Wednesday, December 23, 2009

Most popular currency

The Euro and the US dollar are probably the two most well-known currencies that are used in the Forex market, and therefore they are two of the most widely traded in the Forex market. In addition to the two "kings of currency", there are a few other currencies that have fairly strong reputation for Forex trading. The Australian Dollar, the Japanese Yen, the Canadian Dollar, and the New Zealand Dollar are all staple currencies used by established Forex traders. However, it is important to note that on most Forex services, you won't see the full name of a currency written out. Each currency has it's own symbol, just as companies involved in the stock market have their own symbol based off of the name of their company. Some of the important currency symbols to know are:

USD - United States Dollar

EUR - The Euro

CAD - The Canadian Dollar

AUD - The Australian Dollar

JPY - The Japanese Yen

NZD - The New Zealand Dollar

Online trading for begineers

A career as an individual foreign exchange currency trader (also known as forex or fx trader) is one of the most ideal "jobs" in the world, especially if you love traveling, as you can trade from anywhere in the world as long as you have a good internet connection.
If you are trading forex on a part time basis, it is also flexible enough to accommodate the busy schedule of your full time job. You can plan when you want to trade for extra income, as the forex market is available 24 hours a day. You can still trade after your office hours in the comfort of your own home to supplement the income of your family.
If you are a mother, currency trading as a career would allow you the flexibility to be home with your kids. You can do your online currency trading when your kids are at school, while they are doing their homework, or while they are asleep. It allows you to earn some money from home while being there for your kids.

Forex overview

Each day, millions of trades are made in a currency exchange market called Forex. The word "Forex" directly stems off of the beginning of two words - "foreign" and "exchange". Unlike other trading systems such as the stock market, Forex does not involve the trading of any goods, physical or representative. Instead, Forex operates through buying, selling, and trading between the currencies of various economies from around the world. Because the Forex market is truly a global trading system, trades are made 24 hours a day, five days a week. In addition, Forex is not bound by any one control agency, which means that Forex is the only true free market economic trading system available today. By leaving the exchange rates out of any one group's hands, it is much more difficult to even attempt to manipulate or corner the currency market. With all of the advantages associated with the Forex system, and the global range of participation, the Forex market is the largest market in the entire world. Anywhere between 1 trillion and 1.5 trillion equivalent United States dollars are traded on the Forex market each and every day.

History of forex exchange

5 Economic Events When Currency Rocked The World
These are changes in the currency markets which caused substantial impact in the world economy. It is important that people learn about currency movements and how the occurrence of such events provide lucrative opportunities for currency investors to profit from the forex markets.

Free Market Capitalism is Born
On August 15 1971, this date marked the end of the Bretton Woods system, a system that used to fix the value of a currency to the value of gold. The United States pulled out of the Bretton Woods Accord and took the US off the established Gold exchange Standard.
US were running a balance of payments deficit and a trade deficit back in the early 1970s due to the costs of Vietnam War and increased domestic spending has accelerated inflation. The US government used up almost all of his reserves and gold reserves by that time. Hence it began to print more dollars to supplement its expenditure. In short, most countries lost faith in the dollar as it is overvalued against gold. The international community dumped their dollars in exchange for gold.
The fact is there was not enough gold in the US vault to pay back the international community. US government had printed too much dollar and they were broke.
Following that, President Nixon shocked the world. The event was informally named 'Nixon Shock' because President Nixon and 15 advisors removed US from the Gold Exchange System without consulting the members of the international monetary system.
US dollars was the first currency to be floated- that is, exchange rates were no longer the principal method used by governments to administer monetary policy but is solely determined by supply and demand market forces. By 1976, all the major currencies were floated. The forex markets were started.

Devaluation of U.S Dollar - Plaza Accord
In the early 1980s, the US Federal Reserve System under Paul Volcker had overvalued the dollar enough to make US exports in the global economy less competitive. The U.S government faced a large and growing current account deficit, while Japan and Germany were facing large and growing surpluses.
This imbalance could create a serious economic disequilibrium which would result in a distortion of the foreign exchange markets and thus the global economy. The result of current account imbalances and the possibility of foreign exchange distortion brought ministers of the world's leading economies - France, Germany, Japan, the United Kingdom, and the United States together in New York City.
The Plaza Accord was signed on September 22, 1985 at the Plaza Hotel in New York City, agreeing to depreciate the US dollar in relation to the Japanese yen and German Deutsche Mark by intervening in currency markets.
The effects of the Plaza Accord agreement were seen immediately within 2 years. The dollar fell 46 percent and 50 percent against the deutsche mark and the Japanese Yen. Devaluation of the dollar stabilise the growing US trade deficit with its trading partners for a short period of time. As a result, U.S. economy became more export-oriented while Germany and Japan became more import-oriented.
The signing of the Plaza Accord was significant in that it reflected coordinated actions with respective governments were able to regulate the value of the dollar in the forex market. Values of floating currencies were determined by supply and demand, but such forces were insufficient, and it was the responsibility of the world's central banks to intervene on behalf of the international community when necessary.
To date, we still see countries that continue to regulate value of its currency within a certain band in the forex market. Example of one country is Japan.

Black Wednesday - The Man Who Broke the Bank
Black Wednesday refers to the events on 16th September 1992 when George Soros placed a $10 billion speculative bet against the U.K. pound and won. He became the man who broke the Bank of England.
In 1990, U.K. joined the Exchange Rate Mechanism (ERM) at a rate of 2.95 deutsche marks to the pound and with a fluctuation band of +/- 6 percent. ERM gave each participatory currency a central exchange rage against a basket of currencies, the European Currency Unit (ECU). This system prevents the exchange rate of participatory currencies from too much fluctuation with the basket of currencies.
Until mid 1992, economy began to change in Germany. Following reunification of 1989, German government spending surged, forcing the Bundesbank to print more money. German economy experienced inflation and interest rates were raised to curb inflation.
Other participatory countries in the ERM were also forced to raise interest rates so as to maintain the pegged currency exchange rate. The rate hike led to severe repercussions in the United Kingdom. At that time, U.K. had a weak economy and high unemployment rate. Maintaining high interest rates is not sustainable for U.K. in the long term, and George Soros stepped into action.
George Soros was said to profit $2 billion from the Black Wednesday. This single event showed that with knowledge and experience, investors could profit from the forex market. No central banks can control the forex markets.

Asia Currency Crisis
Leading up to 1997, investors were attracted to Asian investments because of their high interest rates leading to a high rate of return. As a result, Asia received a large inflow of money. In particular, Thailand, Malaysia, Indonesia, Singapore and South Korea experienced unprecedented growth in the early 1990s.
These countries fell one after another like a set of dominos on July 2, 1997, showing the interdependence of the Asian 5 Tigers' economies. Many economists believe that the Asian Financial Crisis was created not by market psychology but by shrouded lending practices and lack of respective government transparency.
In early 1997, Thailand current account deficit has grown consistently up to a level that is believed to be unsustainable. Shrouded lending practices oversupplied the country with credit and in turn drove up prices of assets. The same type of situation happened in Malaysia, and Indonesia.
Levels were reached where price of assets were overvalued and coupled with a sn unsustainable trade deficit, international investors and hedge fund managers began to sell Thai baht and neighboring countries' currencies hoping to profit from the plunge.
Following mass short speculation and attempted intervention, the Asian economies were in shambles. Thai baht was sharply devalued by as much as 48 percent and Indonesian rupiah fell 228 percent from it previous high of 12,950 to the fixed U.S. dollar.
The financial crisis of 1997-1998 revealed the interconnectivity of economies and their effects on the global currency markets. The inability of central banks to intervene in currency markets provided yet another lucrative opportunity for currency investors to profit.

The Euro: Best Reserve Currency after Dollar
The name Euro was officially adopted on 16 December 1995. The Euro is the official currency of 16 of the 27 Member States of the European Union. Euro is the second largest reserve currency and the second most traded currency in the world after the U.S. dollar.

Stop your de-profit in forex

When a trader begins to trade, what normally happens is that the first few trades are usually successful ones. The new traders then becomes so confident of their supreme abilities in trading that their carefully crafted trading plan and money management rules are cast aside.Suddenly their trades are not going so well anymore, they begin to lose more and more regularly. It almost seems that the market is ganging up on them to rip the carpet from under their feet! New traders being inexperienced tend to take it very personally and then sub consciously decide to punish the market.So how to stop losing money in Forex is a must for traders

The position sizes become larger and larger, money management is totally forgotten, and their trading plan is in tatters now. Any piece of rumor or hearsay is taken to be the gospel truth and acted upon. When all these fail and they still lose money, they turn to "sources" that tout the holy frail of trading. That one plan that could make a trader a million in less than a year! (Come on by now wouldn't you have woken up already?)At that desperate situation, many traders choose to believe these sources and make some hefty purchases. They re fund their accounts and take their new trading plan to the market to stop losing money in Forex.

Are you psycho of forex?

It's a fact that forex trading can be learned by anyone but most traders fail and the reason they do is they don't understand forex trading psychology. If you do, you can join the elite 5% who make big consistent profits...

So what why is mindset so important?

The simple answer is forex trading is not just about method, it's also about the discipline to trade your method.
If you don't have the discipline to trade your system, you simply don't have one.

So why is trading with discipline so hard?
The reason is simply, you will at some point face a string of losses and it happens to even the best traders.
Forget all the rubbish you read, about trading with little or no drawdown, you read from vendors - It's not true. You are going to face periods of losses which may last many weeks and you have to keep going, despite taking losses and your emotions will be telling you to deviate from your plan.
Its here, that robust money management and discipline, will carry you through a losing period, until you hit profits again.

Discipline means you have to understand what you are doing and have confidence.
Most traders think they Can follow a so called expert and win, while most advice and forex robots sold online are junk, they cant even follow the few good advisors and forex trading systems because they don't learn from the ground up.

When you operate in the forex market, you operate in an environment that presents these unique challenges:

- The market is all powerful and is always right and only you can be wrong
- Its anarchy and chaos and you will lose for periods of time
- Its an odds based game and you need to learn how to trade them
- There is no rule of law and of course you have to make your own rules to survive
- The work ethic doesn't apply and work rate counts for nothing.
- Being clever also counts for nothing only being right does

Margin trading

Margin trading is the term used when trading forex with borrowed capital. That is how you open $10,000 or $ 100,000 worth positions with only $50 or $1000 in your trading account. You can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital.

There is a minimum amount of currency that we have to buy in order to open a position in foreign currency trading market. In forex terminology we call this minimum amount, a "lot". When you go to the super market you cannot just buy a biscuit. You will have to buy a whole packet. It does not make any sense to buy 1 Yen.

That is why they come in lots.
Carefully read the following example to understand the concept behind this.

Technical and fundamental analysis in a row

Technical analysis is based on:
1. examination of chart formations
2. differentiation of trends
3. identification of buying and selling prospects
4. analyzing highest and lowest price of a currency
5. understanding of opening/closing prices and volume of transactions

Depending on the trading style, forex trader can use technical analysis on a daily basis (5 minute, 15 minute, hourly), weekly or monthly basis.

Technical analysis uses the assumption that all market information and possible currency volatility can be obtained from the price chain. Forex trader who uses technical analysis believes in three fundamental assumptions - the market moves according to all factors, the price movement is purposeful and connected to these events, the history tends to repeat itself over and over again. In other words a trader looks back at what has already happened and makes decisions based on the believe that volatility will generally have the same pattern of the past.

Fundamental analysis uses financial news and economic news, such earnings and consumer reports, economic data releases, interest rates updates etc., together with non financial information, such as political news, weather broadcasts to determine the trades.

Fundamental analysis involves the analysis of current political and economical situation in the country of the selected currency. Generally, the country's economy relies on the following factors:
1. Central Bank's interest rates
2. National unemployment data
3. Tax policy
4. Inflation rate
5. Political unrest or transition

Fundamental analysis of forex trading

No serious discussion of forex trading would be complete without talking about the subject of fundamental analysis, and it's bearing on the markets. Forex traders should always keep their "finger on the pulse" of what is going on behind the economic scenes of the various countries whose currencies they trade.
Fundamental Analysis can best be defined as the study of the underlying economic and political factors that influence a particular currency. The goal is to attempt to predict price action and trends by looking at many different economic indicators and governmental policies.

Fundamentals for a currency may include interest rates, central bank policies, employment figures, and Gross Domestic Product numbers. These statistics are made public on a regular basis by most governments, and are watched closely by the astute foreign exchange trader.

Why bother with fundamental analysis? The simple answer is because only by looking at the fundamental factors that influence currency prices can you gain an accurate long-term view of where the prices are going.
It gives you the "raw material" as to what is driving prices, but it still does not give a trader the entry and exit points of his individual trades. It will help the trader, though, in developing a plan based on his unique trading strategies and goals.

Technical analysis of forex trading

If you are a forex trader and you hear the phrase "technical analysis," what is it that you think? If you instantly think about a chart that is completely filled with indicators such as stochastics, MACD, etc, then you probably have a different definition of technical analysis than I do.

When you use all those indicators, what exactly are you analyzing? To me, it would seem like all the indicators are doing all the "analyzing". The trader is just basing his/her decision whether to buy or sell based on the indicators. If you are going to use technical analysis, then shouldn't YOU be the one that should be analyzing how to trade the market, instead of your trusted indicators???

This is why trading price action is so important if you are going to get into technical analysis. You have to be able to grasp concepts like price movement, and be able to create a trading plan off of it. This may be more subjective than some traders are probably used to. But subjectiveness is something that almost any successful trader uses.

how you become a forex trader?

If you want to know how to become a Forex trader from home and make a valuable second income, then this article will point you in the right direction; simply follow the 3 simple steps enclosed and you can get on the road to Forex trading success.

First lets start with a simple fact - 95% of all traders lose money but they don't lose because they can't learn to trade, they lose because they make fatal errors in their approach. For example, a huge group of traders think they can get rich by making no effort and following a cheap robot but if these worked 95% of traders wouldn't lose money. To win you need to work smart and this leads me to my first steps to success.
Get the right Education.

You don't need to work hard or even be clever, you just need to use a simple Forex trading strategy. You can educate yourself about the markets in a week or two but don't fall for the myth, you can predict the market, you can't. You are simply trading the odds in Forex and that means, using a Forex strategy based on the following:

A simple Forex Trading Strategy based on the Reality of Price Change.
Your strategy should be based on just a few rules and parameters and should be very simple because - if you make it to complicated, it will have to many elements to break. Keep it nice and simple and trade the reality of price change and don't try and predict where prices may go.

A good strategy to use to trade Forex markets (which we have written on in other articles) is to follow and hold long term trends by buying breakouts to new highs. All the big trends start from breakouts and continue from them so, its a simple and timeless, strategy to seek long term gains with.

5 ways for complete forex tradings

Step 1 - Get Yourself Ready To Trade
In my experience, many traders fail to properly prepare to become a trader. A trader is a profession, one that many people have sought a college degree. As a trader, you have selected a work from home job. You'll need to be self-motivated, be a self-starter and enjoy working independently. Many have found that getting up in the morning and getting ready as if they were going to a job helps them get ready to get to work.

Step 2 - Look over your last few trades
A successful trader keeps a journal of their trades. In the beginning, you'll want to keep track of all of your trades. Be as specific as possible and track why you entered and exited a trade and if you were near support or resistance. As you keep a journal, you'll be able to identify your trading pattern. By identifying your pattern, you'll be able to recognize the same mistakes you have made in the past. You will also be able to recognize some trading trends, yours and the FOREX market's.

Step 3 - Fundamental and Technical Analysis
Technical analysis refers to anything that is related to price action. The price itself, formulas, patterns, etc. There many tools that you can use; different indicators and charts. Choose one and be consistent with the one that you use. Don't' use MACD one night and RSI the next. Also, be consistent in the length of your moving averages and don't switch between simple and exponential. Use what makes the most sense to you and don't over analyze. One tip: for sure use Fibonacci Lines.
Fundamental analysis refers to anything other than price action. In the world of trading our case it means news. I look to see what piece(s) of news are being released that day and from that information determine what kind of volatility to expect in the upcoming session. This also helps me to determine which support and resistance levels to expect.

Step 4 - Money Management
This step is all about setting up a good money management system. Choose how you want to increase your trade size and be consistent. Those who change their path day after day tend to experience failure.
This is often when traders begin trading beyond their level. The key is to not trade on a live account until you have consistently made money in a demo account. A rule of thumb is to have made a profit consistently for two weeks. And, it is not consistent if you made $9,000 one day but lost money the other 10 days.

Step 5 - Make the Trade!!!
Now you are ready to make your trade. There are a couple of things to remember. You have the done your homework and know what to expect and what to look for. It's important to be patient and wait for your opportunity. Once you see the opportunity, enter your trade and place your stop order immediately. Then, place your profit target.
Remember to keep your journal and you will gather very valuable information over time. This will help you to continue to improve your trading skills.

Automate your forex trading

An automated Forex trading is a tool or a software that conducts the work of Forex trading system automatically. This software can predict the rise or the fall of the currency rates, so that you are able to trade automatically without having to monitor the Forex markets continuously. Using this tool, an individual trader will be able to keep up with all the data and news, the non-stop schedules of the Forex market, and take the right decision what to do best.

The software can perform complex calculations quickly and easily, analyze large volumes of historical data, and conduct opening and closing orders directly. Some other benefits you will get from tool are as follow: You'll have less stressful and more profitable trading. As the system is used to buy and sell on the Forex markets at any time of the day, you can enjoy optimal trade and get on with the rest of your life.
The software is one of the best ways to make money from currency trading. It can save plenty of time, work to take advantage of the 24 hour currency markets. This can be the best choice for ones who want to succeed in FX trading.

But to ensure that you actually get profits, you have to learn the system, and customize the tool depends on your needs. You must get equipped with basic knowledge of the software and some trading skills. Choose the automated software with best customer service and easy solutions to the problems of the program. Find the facts from the customers reviews about the software, including product features and benefits, or even information about the prices and guarantees.

Handle risk in forex trading

One of the best ways to minimize or avoid risks is to learn to identify a genuine Forex dealer. When you are trading in Forex market, you are 100% relying on the dealer's integrity for a getting you a fair deal. So be cautious about whom you are dealing with and do not forget to check the investment offer. Hire a trader whose business are legally regulated. This is the safest method to avoid forex scams, especially on the net.
Besides choosing the right Forex trader, learn to keep an eye on the ever fluctuating forex market and create a risk profile for yourself. This risk profile or placing of stop loss order will stop or prohibit the Forex dealer from taking risks that are beyond your financial means.

redefine forex trading

Who Trades in FOREX?
The FOREX is made up of about 5,000 trading institutions such as international banks, central government banks (such as the US Federal Reserve), and commercial companies and brokers for all types of foreign currency. There is no centralized location of FOREX; major trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Paris, and Frankfurt. All trading is done by telephone or Internet.
Businesses use the market to buy and sell their products in other countries, but most of the activity on the FOREX is from currency traders who use it to generate profits from small movements in the market.
Even though there are many huge players in FOREX, it is accessible to the small investor thanks to recent changes in the regulations. Previously, there was a minimum transaction size and traders were required to meet strict financial requirements.

With the advent of Internet trading, regulations have been changed to allow large interbank units to be broken down into smaller lots. Each lot is worth about $100,000 and is accessible to the individual investor through 'leverage' loans extended for trading. Typically, lots can be controlled with a leverage of 100:1 meaning that US$1,000 will allow you to control a $100,000 currency exchange.

Advantages to Trading in FOREX
Liquidity - Because of the size of the Foreign Exchange Market, investments are extremely liquid. International banks are continuously providing bid and ask offers and the high number of transactions each day ensures there is always a buyer or a seller for any currency.
Accessibility - The market is open 24 hours a day, 5 days a week. The market opens Monday morning Australian time and closes Friday afternoon New York time. Trades can be done on the Internet from your home or office.

Open Market - Currency fluctuations are usually caused by changes in national economies. News about these changes is accessible to everyone at the same time--there can be no 'insider trading' in FOREX.
No Commission - Brokers earn money by setting a 'spread'--the difference between what a currency can be bought at and what it can be sold at.

How does it work?
Currencies are always traded in pairs: the US dollar against the Japanese yen, or the English pound against the euro. Every transaction involves selling one currency and buying another, so if an investor believes the euro will gain against the dollar, he will sell dollars and buy euros.

The potential for profit exists because there is always movement between currencies. Even small changes can result in substantial profits because of the large amount of money involved in each transaction. At the same time, it can be a relatively safe market for the individual investor. There are safeguards built in to protect both the broker and the investor, and a number of software tools exist to minimize loss.

Redefine forex definition

The foreign exchangemarket is the “place” where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business. If you are living in the U.S. and want to buy cheese from France, either you or the company that you buy the cheese from has to pay the French for the cheese in euros (EUR). This means that the U.S. importer would have to exchange the equivalent value of U.S. dollars (USD) into euros. The same goes for traveling. A French tourist in Egypt can’t pay in euros to see the pyramids because it’s not the locally accepted currency. As such, the tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate.

History of forex trading

Approximately 25 percent of large companies that are exposed to foreign currency fluctuations don't do anything to hedge their risk. Larger companies however do hedge in the currency markets.

For an US based company, when the dollar is strong during their reporting period, accounting for its foreign earned revenue can result in a negative performance. That's because foreign-currency denominated revenue will exchange for fewer dollars when converted and reflect negatively for the accounting period.

It has been estimated that 5-10% of the activity on the FORX market is done because of business hedging and government involvement. Governments and businesses need to convert one currency into another to buy and sell goods and services. The other 90-95% is pure speculation.

The foreign exchange markets have been the playground of governments, corporations, banks as well as high-profile traders such as Warren Buffet and George Soros. Many speculators have made consistent net profits. For instance, George Soros "broke the Bank of England" by shorting the pound and walked away with a cool $1-billion profit in a single day.

Since the currencies are traded 24 hours there are certain times that are more liquid than others for the various currency pairs. For instance, between the hours of 8 AM and 5 PM EST, New York accounts for about 15% to 17% of all FOREX transactions. On the other side of the globe, 10% of FOREX transactions take place between Tokyo's trading hours from 7 PM to 3 AM EST

Tuesday, December 22, 2009

Srewed your forex with tools

If you are going to take Forex trading seriously, you're going to want to invest your labors looking into nothing but excellent Forex analyzing tools. We’ve gone out and gathered these tools for you, and are here to provide you with tried and true, expert recommended, success proven, analyzing tools.

USDCAD launch new test

USDCAD is testing key resistance of 1.0748, a break above this level will indicate that a cycle bottom has been formed at 1.0405 level on daily chart, then a sharp move towards 1.1000 could be seen to follow. However, as long as 1.0748 level holds, we'd expected downtrend to resume and another fall below 1.0206 is still possible.