise decisions based on accurate Forex forecasting. Also, look for a broker that can offer a wide range of account options. They should offer mini-accounts with a smaller minimum deposits and a standard account. This will give anyone interested in the market the opportunity to trade at a level where they feel most comfortable.

Sunday, July 09, 2006

Forex Basics

Forex involves the trading of different foreign currencies. It is by far the largest financial market in the world and has an estimated daily turnover of more than 1.8 trillion dollars. This turnover is larger than all the worlds’ stock markets combined on any given day.

The market does not have a fixed exchange. There is no specific location for the market and that is why it is considered an over-the-counter (OTC) market. It is completely electronic and trades are executed over the phone or on the Internet. Up until 10 years ago access to the market was preserved only for the large financial institutions. Now, with the development of recent years (accessibility of the internet and online trading) an ever-increasing amount of individual traders is exposed to the wonders of forex trading.

Trading of currencies is always done in pairs. A typical pair would be EUR/USD (Euro over US dollars). The first currency is the leading currency. The second currency is the leaded currency. The pair can be viewed, as the amount of the leaded currency that is needed to buy 1 unit of the leading currency. If you were to buy the above pair you would buy Euro and simultaneously selling US dollars. If the pair was sold - it would have been the other way around: you would sell the Euro and buy the US dollar. This might sound confusing but simply think of the pair as one item and you are buying or selling one item. If you think the Euro will go up against the US dollar you buy the EUR/USD pair. If you think the EUR will decrease against the US dollar you sell the EUR/USD pair.

That’s how it works in forex.

Wednesday, June 28, 2006

The history repeats itself - in forex too

Most people tend to forget that history has a tendency of repeating itself in forex not less than in any other field. The trend acts to certain rules, rules that allow you to build a set of guidelines to play these repeating formations and avoid the chase:

The chart, the chart and again - the chart. You're not experienced enough to know how news will affect price (and even some that are, occasionally get it wrong). The chart already knows the news is coming.

Go ahead and use the first good chance you have to sell (when in a new high) or buy (when in a new low). In forex, there are always people that missed the first boat.

Everything is visible, everyone sees the same thing and they're all just waiting to jump in the pool - so buy at support and sell at resistance.

In the last hour - go for the trend. No-one would miss the last chance of the day, so as it gets late - be sure everybody sticks to the market.

Though it sounds weird, price has memory. When a price hits a certain level, most likely it’ll do what it did the last time it was there…

Tops are more fragile than bottoms. Fear has its way on people, much more than greed, that’s why in bottoms stocks drop further than their own weight.

Take the backstage-pass and grab the chic before everybody rushes in. You have(!!!) to take their money - or they’ll take yours. That’s how it works in forex.