You are here: Home / Archives for Currency Market

Forex

What is an Online Forex Trading?

Posted by admin · Leave a Comment 

For-ex stands for Foreign Exchange; it is a global market for dealing currencies at floating exchange rates. The foreign exchange is worlds biggest currency market, on an average everyday pound one to two trillion is traded in the foreign exchange. The trade is mostly done over the internet and telephone lines. Online forex trading is a fast, safe and easy mode of investing. It offers huge returns like twenty to thirty percent every month, yes unbelievable but truth, however thats only in some cases and you need a lot of experience to be able to extract that amount of interest!

There is no fixed centre for the trade so all the trade is done over telephone, internet and fax. The foreign exchange trade witnessed a massive boom only after online forex trading systems were introduced, internet and telephone has helped the trade grow from 70 billion a day in the 80s to around 1.5 trillion to 2 trillion today.

The currency market is made up of around five thousand institutions most of which are international banks, central government banks, commercial companies as well as big brokers and all these are connected with each other and do business on the go through online forex trading system. The major centers for online forex trading are New York, Frankfurt, London, Paris, Tokyo, Hong Kong, Bombay among others, and all these centers also communicate and deal through online forex trading. The benefits of online forex trading are listed below:

- Currency market never sleeps: online forex trading allows you to keep track and deal from anywhere at anytime.
- Mini accounts: some websites offer mini accounts that allow you to get started with as less as 200.
- No Commission! Online forex trading is commission free, theres no exchange or hidden fee either. Your broker earns from the spreads.
- Instant: its instant unlike offline trade which may involve paperwork.

The nature of the market is such that risk comes inherent and can not be separated but risk can be minimized if you are trading at the right point of time and the right point of time can be anytime only online forex trading allows you to be there at the right time as all other methods as explained above are slow and usually take up a lot of time in processing.

December 23, 2010 · Tagged with , , , , , , , , , , , , , , , , , , ,

Forex

What Are The Order Types Used By Forex Traders?

Posted by admin · Leave a Comment 

During the last decade, Forex trading has become one of the most attractive business opportunities to ever hit people’s interest around the world. Every day people from many walks in life is actively considering entering the profitable world of the currency markets due to its accessibility and trading characteristics.

One of the first things you will do once you decide you want to enter and learn about the forex markets will be to choose your forex broker and then download the free trading platform software from your broker website.

When you first open your trading station software, you will find that there are a number of ways to enter the market or, said in another way, there are a number of ways to place an initial order to buy or sell any currency pair.

One of these types of orders is what is called a Market order; this is an order to buy or sell a currency pair at the market price considering the instant that the order is received and processed (which is usually within seconds of hitting the “OK” button on your trading platform). When a market order is placed, you are simply saying “I’ll buy or sell the currency pair at whatever price it is at when my order gets processed.”

There is a different way to enter the market that is called an Entry order; this is an order to buy or sell a currency pair when it reaches a certain price target; which you should determine by using your knowledge of technical and fundamental indicators. In theory this can be any price. You could set an entry order for the low price of a time period, or the high price of the same time period’; it all depends on your intentions, to sell or to buy. As an example, one usual recommendation is that you should always set an entry order to be the same price as the ‘open price of the time period. When you place an entry order to buy, for example, you are simply saying “I want to buy this currency pair at a given future price and if it never reaches that price, I won’t purchase the pair.”

Stop and Limit orders are two different ways to exit a trade, automatically (i.e., without closing out your position via the click of your mouse or manually), after the trade is entered. And they are widely used as safety locks so you won’t end losing everything in a bad trade. In short, you must always use stops and limits when trading the forex markets.

A stop order is used to stop losses. A limit order (recommended if you can’t monitor your open trade) is used to redeem profits. Where these orders are placed, in relation to your open trade, depends on the direction of the entry order, this is; if you buy or sell.

Remember; a stop order is always placed below the current market value of that currency pair when you are in a long (buy) trade. And a limit order is always placed above the current market value of that currency pair when you are in a long (buy) trade.

December 16, 2010 · Tagged with , , , , , , , , , , , , , , , , , , ,

Forex

Pivot Points in Forex: Mapping your Time Frame

Posted by admin · Leave a Comment 

It is useful to have a map and be able to see where the price is relative to previous market action. This way we can see how is the sentiment of traders and investors at any given moment, it also gives us a general idea of where the market is heading during the day. This information can help us decide which way to trade.

Pivot points, a technique developed by floor traders, help us see where the price is relative to previous market action.

As a definition, a pivot point is a turning point or condition. The same applies to the Forex market, the pivot point is a level in which the sentiment of the market changes from bull to bear or vice versa. If the market breaks this level up, then the sentiment is said to be a bull market and it is likely to continue its way up, on the other hand, if the market breaks this level down, then the sentiment is bear, and it is expected to continue its way down. Also at this level, the market is expected to have some kind of supportresistance, and if price cant break the pivot point, a possible bounce from it is plausible.

Pivot points work best on highly liquid markets, like the spot currency market, but they can also be used in other markets as well.

Pivot Points

In a few words, pivot point is a level in which the sentiment of traders and investors changes from bull to bear or vice versa.

Why PP work?
They work simply because many individual traders and investors use and trust them, as well as bank and institutional traders. It is known to every trader that the pivot point is an important measure of strength and weakness of any market.

Calculating pivot points
There are several ways to arrive to the Pivot point. The method we found to have the most accurate results is calculated by taking the average of the high, low and close of a previous period (or session).

Pivot point (PP) = (High + Low + Close) 3

Take for instance the following EURUSD information from the previous session:

Open: 1.2386
High: 1.2474
Low: 1.2376
Close: 1.2458

The PP would be,
PP = (1.2474 + 1.2376 + 1.2458) 3 = 1.2439

What does this number tell us?
It simply tells us that if the market is trading above 1.2439, Bulls are winning the battle pushing the prices higher. And if the market is trading below this 1.2439 the bears are winning the battle pulling prices lower. On both cases this condition is likely to sustain until the next session.

Since the Forex market is a 24hr market (no close or open from day to day) there is a eternal battle on deciding at white time we should take the open, close, high and low from each session. From our point of view, the times that produce more accurate predictions is taking the open at 00:00 GMT and the close at 23:59 GMT.

Besides the calculation of the PP, there are other support and resistance levels that are calculated taking the PP as a reference.

Support 1 (S1) = (PP * 2) H
Resistance 1 (R1) = (PP * 2) – L
Support 2 (S2) = PP (R1 S1)
Resistance 2 (R2) = PP + (R1 S1)

Where, H is the High of the previous period and L is the low of the previous period

Continuing with the example above, PP = 1.2439

S1 = (1.2439 * 2) – 1.2474 = 1.2404
R1 = (1.2439 * 2) 1.2376 = 1.2502
R2 = 1.2439 + (1.2636 1.2537) = 1.2537
S2 = 1.2439 (1.2636 1.2537) = 1.2537

These levels are supposed to mark support and resistance levels for the current session.

On the example above, the PP was calculated using information of the previous session (previous day.) This way we could see possible intraday resistance and support levels. But it can also be calculated using the previous weekly or monthly data to determine such levels. By doing so we are able to see the sentiment over longer periods of time. Also we can see possible levels that might offer support and resistance throughout the week or month. Calculating the Pivot point in a weekly or monthly basis is mostly used by long term traders, but it can also be used by short time traders, it gives us a good idea about the longer term trend.

S1, S2, R1 AND R2…? An Objective Alternative

As already stated, the pivot point zone is a well-known technique and it works simply because many traders and investors use and trust it. But what about the other support and resistance zones (S1, S2, R1 and R2,) to forecast a support or resistance level with some mathematical formula is somehow subjective. It is hard to rely on them blindly just because the formula popped out that level. For this reason, we have created an alternative way to map our time frame, simpler but more objective and effective.

We calculate the pivot point as showed before. But our support and resistance levels are drawn in a different way. We take the previous session high and low, and draw those levels on todays chart. The same is done with the session before the previous session. So, we will have our PP and four more important levels drawn in our chart.

LOPS1, low of the previous session.
HOPS1, high of the previous session.
LOPS2, low of the session before the previous session.
HOPS2, high of the session before the previous session.
PP, pivot point.

These levels will tell us the strength of the market at any given moment. If the market is trading above the PP, then the market is considered in a possible uptrend. If the market is trading above HOPS1 or HOPS2, then the market is in an uptrend, and we only take long positions. If the market is trading below the PP then the market is considered in a possible downtrend. If the market is trading below LOPS1 or LOPS2, then the market is in a downtrend, and we should only consider short trades.

The psychology behind this approach is simple. We know that for some reason the market stopped there from going higherlower the previous session, or the session before that. We dont know the reason, and we dont need to know it. We only know the fact: the market reversed at that level. We also know that traders and investors have memories, they do remember that the price stopped there before, and the odds are that the market reverses from there again (maybe because the same reason, and maybe not) or at least find some support or resistance at these levels.

What is important about his approach is that support and resistance levels are measured objectively; they arent just a level derived from a mathematical formula, the price reversed there before so these levels have a higher probability of being effective.

Our mapping method works on both market conditions, when trending and on sideways conditions. In a trending market, it helps us determine the strength of the trend and trade off important levels. On sideways markets it shows us possible reversal levels.

How we use our mapping method?
We at StraightForex (www.straightforex.com) use the mapping method in three different ways: as a trend identification (measure of the strength of the trend), a trading system using important levels with price behavior as a trading signal and to set the risk reward ratio (RR) of any given trade based on where the is the market relative to the previous session.

September 2, 2010 · Tagged with , , , , , , , , , , , , , , , , , , ,

Forex

Is The FOREX The Market To Trade Your Way to

Posted by admin · Leave a Comment 

Is The FOREX The Market To Trade Your Way to Riches?

Ever watch the news and see the ending FOREX trades of the currency markets? They’re usually based on how individual currencies traded against the pound. FOREX is the abbreviation for the Foreign Exchange market. FOREX is a market where the value of individual currencies from all over the world are traded. The currency market today began in the 1970s as currencies that were historically tied to the gold standard, or the price of gold, were decoupled and allowed to float.

So instead of a pound having a gold based value, it’s value is now determined by the other currencies in the world. FOREX can be an investors paradise as it’s as close to a free trading market as you can get. Almost anyone can invest in FOREX because it’s simply the trading of 1 currency for another.

So how does this work? Let’s say that you believe the United States market is going to be suffering from inflation. That is, the value of the pound, over the next year or so is going to go down….and all 100 pounds of your savings is in US pounds.
One way to trade the FOREX would be to trade your savings in pounds for a currency you believe will be more valuable or stable like the EURO as an example. For this example, let’s say one pound is worth 2 Euros and remember this is an example only. So the trade is 100 US pounds for 200 European EUROS.

Next, let’s say your right and inflation does hit the US hard and the value of the pound drops by 10%. Be aware that when talking about currency we’re talking not about the number of pounds and other currencies but the value of those currencies. That is, what it can buy or it’s actual worth.
So in our example, if you kept your savings in US pounds it would now be worth only 90% of the value it held last year. Because you have your savings in EUROS however and that market has remained stable, the VALUE of your savings has been protected. The reason is that the FOREX trading markets will adjust the value of the pound because of the inflation and raise the value of the Euro appropriately. So in this example, a US pound would be worth about 1.8 Euros.

To complete the example, your savings of 200 EUROS could be traded back into US pounds. Because of the inflation however and the value of the pound went down so you can now trade your 200 EUROS for about 110 US pounds.

Almost anyone can invest in FOREX, and there are strategies for investors who look for long term and short term gains. For those of you who are interested in forex trading, the very first stop is to get some good training and understand the markets. Unlike the private markets where stocks, bonds and commodities are traded, FOREX is currency which belongs to the individual governments. Currency manipulations by governments is not uncommon, while decisions they make can dramatically change the value of their underlying currency.

While many people and currency dealers can make it sound easy, the only thing easy in making any investment is losing your money. It’s important to remember that currency dealers make their money through commissions and usually not on the investment they’re selling. The example we used above, although very simplistic, had a number of risk factors and additional costs we didn’t consider. Things like trading costs, and the assumption that one government held their currency completely stable, which is not usual, while another did not.

Many people involved with FOREX say a lot of money can be made trading currency. They’re correct of course, but you can also lose a lot of money also. So get training, learn the markets and trade smart.

June 10, 2010 · Tagged with , , , , , , , , , , , , , , , , , , ,

Forex

Introduction To Forex Trading

Posted by admin · Leave a Comment 

There are many markets: markets for stocks, futures, options and currencies. These are probably the most accessible markets for everyday traders like you and I. People easily understand the basics of trading shares. I began trading shares first and then I moved on to trading currencies.

If you do not know a lot about currency trading, allow me to introduce it to you. It is what I trade and I believe that it is one of the best markets to trade because of its efficiency. The transaction costs to execute a trade are minimal and most brokers provide you with the tools and data you need to make your trading decisions, they usually provide them for free. The market is open 24 hours a day which allows you to design your trading hours around your daily commitments. It is very volatile, which is great for those people who are looking for day-trading opportunities.

The foreign exchange market is the market in which currencies are bought and sold against one another. People may loosely refer to this market under different labels, including foreign exchange market, forex market, fx market or the currency market.

The foreign exchange market is the largest market in the world, with daily trading volumes in excess of 1.5 trillion US pounds. All transactions involving international trade and investment must go through this market because these transactions involve the exchange of currencies.

It is the most perfect market that exists because it has a large number of buyers and sellers all selling the same products. There is a free flow of information and there are little barriers to participate.

The currency exchange market is an over-the-counter (OTC) market which means that there is not one specific location where buyers and sellers can actually meet to exchange currencies. Instead, transactions are conducted by phone, fax, e-mail or through the websites of brokers who specialize in currency trading.

The major dealing centres at the time of writing are: London , with about 30% of the market, New York , with 20%, Tokyo , with 12%, Zurich , Frankfurt, Hong Kong and Singapore , with about 7% each, followed by Paris and Sydney with 3% each. Because of the fact that these centres are all over the world, foreign exchange traders can execute transactions 24 hours a day. The market only closes on the weekends.

THE MAIN PLAYERS’ IN THE FOREX MARKET

The five broad categories of participants are: consumers, businesses, investors, speculators, commercial banks, investment banks and central banks.

Consumers, including visitors of countries, tourists and immigrants, do need to exchange currencies when they travel so that they can buy local goods and services. These participants do not have the power to set prices. They just buy and sell according to the prevailing exchange rate. They make up a significant proportion of the volume being traded in the market.

Businesses that import and export goods and services need to exchange currencies to receive or make payments for goods they may have bought or services they may have rendered.

Investors and speculators require currencies to buy and sell investment instruments such as shares, bonds, bank deposits or real estate.

Large commercial and investment banks are the price makers’. They are the ones who buy and sell currencies at the bid-and-offer exchange rates that they declare through their foreign exchange dealers.

Commercial banks deal with customers on one hand, and with the Interbank or other banks, on the other hand. They profit by utilizing the bid-and-offer spread. The bid price is the exchange rate that the buyer is willing to buy and the offer price is the exchange rate at which the seller is willing to sell. The difference is called the bid-offer spread. They also make profits from speculating about whether the exchange rate will rise or fall.

Central banks participate in the foreign exchange market in their effective duty as banks for their particular government. They trade currencies not for the intention of making profits but rather to facilitate government monetary policies and to help smoothen out the fluctuation of the value of their economy’s currency.

_____________

This is an excerpt, modified from the book: The Part-Time Currency Trader, featuring examples of how to trade these currency pairs.

May 27, 2010 · Tagged with , , , , , , , , , , , , , , , , , , ,

Forex

How to Win the Forex Battle

Posted by admin · Leave a Comment 

Every trading activity is in fact participating in a battle. Winning the battle is a matter of knowledge, skill and experience. If you miss any of those you are going to join the long line of losers. Some says that 95 to 99 percent of the traders are lining up on the losers side.

How to win the battle in the currency market? It is easy to answer that question, based on the above approach prepare yourself for the battle. If you treat currency market activity as a hobby youll ultimately lose all investments there. If you treat it as a business you still may loose everything.

The correct approach is: consider each pressing of the BuySell button as entering a battlefield. If you enter it without having a knowledge, skill and experience on how to win, you are destined to fail. You may have some lucky trades in the beginning, though. That, by the way, is the worst case scenario for the rookie in trading.

The earlier you get your bad lessons, the better for your overall experience. No mater how good you consider yourself prepared, after demo trading lessons, you have no idea of the forces ruling on the real market.

In fact the worst enemy you are going to face in the very beginning is not hiding behind the walls of the global currency trading centers. Your most dangerous foe is hiding deep inside of you. That enemy is so powerful that you will be amazed how quickly it will wash away all your carefully considered decision.

No one has been able to evade the force of that destructive power. No one can understand or realize that force unless it has been confronted face to face. Start trading with real money and youll face it too. Fear, Greed or Hope are some of the names of that power.

Fear forces you to sell near the bottom and buy near the top. Greed forces you to get out of the market prematurely. Hope will keep in the trade until you loose everything. Fear may save you but hope may wreck you completely. Greed will never make you rich.

It is easy to give advice to trade without emotions and use the logic, only. How you can achieve that if you never have been there. You need to go through that turmoil, pick up your loses due to your emotional decisions and than analyze.

Study all your bad trades, because they are the most precious gifts on the way to proficiency in trading. Growing as an experienced trader is possible only after getting your losses in the beginning. Then sit down and carefully study the lessons they brought to you.

One thing traders never want to do is to admit of being wrong. The market is a constantly changing and it demands flexibility in taking decision. That implies monitoring and constantly adjusting, changing your decision and action. When your logical analyzes suggest that you are wrong get out, quickly.

Once you overcome the emotions, concentrate on developing your signature way of trading. You can start with following different advisors and system and picking from them the things you like. Demo trade and test your ideas until you find the trade system which is matching completely your personality.

Now, you have to go back to emotion in a controlled way. Every time your system suggests a trade look inside you and see how you feel about this trade. You feel bad discard it. If you feel good keep it.

Here comes the final step: Looking for the final approval sign before submitting the trade. Here is the time, where the mastership shows up. Your weapon is loaded, the target is clearly seen on the visor and the finger is on the trigger. You have to make that final exhale, get the target over the cross point and shoot it.

How much knowledge, skill, experience and patience you need to build within in order to reach that very final stage of trading proficiency? Only youll know that and only you can do it. The rest is just numbers in your bank account.

Building a fortune by trading currency is not a mirage in the desert of live. There are hundreds of traders who are making living of that business and you can do it too. Study all you can find on the net and follow the steps of the best if you want to win that battle.

April 29, 2010 · Tagged with , , , , , , , , , , , , , , , , , , ,