Monday, March 30, 2015

Trading Intervals in Forex

Trade Intervals
Trade intervals in this context refers to the length of time positions are held open in the account.
Because there is no standard definition, it is helpful to think of trades as falling into one of two main types – intra-day trades and inter-day trades.

In Lesson 3, we looked at how most brokers use an end-of-day evaluation to determine the daily net interest for open positions. These positions are then closed and "rolled-over" into an identical position for the following day. Because day trades are closed prior to the end of the business day, day trade positions are not typically included in the interest calculation for your account.

 Sample Price Chart
 Intra-Day Trades
Commonly referred to as day trades, intra-day trades are opened and closed during the same business day.
The length of time intra-day trades remain open could range from just a minute or two, to several hours.
Intra-day traders hope to profit on the currency pair's volatility as exemplified in the following price chart.

Note that even though the exchange rate fluctuated continuously between 14:00 and 16:00 hours, overall, the rate declined.
In this case, taking a short position around 14:00 hours and holding it for only two hours, would have resulted in a gain of approximately 35 – 40 pips.

 Inter-Day Trades
An inter-day trade remains open overnight.
Because these trades are held over from one day to the next, they are included in the end-of-day rollover and also the interest calculation for the account.
Inter-day traders are usually employing one of the following three strategies:
Trading a long-term view
Establishing a carry-trade
Hedging future currency exposures
 Trading a Long-Term View
A long-term view is the forming of an opinion on the future direction of an exchange rate.
If you believe, for instance, that Japan's economy will contract over the next quarter, while the Eurozone countries led by industrial powerhouse Germany will expand, you might conclude that the euro will appreciate in value over the yen over the long term.
To take advantage, you could go long the EUR/JPY with the intention of holding the position open for the next two to three months, or even longer.
As time goes on and your assessment proves accurate (or not), you can close the position at any time at the current market price.
Depending on the market price, closing the position will serve to either realize your gains, or limit your losses.

Eurozone – The name given to the collection of countries that use the euro as their currency.
 Establishing a Carry Trade
A carry trade is used to take advantage of the interest rate differential between the two currencies in a currency pair.
The basic goal of a carry trade is to buy currencies with a high interest yield, while shorting currencies with a low yield.
For your carry trade to be profitable, your long position must yield more interest than you are forced to pay for your short position. The difference is called carry, and if the carry is positive, you profit – if the carry is negative, you lose money.
In addition to earning profit on the interest rate carry, you can also profit on a change in the exchange rate. Keep in mind however, that if the rate moves against you, it could eliminate any profit you earn through the interest, so you must continually monitor your carry trades.
For more information on how forex brokers calculate interest on open orders, see End-of-Day Rollovers for Open Positions in Lesson 3.
 Hedging Future Exchange Rate Exposures
A future exchange rate exposure exists when you will be required to convert your own currency to a foreign currency at some point in the future.
For instance, you could be faced with an upcoming payment that must be submitted in another currency, or you could be expecting some form of payment that will be converted from a foreign currency to your own.
Both situations include an element of risk in that you cannot control future exchange rates.
This means that your upcoming bill could cost you more than expected if your own currency loses value against the currency in which you must pay the bill.
On the other hand, if your currency gains in strength and you are expecting a future payment, it will be worth less to you once converted to your own currency.
 Using Spot Forex Trades to Hedge Future Exchange Rate Exposures
To protect against an unfavorable change in the exchange rate in the future, you can enter into a spot market forex trade.
For example, a UK resident intends to buy property in the U.S. later in the year. To think of this in currency trading terms, the buyer is long GBP and short USD.
To protect against the dollar gaining on the pound before the buyer can complete the transaction, the buyer could sell GBP and buy USD, and hold this position open in a forex trading account.
This effectively "locks in" the current exchange rate as the buyer is holding USD in the trading account.
If the dollar gains in value, the buyer will receive more pounds back when the position is closed, and the extra can be used to buy USD.
On the other hand, if the dollar falls in value, the buyer will still have the equivalent when converted to USD - which is the purpose of the hedge in the first place.

A word of warning before engaging in any long-term, inter-day trading – you will need to be able to withstand the normal fluctuations that will most certainly occur for any currency pair over a longer time frame. You may suffer through several days in a row where the price moves against you, but you must have the courage to stick to your strategy and remember that you are in it for the long haul.

Trends are rarely in a straight line and rates will fluctuate. But, if the overall trend is in the direction you predicted, you will come out on top. If you don't think you can handle this pressure, or if you question your ability to identify such opportunities, then this form of trading may not be appropriate for you.

Making The First Forex Trade

Now that you have completed the first three lessons of this course, you have the basic information you need to make your first forex trade. Before you take that first step and commit your money to a trade, there is something more you can do to help prepare yourself for the real world of trading:

Open a practice forex trading account.

Most online forex brokers offer practice accounts that simulate the real trading experience. Instead of risking your hard-earned cash, you can trade using virtual money. The lessons you learn using a practice account are immediately transferable to live accounts, so to receive the greatest benefit, you must treat the practice account seriously and trade as if you were trading real money.

Do this for at least a few weeks and then make an honest assessment of your performance. If you have more losing trades than winning trades, you must adjust your strategies and continue practicing before you open and fund an actual trading account.

Sunday, March 29, 2015

History of the Forex Market

Until the 1970s or so, currency trading was limited mostly to the needs of large companies conducting business in multiple countries.
Trading for investment and speculative purposes was not widely practised at this time, and most trading was centered on commodities and individual stocks.

Speculation – An attempt to profit on the fluctuation in prices for currencies and other investment securities.
 The Bretton Woods Accord – Courting Controversy
After World War II, economies in Europe were left in tatters.
To help these economies recover – and to avoid mistakes made in the wake of the First World War – the Bretton Woods Accord was convened in July 1944.
Several resolutions arose from Bretton Woods, but it was the "pegging" of foreign currencies to the U.S. dollar that arguably had the greatest immediate impact on the global economy.

Gold Standard Currency – A commitment to fix the value of a currency to a specific quantity of gold. Under this system, the holder of the country's currency can convert funds to an equal amount of gold.

Fiat or Floating Currency – Fiat currency is the opposite of a gold standard arrangement. In a fiat currency system, the currency's value rises and falls on the market in response to demand and supply pressures. It is this fluctuation that makes it possible to speculate on future currency values.
 Pegging U.S. Currencies to the U.S. Dollar
By pegging (or linking) these currencies directly to the dollar, the value of the pegged currencies remained dependent on the value of the dollar.
At the same time, the value of the dollar was tied to the price of gold which, at the time of the Bretton Woods Accord, was valued at $35 an ounce.
The U.S government was obligated to maintain gold reserves equal to the amount of currency in circulation, making the United States a true gold standard economy.

Saturday, March 28, 2015

The dark underworld of forex trading

Investors around the world haven't lost their appetite to trade in the post-financial-crisis era. But instead of playing the sharemarket, they fancy themselves as global currency traders. That has been propelling the growth of retail foreign exchange broking into a $380 billion industry, doubling since 2007.

Australia has become a hot-bed of the industry by virtue of its trading culture, and as a safe jurisdiction for locally based players to market themselves to traders around the world. Such is its popularity that daily turnover at some of Australia's largest brokers can exceed the entire cash equities volume of the Australian Securities Exchange on a given day.

Forex trading is not new, but the electronic platforms and extreme leverage – sometimes as high as 500 to one – can make the Euro/US dollar pair as riveting as punting on a penny stock.

Yet despite its rising popularity, some insiders are adamant the world of forex broking has been, and remains, a shifty business. Technology may have lowered trading costs but it has allowed many unsavoury practices to take place on a larger scale.

The industry's dirtiest little secret is the extent of trading profits that brokers earn by directly taking on their muggiest punters.

While some platforms act like true brokers others are more akin to bookmakers. They're understood to split their trades into what is known in the industry as "A-books" and "B-books".

The "A-book" describe the trades the broker receives that are passed on to the inter-bank market with the broker clipping a ticket.

The alternative "B-book" consists of trades that the broker has not passed on to the market but taken on themselves.

Why would brokers take on their clients? Because an estimated 95 per cent of retail traders are pre-programmed to fail, which means the brokers will ultimately win by taking them on rather than passing them off to the market.

The existence of leverage amps up the movements in clients' positions, making it more likely that a stop-loss (mandatory sell order) will be triggered, speeding up the inevitable loss. And with brokers trading against their clients, they may possess the ability to tilt the game in their favour.

This includes inserting charges such as "cost of carry" that retail punters have little chance of reconciling. It has also been suggested the brokers can and do widen their bid-to-offer spreads momentarily to hit the stop-losses, forcing a loss on the client.

The B-book does carry risks that a large savvy trader will bet big and win, which means the larger accounts are shifted to the A-book where the broker pays an inter-bank dealer a fee.

"B-booking" is a taboo subject and brokers are loath to admit they engage in betting against their clients. But insiders are convinced it is an integral part of several of the brokers' business models that required them to constantly market for new clients.
Cottage industry of trading analytic firms 

As evidence of B-booking's prevalence, a cottage industry of trading analytics firms has sprouted up to help brokers identify which clients have even the faintest idea what they're doing. They're then shifted to the A-book.

There are reasons why foreign exchange markets are particularly well suited to the retail brokerage model. And much of the logic played out in reverse last Thursday evening. The FX markets never sleep, which means the sudden "gapping" in pricing that can blow up brokers and their clients in other markets is rare.

That's why former Axi Trader executive and currency trading expert Quinn Perrot believes high leverage of up to 400 times in certain currency pairs is not as dangerous as it sounds. "The FX markets have high leverage because they trade 24 hours a day, which usually prevents the type of gaps seen between market close and market open on the stock market," he said.

But on Thursday the Swiss franc gapped like no currency in history.

Perrott says this was because larger dealers had a view where the franc should trade without the peg. They instantaneously moved their market pricing to that point, blowing through stop-losses of broker clients. For a trader with 400 times leverage, a 30 per cent move resulted in a 1200 per cent loss.

Such enormous losses, which exceeded client balances by many multiples, meant the big problems lay with brokers. Some either had a blowout in bad debts or closed out their client's trades at different levels to where they could hedge the exposures. The losses effectively blew up the largest and third-largest retail forex broker and inflicted multimillion-dollar losses for other players.

Perrott says poor risk management "too often confined to lawyers and operations staff stuck away in a corner office" caused brokers to collapse. He stress-tested scenarios where the peg was lifted and rejects the assertion that the Swiss move was a shock "black swan" event. "What was missing is they probably never sat down with their risk managers and brain-stormed the potential knock-on effects."

The melt-down of some offshore brokers has also raised the controversial issue of client segregation. Australia imposes tough restrictions on derivative brokers, but unlike other countries allows brokers to use client funds as collateral. On this issue, local and international brokers are at loggerheads.

The Australia CFD Forum, which consists of big global players like IG Markets and CMC – lobbied governments to introduce segregation of client funds. Other brokers such as Pepperstone say they support client segregation but take exception to foreign firms lobbying for rule changes on their home turf.

The risks of frozen client funds was apparent to local clients when global broker MF Global collapsed in 2011. It ran into trouble taking highly leveraged "off-piste" bets on European interest rates. That and the Swiss events are reminders of a lesson even the largest players often forget: the dangers of trading are beyond what meets the eye 

Friday, March 27, 2015

Forex Trading

The foreign exchange market (also known as forex or FX) is one of the most exciting, fast-paced markets in the financial world. Though historically, forex has been the domain of large institutions, central banks, and high wealth individuals, the growth of the Internet has allowed the average individual to become involved with and profit from trading currencies. Online Trading Academy offers Forex Trading workshops as well as weeklong courses to traders of all levels. Learn to trade the currency market using the latest tools and software, and make predictions based on careful training from the pros.

About the Forex Trading Market

The foreign exchange market is the virtual location where global currencies are traded. Though the total volume ebbs and flows, the Bank for International Settlements reported that the forex market trades in excess of $4.9 trillion U.S. per day. This makes it the largest electronic market, essentially dwarfing the stock market.
What is Currency Trading?

Trading currencies is the act of making predictions based on minuscule variations in the global economy and buying and selling accordingly. The exchange rate between two currencies is the rate at which one currency will be exchanged for another. Forex traders use available data to analyze currencies and countries like you would companies, thereby using economic forecasts to gain an idea of the currency's true value.
The Benefits of Forex Trading

Unlike stocks, forex trades have low, if any, commissions and fees. Even so, new forex traders are always advised to take a conservative approach and use orders, like stop-loss, to minimize losses. High leverage, which should be prudently applied, gives traders the opportunity to achieve dramatic results with far less capital than necessary for other markets. Forex trading requires training and strategy, but can be a profitable field for individuals looking for a lower risk endeavor.
Learn Forex Trading with Online Trading Academy

At Online Trading Academy, we break down the forex trading experience into multiple courses based on your level of expertise. We can help establish the fundamentals of currency trading for the new trader, or refresh advanced principles with a more experienced investor. Trade on your own schedule with markets open 24 hours a day, five days a week. Our expert educators can help you implement your own forex trading strategy based on live streaming data and analysis.

Thursday, March 26, 2015

The 10 Best Forex Strategies 2015

When it comes to selecting strategies to trade, you have the choice between buying one off-the-shelf or trawling the Internet for freebies. The trouble with free forex trading strategies is that they are usually worth about as much as you pay for them. They haven’t been tested, and there is little evidence of their reliability.
The strategies covered here on the other hand, are ones that either I or successful traders I know have used in a consistently profitable fashion…


N.B. not all of the following strategies are equal in all markets. Some perform better than others, and each individual trader will find some strategies more suitable for them to trade than others.
Rushed for time? Click here to get the 10 Best Forex Strategies sent to you, starting now!
#1: The Bladerunner Trade

The Bladerunner is an exceptionally good EMA crossover strategy, suitable across all timeframes and currency pairs. It is a trending strategy that tries to pick breakouts from a continuation and trade the retests.
#2: Daily Fibonacci Pivot Trade

Fibonacci Pivot Trades combine Fibonacci retracements and extensions with daily, weekly, monthly and even yearly pivots. The emphasis in the discussion here is on using these combinations with daily pivots only, but the idea can easily be extended to longer timeframes incorporating any combination of pivots.
#3: Bolly Band Bounce Trade

The Bolly Band Bounce Trade is perfect in a ranging market. Many traders use it in combination with confirming signals, to great effect. If Bollinger Bands appeal to you, this one is well worth a look.
#4: Forex Dual Stochastic Trade

The Dual Stochastic Trade users two stochastics – one slow and one fast – in combination to pick areas where price is trending but overextended in a short term retracement, and about to snap back into a continuation of the trend.
#5: Forex Overlapping Fibonacci Trade

Overlapping Fibonacci trades are the favourites of some traders I have known. If used on their own, their reliability can be a little lower than some of the other strategies, but if you use them in conjunction with appropriate confirming signals, they can be extremely accurate.
#6: London Hammer Trade

The extra volatility you get when London opens presents some unique opportunities. The London Hammer Trade is my take on an attempt to capitalise on these opportunities. Especially effective during the London session, it can be used at any time when price is likely to be taking off strongly in one direction, and possibly reversing from an area of support/resistance just as strongly.
#7: The Bladerunner Reversal

As mentioned above, the Bladerunner is a trend following strategy. The Bladerunner reversal just as effectively picks entries from situations where the trend reverses and price begins to trade on the other side of the EMA’s.
#8: The Pop ‘n’ Stop Trade

If you’ve ever tried to chase price when it bounds away to the upside, only to suffer the inevitable loss when it just as quickly reverses, you will want the secret of the pop and stop trade in your trader’s arsenal. There is a simple trick to determining whether or not price will continue in the direction of the breakout, and you must know it in order to profit from these situations.
#9: The Drop ‘n’ Stop Trade

The flip side of the pop and stop, this strategy trades savage breakouts to the downside.
#10: Trading The Forex Fractal

The forex fractal is not just a strategy but a concept of market fundamentals that you really need to know in order to understand what price is doing, why it is doing it, and who is making it move. This is the kind of inside info that took me years and many thousands of dollars to learn. It’s yours here for free, so make use of it

There are also several sites on the net offering free strategies. The problem with most of these sites is, as mentioned above, they just give a brief description of each strategy, with little real proof that they work. Consequently, there is a need for greater research on your part before using any of those strategies in your actual trading. Once you have selected a strategy from one of these sources you will of course need to thoroughly back test and forward test it.

The various processes for this are covered in Forex Strategy Testing There are also several commercial systems to consider. Since these are more comprehensive than the simple strategies presented above, and thereby fall into the definition of Forex Trading System, they are dealt with separately in the following section, Forex Trading Systems

Wednesday, March 25, 2015

How a forex trade works

Forex prices are always quoted in currency pairs. This is because you are effectively buying one currency while selling the other.

Each currency in the pair is known by a three letter currency code, such as GBP/USD (sterling against the US dollar) or USD/JPY (the US dollar against the Japanese yen).

The first currency listed in a pair is known as the base currency. It is also sometimes referred to as the primary currency. The second currency in a forex pair is known as the quote currency, or counter currency.

A forex price indicates how much one unit of the base currency will buy of the counter currency. For example, if you see GBP/USD = 1.63792, this means one pound is worth 1.63792 dollars. To buy one pound, you would have to sell 1.63792 dollars. If you sold one pound you would receive 1.63792 dollars.

Forex trade example

Let’s say a news story has led you to believe that sterling will rise against the Australian dollar. You decide to buy £10,000 of GBP/AUD at 1.41703, which costs you A$14,1703. A few weeks later the price stands at 1.52703, meaning that the £10,000 you hold is now worth more. You decide to take your profit, converting your pounds back into Austrialian dollars for a profit of A$1100 (15,2703 - 14,1703). A breakdown of the transaction can be seen in the table on the right.
Going long and short

Depending on your view, you can either buy (‘go long’) or sell (‘go short’) in the forex markets.

Let’s say you have been keeping an eye on the euro and you think it will increase in value. In this situation, you would go long EUR/USD. In other words, you would buy euros and simultaneously sell dollars.

If you thought the euro was destined to decrease in value, you would go short EUR/USD. That would mean selling euros and buying dollars.
Forex pricing

A forex quote will always come with two prices: a selling price (known as the bid price) and a buying price (known as the offer price, or sometimes the ask price). The difference between the two prices is the spread. This is because the broker will incorporate a fee into the price.

The bid price is the price at which you can sell one unit of the base currency.

The offer price is the price you pay in order to buy one unit of the base currency.

Take a look at the quote for EUR/USD on the right.

The bid price is the amount you would receive in dollars (1.43552) in return for selling each euro. This is the maximum that the broker would be willing to pay for euros, in return for selling US dollars.

The offer (or ask) price of 1.43572 dollars is the amount of US dollars you would pay to buy each euro.
Points and pips

The movements of a currency are measured in terms of points or pips. A point, also known as a pip, is generally the fourth digit to the right of the decimal point. So for EUR/USD, a movement from 1.43551 to 1.43561 is one point or pip.

Why trade forex?

Forex trading enables you to speculate on the relative strength of one currency against another.

Forex is the world’s most popular financial market, with an immense volume of trades taking place every day. The majority of these are by speculators buying and selling on intraday price movements.

 There is an estimated daily turnover of over $4 trillion in forex trades worldwide. Commercial and financial transactions make up only about 10% of this trading volume.

The large number of traders and immense quantity of currency traded on a daily basis give the forex market exceptionally high liquidity.

This means it’s a very easy market for anyone to access – you can normally buy a currency on demand, because another trader somewhere will be glad to sell it to you, or vice versa.

The forex markets are also free from the commission systems which can complicate some other markets.

Generally you only need a small margin to get started, and there are low transaction costs.

You can trade around the clock and take advantage of high levels of leverage.

New to forex?

Forex (or sometimes just FX) is short for foreign exchange, and is the largest financial market in the world. Simply put, it’s how individuals and businesses convert one currency to another.

FX transactions worth trillions of dollars take place every day, and unlike stocks or commodities there’s no central exchange. Instead, currencies are traded by a global network of banks, dealers and brokers, which means you can trade any time, day or night, Monday to Friday.

FX prices are influenced by a range of different factors, including interest rates, inflation, government policy, employment figures and demand for imports and exports.

And because of the sheer volume of currency traders and the amount of money exchanged, price movements can happen very quickly, making currency trading not only the largest financial market in the world, but also one of the most volatile.

Monday, March 23, 2015

What is Forex?

What Am I Doing When I Trade Forex?

Forex is a commonly used abbreviation for "foreign exchange," and it is typically used to describe trading in the foreign exchange market by investors and speculators.

 For example, imagine a situation where the U.S. dollar is expected to weaken in value relative to the euro. A forex trader in this situation will sell dollars and buy euros. If the euro strengthens, the purchasing power to buy dollars has now increased. The trader can now buy back more dollars than they had to begin with, making a profit.

 This is similar to stock trading. A stock trader will buy a stock if they think its price will rise in the future and sell a stock if they think its price will fall in the future. Similarly, a forex trader will buy a currency pair if they expect its exchange rate will rise in the future and sell a currency pair if they expect its exchange rate will fall in the future.
What Is An Exchange Rate?

The foreign exchange market is a global decentralized marketplace that determines the relative values of different currencies. Unlike other markets, there is no centralized depository or exchange where transactions are conducted. Instead, these transactions are conducted by several market participants in several locations. It is rare that any two currencies will be identical to one another in value, and it's also rare that any two currencies will maintain the same relative value for more than a short period of time.  In forex, the exchange rate between two currencies constantly changes.

For example, on January 3, 2011, one euro was worth about $1.33.  By May 3, 2011, one euro was worth about $1.48.  The euro increased in value by about 10% relative to the U.S. dollar during this time.

Why Do Exchange Rates Change?

Currencies trade on an open market, just like stocks, bonds, computers, cars, and many other goods and services. A currency's value fluctuates as its supply and demand fluctuates, just like anything else.
An increase in supply or a decrease in demand for a currency can cause the value of that currency to fall.
A decrease in the supply or an increase in demand for a currency can cause the value of that currency to rise.

A big benefit to forex trading is that you can buy or sell any currency pair, at any time subject to available liquidity. So if you think the Eurozone is going to break apart, you can sell the euro and buy the dollar (sell EUR/USD). If you think the price of gold is going to go up, based on historical correlation patterns you can buy the Australian dollar and sell the U.S. dollar (buy AUD/USD).

This also means that there really is no such thing as a "bear market," in the traditional sense. You can make (or lose) money when the market is trending up or down.

Tuesday, March 17, 2015

What is Forex Trading?

Foreign exchange, commonly known as ‘Forex’ or ‘FX’, is the exchange of one currency for another at an agreed exchange price on the over-the-counter (OTC) market. Forex is the world’s most traded market, with an average turnover in excess of US$ 4 trillion per day.

Compare this to the New York Stock Exchange, which has a daily turnover of around US$50 billion and it’s easy to see how the foreign exchange market is the biggest financial market in the world. Essentially, forex trading is the act of simultaneously buying one currency while selling another, primarily for the purpose of speculation. Currency values rise (appreciate) and fall (depreciate) against each other due to a number of factors including economics and geopolitics. The common goal of forex traders is to profit from these changes in the value of one currency against another by actively speculating on which way forex prices are likely to turn in the future. Unlike most financial markets, the OTC (over-the-counter) forex market has no physical location or central exchange and trades 24-hours a day through a global network of businesses, banks and individuals. This means that currency prices are constantly fluctuating in value against each other, offering multiple trading opportunities. 24-Hour Forex Trading One of the key elements behind forex’s popularity is the fact that forex markets are open 24-hours a day from Sunday evening through to Friday night. Trading follows the clock, opening on Monday morning in Wellington, New Zealand, progressing to Asian trade spearheaded out of Tokyo and Singapore, before moving to London and closing on Friday evening in New York. The fact that prices are available to trade 24 hours a day helps to ensure that price gapping (when a price jumps from one level to the next without trading in between) is less and ensures that traders can take a position whenever they want, regardless of time, though in truth there are certain ‘lull’ times when volumes are below their daily average which can widen market spreads. Leverage Foreign exchange is a leveraged (or margined) product, which means that you are only required to deposit a small percentage of the full value of your position to place a forex trade. This means that the potential for profit, or loss, from an initial capital outlay is significantly higher than in traditional trading. Find out more about risk management. Pricing All forex is quoted in terms of one currency versus another. Each currency pair has a ‘base’ currency and a ‘counter’ currency. The base currency is the currency on the left of the currency pair and the counter currency is on the right. For example, in EUR/USD, EUR is the ‘base’ currency and USD the ‘counter’ currency. Forex price movements are triggered by currencies either appreciating in value (strengthening) or depreciating in value (weakening). If the price of EUR/USD for example was to fall, this would indicate that the counter currency (US dollars) was appreciating, whilst the base currency (Euros) was depreciating. When trading forex prices, you would buy a currency pair if you believed that the base currency will strengthen against the counter currency. Alternatively, you would sell a currency pair if you believed that the base currency will weaken in value against the counter currency. Some examples of major currency pairs are: EUR/USD (The value of 1 EUR expressed in US dollars) USD/CHF (The value of 1 USD expressed in Swiss francs)   Pips (Percentage in Points) Pip stands for Percentage in Points. Most of our currency pairs are quoted to 5 decimal places with the change from the 4th decimal place (0.0001) in price commonly referred to as a ‘pip'. For example, if the price of the EUR/USD forex pair moved from 1.33800 to 1.33920, it is said to have climbed by 12 ‘pips’ (92-80=12). Spread The difference in the BID/ASK of the currency pairs is referred to as the 'spread'. An example would be EUR/USD dealing at 1.33800/1.33808 (in this case the spread is 0.8 pips or 0.00008). The exceptions to this are the JPY pairs which are quoted to just 2 decimal places. A USD/JPY price of 97.41/97.44 displays a 3 pip 'spread'. What affects forex prices? Forex prices are influenced by a multitude of different factors, from international trade or investment flows to economic or political conditions. This is what makes trading forex so interesting and exciting. High market liquidity means that prices can change rapidly in response to news and short-term events, creating multiple trading opportunities for retail forex traders. Some of the key factors that influence forex prices are: Political and economic stability Monetary Policy Currency intervention Natural disasters (earthquakes, tsunamis etc) - See more at:

Forex Tutorial

The foreign exchange market (forex or FX for short) is one of the most exciting, fast-paced markets around. Until recently, forex trading in the currency market had been the domain of large financial institutions, corporations, central banks, hedge funds and extremely wealthy individuals. The emergence of the internet has changed all of this, and now it is possible for average investors to buy and sell currencies easily with the click of a mouse through online brokerage accounts. 

Daily currency fluctuations are usually very small. Most currency pairs move less than one cent per day, representing a less than 1% change in the value of the currency. This makes foreign exchange one of the least volatile financial markets around. Therefore, many currency speculators rely on the availability of enormous leverage to increase the value of potential movements. In the retail forex market, leverage can be as much as 250:1. Higher leverage can be extremely risky, but because of round-the-clock trading and deep liquidity, foreign exchange brokers have been able to make high leverage an industry standard in order to make the movements meaningful for currency traders. 

Extreme liquidity and the availability of high leverage have helped to spur the market's rapid growth and made it the ideal place for many traders. Positions can be opened and closed within minutes or can be held for months. Currency prices are based on objective considerations of supply and demand and cannot be manipulated easily because the size of the market does not allow even the largest players, such as central banks, to move prices at will. 

The forex market provides plenty of opportunity for investors. However, in order to be successful, a currency trader has to understand the basics behind currency movements. 

The goal of this forex tutorial is to provide a foundation for investors or traders who are new to the foreign currency markets. We'll cover the basics of exchange rates, the market's history and the key concepts you need to understand in order to be able to participate in this market. We'll also venture into how to start trading foreign currencies and the different types of strategies that can be employed.

How Safe is Forex Trading

The frank answer to the query that 'how safe is Forex trading' is, depends. There are some potential things that can go wrong and may result into loss in cases of carelessness. The following article, discusses some aspects of Forex trading. To know more about is forex trading safe, read on…
The Forex market is known by many different names including the FX market, or simply the Foreign exchange market or even the currency trading. This market is a world wide, over the counter market, which is open of 6 days a week and is accessible world wide through a gigantic network of several different foreign exchange brokers, and intermediaries. The very honest answer to the question that how safe is Forex trading is that if you are careless, its very dangerous and if you are a bit careful its very profitable. Frankly, it totally depends upon you. The following paragraphs, define some minor mechanisms in the Forex trading system and also enlist some common flaws or instances where unhealthy loss can occur.

How does a Forex Trade Work?

Point number one, Forex trading is not going to make you millionaire with you sitting back and relaxing, there is a lots and lots of hard work that is involved in the process. Plus you have to put in your own analysis and study, all with a great deal of carefulness.

Internationally any national currency which can be easily expressed and valued every day with the the help of a parameter which is usually United States dollars. For example 1 Euro = 1.4021 U.S. Dollars or $1 equals 44.36 Rupees (INR). Since the United States dollar has been used as a measurement for investments, it is sometimes also called as the base currency. A person trading in Forex, basically invests say $5 into Euros of the same amount and waits. If the European union performs well, economically, then the value of invested Euros, appreciates, upon which the trader can reconvert the Euros into dollars which would now have appreciated to about say $7. As a trader you should be well versed with this mechanism and also have the Forex trading tips on your fingertips.

You can register with broker who deals in Forex so as make legal and secure trades in the market. Make sure that you register yourself with a broker who has an authorization to solicit and your trades in the market. Also make sure to check his authorization, disclosures and the registration with the authorities, in ensure safety in Forex trading. Safe investment however is however not restricted to just having a good broker.

How Safe is Forex Trading?

Is forex trading safe? Well, to be really good at Forex trading, you also need to develop some good forex trading strategies. Here's what you can do…

The one of the best things that you can do is pair up economies. That is pair up United States Dollar with the Euro or the UDS with the Yen. Monitor the two economies closely, and make an analysis of their demand and supply. Before investing make sure you track the rates of exchange between the two economies. This will give you good graph sense and and anticipation judgment regarding the graphs of the currencies. The key to success is to purchase at a very ow expense and sell at a good rate. To know when to sell a particular currency and when to purchase one you will have to start learning statistical analysis of economies and also their demand and supply. You can also read about Forex trading secrets, where some economic activities influencing national economies are studied. There are some Forex trading techniques where the trades are done on sheer mathematical barrier breaks. That is if a particular currency breaks a certain barrier or exceeds certain value, then the trader sells the currency immediately. This strategy is often known as scalping. Another strategy is known as arbitrage trading where in the buy and sell action is almost simultaneous.

To keep your knowledge updated and senses alert you can use Forex signal providers which will alert you about the different changes in the world economies. The best way to cut your risk is to make sure that you remain alert and on your toes all the time. Remember, the market is not the same every day. I hope that you have go the answer to your question, 'how safe is Forex trading'. Good luck.

How Forex Leverage Works

The query 'how Forex leverage works' can be heard quite often from people who invest in the foreign exchange market or rather the Forex market. After all, a Forex leverage is a great way of expanding business and the possibility of getting better returns. Take a look at how it works…

In the world of finance and commerce, the 'word' leverage implies a technique to increase or multiply the returns on investment for a particular investment or set of investments. In some cases it also implies the increasing of equity or net worth of a business. Though the term is broad and covers several different assets, business and investments, a Forex leverage is basically a method or a set of methods, which are used to increase the net worth or realizable value of an asset or the returns of a certain investment. Leverage is conventionally achieved with the help of borrowings, contracts or debts. In case of Forex leverage, the credit or loan for the process is provided by the Forex brokers.

It must be noted that the theory, facts and mechanism of Forex leverage tends to sound surrealistic and almost like a bluff, however, that is the way it works.

Theory of Leverage in Forex

To understand the concept of Forex leverage properly, one needs to know how Forex trading works and the meaning of PIP and BP. If you don't, a quick reminding illustration of the same has been given in table at the bottom of the following paragraph. Well let's get started.

When you invest money in market such as a money market, stock market or in this case, the Forex market, there are three kinds of benefits or profits which you can reap, if the investment is done thoughtfully, logically and in a well analyzed, reasoned and calculated manner. The first one is the sale value profit, which is basically obtained from selling the owned investments at very high price from the price at which it was purchased. The second type of benefit is the period return that you receive from the investment such as dividends on shares/stock. The last one is broadest and is commonly known as total return on investment. This is the total and overall gain you have made from the investment. This amount is the cash or non-cash and may be realizable or unrealizable. With the help of Forex leverage, what we do is, increase the total amount that you hold in the Forex market in some other currency. There are two prominent ways with the help of which this can be done.
The first step is to open a marginal account with the broker when you are dealing in Forex. Then you can borrow, some money from the broker to invest in some other 'quote currency'. There is of course, a minimum amount you have to personally put in, before which the broker does not sanction the loan. The loan sanctioned is usually expressed in a ratio such as 5:3 or in percentages such as the 60%. The latter number or the percentage is the amount which is invested by you into the marginal account. It is basically your own investment. In this case, the broker will be loaning you 40% of the total investment. The 40% loan is your leverage.
Now the second method with the help of which you can opt for Forex leverage is by using derivatives. Derivatives are contracts wherein you as an investor has the right, but not the obligation, to purchase a currency at a predetermined price. Now this type of contract considerably increases the value of asset which you are holding whereas you actually invest or quote less. Note that a careful study is required to exercise the right properly.
In most of the cases instead of using just the derivatives, brokers make it a point to invest both ways, as it wards off unwarranted risks.
PIP: Price Interest Point
It indicates the 4 figures that follow the decimal.


A rise of 4,000 in the PIP means that the quote currency has risen and is indicated by: $1,000.4000 BP: Base Point
It indicates the 4 figures that precede the decimal.


A rise of 4000 in the BP means that the quote currency has risen and is indicated by: $4000.0000

Note: Info in the table assumes that the base currency is the USD (United States Dollar)

Forex Leverage: Practical Application

The practical application of Forex is known as margin based leverage after the marginal account wherein you invest your money. The leverage or rather the loan which is provided by the broker has the following formula.

Leverage (Margin Account) = Total Value of Investment/Asset/Transaction (-) Required Margin/Minimum Balance in account

Now such a leverage is often expressed in percentages or ratios. For example, a 50:1 ratio means that 2% of the total asset/investment value is your marginal accounts balance, which is your money. The remaining $49 is of course, the loan by your broker. That is to purchase $50 worth of foreign currency you need to put in, at least, $1 following which the lender loans you $49. Sometimes this sounds almost unreal however, the very small rises in the PIP and BP lead to profits, which are quite significant, and hence, the large loan by the broker. Either ways, the broker is always at advantage even if you loose money. One needs to remember that a leverage is a loan and a fee and interest is charged upon it through your marginal account.

Some people question how the profit is distributed. Well, the trend often differs from broker to broker and also country to country. The usual trend goes that the broker charges a nice hefty fee and percentage and the total amount lent i.e. $49 as in the above case is returned to the broker. The remaining profit is enjoyed by the investor that is you. Please note that there are some strict compliances regarding the balance in the marginal account and the ratio or percentages of the leverage. I hope that you have the answer to the query, how Forex leverage works. Good luck.