Forex Trading - Forex Resources

Which Forex Currency Tracks What?

Fri, 27 Jun 2008 18:10:37 -0700

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The US Dollar is the most common currency that is commonly quoted in trade across the globe. It is one of the most popular currencies in the world. However, there are several other currencies that are actually not affected by the US Dollar movements in the forex market. These currencies may not be as popular as the US Dollar; nevertheless, they hold their own importance and are backed by several factors in their own countries that make them hold their ground strongly, in case of Dollar fluctuations.

The Euro:

European Union decided to have its own currency in 1999 and introduced it in the forms of coins and notes by the year 2002. Since then, the Euro has been one of the strongest contenders against the US Dollar. The EU consists of Austria, Belgium, Greece, Germany, France, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. Socialist countries, which are also the largest countries of EU, hold the reigns of government budget deficits. The ECB or the European Central Bank is the lead bank that decides the monetary policies and aims to keep a check on inflation rather than keeping a check on economic contraction. The ECB has kept steady interest rates in past when there had been an economic slow down. Thus interest rates or adjustments in Euro exchange rates are less frequent.

The Japanese Yen:

Japan is a net importer of goods. However, the US and Europe are its major customer for its machinery and other production. Japan especially needs crude oil to keep its economic machinery running like clockwork. Bank of Japan faced one of the major deflationary crises in 1990s when it was compelled to switch to zero interest policy. At this time, Yen experienced the carry trade – when an entity buys a currency at zero interest rate and parks it in another account with high interest rates. In 1990s, the US treasury bonds and German bunds witnessed many such transactions. This means that the Japanese Yen shall always trade lower against the Euro and US Dollar which gives Yen/Euro trade as a viable pair. The only contention offered to this trade is the Chinese Yuan. China is one of the biggest competitors of Japan. Since china also artificially floats its currency, it may weaken the Yen’s value eventually.

The British Pound:

Britain has oil production in North Sea which can influence its economy. This means that Britain has energy reserves and thus, whenever the oil prices have gone high in past, so has the British pound. However, Britain has been experiencing a net increase in its demand for natural gas which has made it as a net importer of natural gas. This means that if there are any outrageous price spikes in the commodity, it would lead Britain to economic exposure. If oil prices start to head north rapidly, Bank of England may need to keep inflation in check and consumer spending may be severely affected. The British pound is also susceptible to strengthening of European currency. Thus, trading Euro with Pound can be quite a liquid trading relationship.

The Canadian Dollar

It is also referred to as "the Loonie" as it has the bird, huard, on its coin. Loony is the French for huard. Bank of Canada is country’s central bank that dictated the monetary policies for the nation. It holds eight meetings in a year to decide upon the interest rates policy. Canada is also world’s second largest reserve for crude oil with more than 175 billion barrels of reserves. The US is its main customer and if there is an increase in the oil prices, they would further strengthen the Canadian Dollar.

The Swiss Franc

It is commonly known as the "the Swissy". It is one currency that is capable of outperforming the Euro if there is dissention between the EU members. It is backed by gold thus is considered one of the safest currencies. Inflation, economic contraction, political stability and excessive economic growth are some of the factors that affect performance of the Swissy.

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Keys to Forex Trading Success

Tue, 22 Apr 2008 19:24:11 -0700

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Forex trading can be a profitable business and there are a few personal characteristics that most successful forex traders have in common. The following personal characteristics lead to a profitable career as a Forex Trader.

Honesty

Some people believe that to make a sale or make a topic more interesting, they need to exaggerate and make things interesting in order to sell something. These people never go over the bad points, but tend to brush them aside. As a Forex trader, an absolutely essential quality is that of complete honesty. Honesty in Forex trading is a high commodity; it helps build strong business relationships, promotes trust, and earns security from clients. If you are trading your own money - be very honest to yourself and your own personal trading position.

Keep Your Word and Follow the Rules

The saying, “your only as good as your word” is never more true than in this business. When a Forex Trader promises something, it better come true. If a commitment is made, then it needs to be kept.

Its also very important that all Forex Trading rules are followed thoroughly. In the beginning this might be time consuming, but as the Trading continues, the process will become easier to follow and even automatic.

Listen, then Think then Take action

Most people are terrible listeners, interrupting when they shouldn’t, not listening to the full story, and then realizing that they made a terrible mistake because they didn’t listen. In Forex trading it is absolutely essential to listen, then analyze what has been said, and only then take action.

Good Forex traders are known for their listening skills, and thinking abilities. They do not react to what they are listening to before analysing it. Once they have thoroughly thought out the consequences, they will express their ideas and possible solutions

There is No Room For the Ego in Business

The worst business decisions and especially in Forex Trading are based on Pride. Decisions based on pride or arrogance, are the worst decisions that can ever be made. A successful Forex trader is going to base his decision on facts and not based on his previous successes or failures.

Forex Trading Goal Setting

People that are successful in the financial world know how to set goals. They are persistent and unyielding until they do what they set out to do. Setting goals gives you a basic outline of what your total aim is. Many people set goals everyday but the sad part is they never follow through, with not even one of those goals.

Forex Physics

The truly intelligent and successful Forex trader will not overlook the laws of physics. Laws which state that negative feelings promote negative outcomes, and positive outlooks promote positive outcomes. This law known as “The Law of Attraction” states that when a person believes in a positive outcome, he will be surrounded by positive people, positive outcomes, and be successful, but when a person does not believe in himself or that he deserves positive things in his life, that is exactly what will happen. He won’t have anything positive happen in his life!

The first step in becoming a successful Forex trader is developing the right personal characteristics, before learning the technical skills needed in Forex trading. People must develop their personal characteristics before wanting to be exceptional traders.

Forex: The Cash Machine of the World

Mon, 21 Apr 2008 19:58:13 -0700

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Forex (FOReign EXchange) is the cash machine of the world. The international forex market offers the active trader the opportunity to access an interesting investing asset class which offers a large amount of leverage and a market open for trade 24 hours a day.

The cash machine of the world is opened by New Zealand and Australian trading on their Monday morning (while it is Sunday in USA) and close on Friday afternoon in USA (Saturday in Oceania and Asia). Forex is a very exciting market to actively trade.

A forex position is expressed in terms of the first currency in the pair. For example, if you went long on the Euro and short on the US Dollar you would have traded the EUR/USD currency pair.

It is widely reported that the Forex market has a volume of some $1.5 trillion daily, which makes the Foreign Exchange market the largest and most liquid trading market in the world. Because of the sheer volume, the trader can enter and exit their forex trade at any time with minimal execution risk. Also, because of the huge cash machine, no one person, company or entity can control the market. Not even a central bank can control the market price (Of course this has certain exceptions - e.g. the Chinese Yuan, a currency which is still artificially fixed to a certain extent).

The forex market has no fixed address or exchange unlike other worldwide exchanges. The forex trading market operates through an electronic network of banks, corporations and other parties.

How To Succeed In Forex Trading

Mon, 18 Feb 2008 20:11:07 -0800

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As personal technology continues to advance, the more traders participate in forex trading. Forex trading is also becoming a career alternative for many individuals. It offers forex traders with flexible hours, the option to work at home and the potential to earn a very large income.

Despite these benefits, there are also negatives just like any other business venture. Forex trading is like having a business in a sense that many fail. Failure can happen for a number of reasons, such as under capitalization, poor trading plan, poor management and a lack of discipline. Any one of these can cause your venture to collapse.

How do you succeed in Forex Trading? First of all, you need to have developed your own Forex Trading Plan. This plan is what you must follow at all times as it helps you avoid emotional trading, which in the long run will ruin your success in Forex Trading. To succeed in Forex Trading, a plan is essential since those who work through the humble trial and error method will experience limited success in Forex Trading. To increase you knowledge in order to develop your Forex Trading plan, visit our forex trading tips index. This index has pretty much everything a novice trader needs to develop and succeed in Forex Trading. Another good source of information is our Free and official Easy Forex Ebook.

The important tip is to ALWAYS TRADE WITH RISK CAPITAL, which also means to invest with the money your willing to lose.

Easy Forex provides easy access to the necessary technology needed in order to succeed in Forex Trading. In comparison to owning a business, the start up costs for Forex Trading is minimal. How to Succeed in Forex Trading? To succeed, you need to research and develop your knowledge in forex trading, create a forex trading plan and alongside knowledge, develop your trading discipline.

Just like in basketball, you must be in the game to win the game. In order to succeed in Forex Trading, you must be in it to win it also. Any ‘win’ will be well earned. Join us in Forex Trading today!

Top Ten Forex Trading Strategies

Tue, 05 Feb 2008 21:07:38 -0800

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Forex trading is sometimes a very volatile form of investment, with many people losing significant amounts during the trade. This article will address ways to ensure that success will come to you during forex trading. These top ten forex trading strategies will help you on your way to forex trading success!

Top Ten Forex Trading Strategies!

First of all, you need to find out how much money you are willing to lose. It is extremely important to trade within your means. In forex trading, it is inevitable that you will lose parts of your funds at times. There it is crucial that you invest the money that you are only willing to lose. A good way of approaching this is to set aside a certain amount of your savings which is only dedicated to forex trading.

Secondly, you have to implement a forex trading strategy. It is recommended that you develop a forex trading system which you can stick with because having an okay strategy is not good enough on its own. You should initiate this by creating a schedule of when you will participate in the forex trading market. After that, you should set out an organized budget in order to keep in track of the inflow and outflow of funds. Just like the economic and business cycle, forex trading will have its own upturns and downturns. It is important to stick to your forex trading strategy during these movements in order to maximize profits in the long term.

Third, it is important that you focus on the most commonly traded pairs in forex trading. This also means trading alongside the Major Currencies which include the US Dollar (USD), The Euro (EUR), The British Pound (GBP), The Swiss Franc (CHF), Japanese Yen (JPY), The Canadian Dollar (CAD) and the Australian Dollar. These major currencies make up the most common pairs such as GBP/USD, EUR/USD, AUD/USD, USD/JPY, USD/CHF, and USD/CAD.

Fourth, learn how to read and trust trends in forex trading. There will always be slight fluctuations while trading, but currencies generally move in one direction. If you have no idea where to position yourself during a trade, it is usually a safe forex trading strategy to stick with the trend.

Next, you should be prepared to make losses in forex trading. It doesn’t matter how extensive your knowledge is in forex trading, there will always be times where you encounter certain amounts of losses. You need to expect losses from time to time and learn how to put them aside in order to focus on acquiring bigger profits in the future.

Connected with the last paragraph is the importance to avoid emotional trading. You must stick to your forex trading strategy and not deviate due to hunches or ‘gut feelings’. You need to exit forex trading once the signals show that the market is about to swing at an unfavorable direction.

An important tip is to avoid forex trading strategies that you don’t understand. You should invest your time in researching in order to acquire information from forex guides and tutorials. It is extremely important to be aware of forex trading scams. Sometimes, offers pop out telling you that certain companies can make no risk trades to earn profit for you. Anything that sounds too good to be true must be avoided. There is also no such thing as no risk in the forex market. Profits which you attain during forex trading will be well earned if you invest your time developing your own forex trading strategy. The important thing is that you know your strategy well from back to front and are comfortable with the risks and benefits whether you trade on your own or with a broker.

Determine and set yourself a limit to how much you are going to invest! NEVER ever surpass the limit in which you have set for yourself.

Next, you must have an exit strategy. Small losses are a normal occurrence in forex trading, but you must realize when the trend is really going at an unfavorable direction. It is important to recognize these situations and exit the market.

This is similar to the paragraph above. It is important that you cut your losses once you realize that the trade isn’t going your way!

Forex trading is a very volatile market. But if you follow these top ten forex trading strategies and invest time in research, you will be on your way to becoming a successful part-time or full-time forex trader! Download this free ebook to start off. We also have a forex resources section intended to help you about the art of forex trading. If you believe you are ready to try out forex trading, join us here on easy-forex!

What is a currency carry trade?

Wed, 13 Jun 2007 22:10:35 -0700

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What is a currency carry trade? The currency carry trade, known simply as carry trading is a strategy where the investor sells a currency with a relatively low borrowing rate and uses the borrowed funds to purchase another currency with a higher interest rate differential. An investor using this strategy attempts to take advantage of the interest rate differential.

A good example of a currency susceptible to carry trades is the Japanese Yen,whose borrowing rate is at 0.5 percent.

Eg. A trader borrows 2,000 Yen from a Japanese Bank the converts it to Australian Dollars then buys a bond for the equivalent amount. Assuming that the bond pays 5 percent and the Japanese interest rate is 0.5 percent, the trader expects a 4.5 percent profit under the condition that that the exchange rate between the two nations don't change.

Carry trading is risky due to volatile movements of the exchange rates. Using the above example, if the Australian Dollar depreciates against the Japanese Yen, the trader is set to make a loss. Carry trade transactions are usually done with leverage, therefore a small movement in exchange rates would result in massive losses of funds.

The Japanese Yen in recent years had been susceptible to carry trade due to its relatively low borrowing rates.

The European Central Bank

Sat, 07 Apr 2007 22:49:07 -0700

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The European Central Bank is one of the most important central banks in the world, taking responsibility for the monetary policy of the 13 countries of the Eurozone. The ECB was set up on June 1, 1998 and its headquarters are situated in Frankfurt, Germany. It is one of the components of the European System of Central Banks (ESCB) and also the national banks of all 27 member states of the European Union.

The primary objective of the European Central Bank is the ‘maintenance of price stability’ by keeping inflation low with the inflation target at about less than 2 percent. The bank must also support the economic policies of the European Union, which was established in order to sustain high employment levels and non-inflationary economic growth.

In order to fulfill these objectives the ECB maintains monetary policy through main financing operations, deposit facility, marginal lending facility, the conduct of foreign exchange and the promotion of the smooth operation of payment systems. Further tasks in which the ECB is involved in include the issuance of banknotes within the Euro area, collecting statistical information, the smooth conduct of policies which maintain the stability of the financial system and finally working with relationships with relevant institutions of the in the European Union and the international community.

Forextradinghq is dedicated to bringing the most important, up to date news regarding the European economic and financial condition and also its major counterparts in the ‘Major Currencies’ section of the website.

The Euro, Official currency of the eurozone

Sat, 07 Apr 2007 22:46:59 -0700

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The Euro is the official currency of the ‘Eurozone’, which includes the European nations such as Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia and Spain. The official currency sign is ‘€’ and the banking code is EUR. The Euro is the used currency for about 317 million people. It was announced on December 2006 that more than €610 billion has circulated worldwide. The Euro was first introduced to the world’s financial markets as an accounting currency in 1999 and then developed as physical coins and banknotes. All European Union (EU) members are eligible to join under the condition that they follow certain monetary requirements. Despite this, not all European Union members have taken the currency as their own. Countries such as The United Kingdom and Denmark have not adopted the Euro.

The Euro is divided into 100 cents. They show a ‘common’ side showing the denomination or value of the coin and a national side which shows a picture which has been chosen by the specific country which has issued the coin. Euro coins come in as €2, €1, 50c, 20c, 10c, 5c, 2c and 1c. The Euro banknotes have a common design for each denomination on both sides. European notes come in the form of €500, €200, €100, €50, €20, €10, €5

The Euro is under the control and management of the Frankfurt based, European Central Bank (ECB) and also the European System of Central Banks (ESCB) which is made up of the central banks of all its member states. The European Central Bank has the authority to control monetary policy while the ESCB controls print, minting, and the distribution of the currency to its member states. The Euro has provided important benefits to its citizens and its enterprises. European citizens can travel more easily due to the combined single market of the European Union. The Euro is also a major reserve around the world and now has become a major currency in which you can borrow money through the issuing of international securities.

Forextradinghq is dedicated in bringing the latest news regarding the European Currency. We provide this through the ‘major currencies’ link.

Forextradinghq is dedicated to bringing the most important, up to date news regarding The Euro’s economic and financial condition.

The Bank of Japan (BoJ)

Sun, 21 Jan 2007 13:10:05 -0800

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The Bank of Japan (BoJ) is the central bank of Japan which was established after the Meiji restoration. Before the restoration, the money system had an array of incompatible denominations, but was removed after the new currency act of Meiji established the Japanese Yen as the new, official decimal currency. The Bank of Japan is a juridicial person established through the Bank of Japan law and is neither a private company nor a government organization.

The objectives and missions of the Bank of Japan are the maintenance of price stability, stability of the financial system to ensure stable foundations for sound economic development in Japan. In order to achieve this, the BoJ participates in activities which include the Issuance and management of bank notes, to conduct monetary policy, the provision of settlement services, to ensure the stability of its financial system and also to conduct activities as a “government’s bank”, where the government’s financial activities are monitored by the BoJ. In order to conduct monetary policy, the BoJ need an accurate view of Japan’s economic and financial condition. To assist in this, the BoJ compiles statistics which include, wholesale price index, corporate service price index and money stock. To add to this, the Bank of Japan directly contacts firms in order to gain their views and opinions on the current state of the Japanese economy. The Bank of Japan also participates in activities which involve the international community, such as international financial transactions and operations, intervention in the forex markets and also as an international exchanger or views.

Forextradinghq is dedicated to bringing the most important, up to date news regarding Japan’s economic and financial condition and also its major counterparts in the ‘Major Currencies’ section of the website.

The Yen, Official currency of Japan

Sat, 20 Jan 2007 04:26:52 -0800

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The Japanese Yen is the official currency Japan since 1870, through the new Meiji government. It was established straight after the release of the New Currency Act of 1871. It is one of the most widely used reserve currencies after the US. Dollar and the Euro. Its ISO 4217 codes for the Yen are 392 and JPY.

After World War 2, the value of the Japanese Yen was fixed at 360 Yen per US. Dollar through a plan by the United States of America, related to the Bretton Woods system in an attempt to stabilize the prices in the Japanese economy. This was maintained until 1971, when the Americans abandoned the system. Straight after this, they imposed a 10 percent surcharge towards imports, thus prompting the floating of international exchange rates in 1973. This greatly affected the Yen since imports had a high cost, while Japanese exports received little. The next 30 years showed a gradual rise in value of the Japanese Yen, despite events such as the 1973 and 1979 oil crises. 1985 and the Plaza Accord agreement helped the Yen double in value to 123 Yen per US. Dollar in 1992. April 1995 showed a further strengthened Yen at 80 Yen per Dollar, which made it nearly the same size as the US. economy. Despite being part of the top 5 countries with the most widely used reserve currencies, Japan is currently on the decline as a reserve currency over the past decade.

The Japanese economy is amongst the strongest in the world, with the United States of America having a higher Gross National Product (GNP). Its main imports include motor vehicles, electronics and computers. The United States is its most important trading partner and also trades with Taiwan, South Korea, Hong Kong, China and Singapore. Major Japanese industry comprises of manufacturing, construction, distribution, real estate and services. The goods that Japan relies on through import include oil, foodstuffs and wood, supplied mostly by the United States, China, Indonesia, South Korea and Australia.

The US. Federal Reserve System

Fri, 19 Jan 2007 03:39:18 -0800

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The Federal Reserve System, (aka US. Federal Reserve, Federal Reserve, or simply The Fed) is the central banking system of the United States of America and was established by Congress in 1913 through the Federal Reserve Act 1913 to provide the United States with a safe, flexible and stable monetary system. This was made due to many previous bank panics throughout the 19th century and provided a strong demand to establish a centralized banking system.

The main role and responsibility of the US. Federal Reserve includes:
1. The conducting of monetary policy by influencing the conditions of the US. economy to chase the goals of maximum employment, stable prices and moderate long-term interest rates.

2. Maintenance of the US Dollar and the American economy and also to contain system risk in the financial markets.

3. Regulation of banking institutions to ensure safety of the United States banking and financial system and also the protection of credit rights to its consumers.

4. Provision of services towards the US. Government, depository institutions, foreign official institutions and also the assistance in the operation of United States’ payment system.

This banking system is composed of a Board of Governors (presidentially appointed), the Federal Open market committee, and 12 Federal Reserve banks in major US. Cities and also other member banks. The 7 members of the Board of Governors are appointed by the President and confirmed by the Senate. The Federal Open market committee (FOMC) comprises of the 7 members of the board of governors and also 5 representatives selected from the Federal Reserve banks.

Forextradinghq is dedicated to bringing the most important, up to date news regarding the United States’ economic and financial condition and also its Major counterparts in the ‘Major Currencies’ section of the website.

The US. Dollar, Official currency of the United States of America

Fri, 19 Jan 2007 03:27:28 -0800

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The Dollar is the official unit of currency of the United States of America. Its abbreviated with a ‘$’ sign and placed with a ‘US’ to differentiate it from other dollar based currencies such as the Australian Dollar. Other nicknames for the US. currency include the buck, greenback, clam, dough and even dead presidents. The US. Dollar was established by the Congress of Confederation of the United States on July 6, 1785. There are several other countries that use the US. Dollar as its official currency, or used in some countries in a ‘de-facto’ capacity. The US. Dollar is the most used currency in international transactions and is also the world’s largest ‘foreign reserve’ currency, with the majority of American notes held outside the United States. It is also the most traded currency in terms of foreign exchange trading.

The US. currency takes decimal form and is divided into 100 cents. The separate denominations for American coins are ‘1c’ (penny), ‘5c’ (nickel), ‘10c (dime), ’25 cent’ (quarter). There are also ‘50c’ and ‘$1’ coins in circulation. The denominations for American bank notes (bills) are $1, $5, $10, $20, $50 and $100. There is also a $2 note in circulation, released in 1976 to commemorate the 200th anniversary for American Independence.

In first 2/3 of the 20th century, the US. Dollar was backed by reserves of gold bullion, until it officially went off it in order for it to become a floating currency, meaning a currency influenced by the market forces of supply and demand. The US. Dollar is considered the standard currency in the international markets for commodities such as petroleum and gold.

Forextradinghq is dedicated to bringing the most important, up to date news regarding The US. Dollar’s economic and financial condition and also its major counterparts in the ’Major currencies’ section of the website.

The Reserve Bank of Australia

Sat, 06 Jan 2007 20:09:28 -0800

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RBA – Reserve Bank of Australia is the central bank of Australia. The RBA are responsible for the money and banking system. The Reserve Bank is different from other banks as they do not desire profit. Instead they work on the maintenance of the Australian Financial System in accordance to the rules of the Commonwealth Government. The RBA was made under the Reserve bank Act 1959 and was officially established in the 14th of January, 1960.The RBA’s main responsibility is monetary policy and achieves their goals through overlooking the maintenance of the Australian Dollar, full employment and also the overall welfare and prosperity of the Australian People. This is through the objective of maintaining low and stable inflation over the medium term. The RBA provides information regarding interest rates, exchange rates, and money and credit growth and also up to date news on the condition of the Australian Dollar.
The Reserve Bank actively participates in Australia’s financial markets by managing Australia’s foreign reserves, note issuing and also works as a banker to the Australian government.

Decisions by the Reserve Bank are made by the Reserve Bank Board. The Reserve Bank Board has the authority to determine the policy of the Bank in relation to any matter other than its payments system policy. It is the responsibility of the Reserve Bank Board, within its powers, to ensure that monetary and banking policy of the Bank is aimed to the greatest advantage for the people of Australia. The main focus of the Reserve Bank Board meetings each month is monetary policy. The Board normally meets eleven times every year on the first Tuesday of each month, excluding January. At least one meeting it to be held in Melbourne, usually in the first half of the year and they may meet in other Australian capitals.

How to trade in the foreign exchange, the safe way

Mon, 16 Oct 2006 05:46:15 -0700

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In order to reduce losses in trading in the foreign exchange market, you will need the necessary and adequate amount of risk management systems in place. Staying afloat is essential in staying in the forex trading game. It will be unlikely that you will recover from a loss of money that you cannot afford to lose. A good forex trader will know how to reduce losses quickly and also ride profitable positions higher. Systems such as stop losses and profit caps are needed to keep losses manageable.

Stop losses are so essential to make a successful trade that most brokers will not allow you to trade without a stop-loss in place. A stop-loss is a system that automatically closes out a position when the bid or offer price reaches the given level. For example if your long (you have bought) a currency, your stop-loss will be placed below the current market price and will be activated if the price falls past this threshold. Stop losses are beneficial to traders because it is positive knowledge that you’re protected from a downside risk. This is useful for novice traders because they can become ‘emotionally trapped’ in a falling trade.

Guaranteed stop-losses are offered by some brokers and will provide extra protection for traders. Rare intervals where the market gaps – decreasing without trading at each consecutive rate – and traders who have no acquired guaranteed stop-losses are only assured of getting the next available price. Factors such as central bank or government intervention, state of the Australian economy and international economies, political, war or natural crises may cause falls that expose traders without guaranteed stop-losses to substantial losses. Stop-losses can be moved higher or lower to suit the trader. By reducing the stop-loss (placing it closer to the purchase price) you’ll limit the potential size of your loss and by increasing it (placing it further away from the purchase price) you will increase your exposure.

Profit caps are opposite to stop-loss because you place a limit on the profits that you have made in forex trading. It is beneficial for traders who leave trades unattended over night; a profit cap will be triggered when the market moves through a given threshold and will secure the profit made for the trader.

Automatic triggers are needed to limit the risk but money management is as important. This means making the decision on how much money you can afford to lose on a trade and how much you are able to invest. It is also recommended that you invest no more than 10% of your available funds in any single trade. These practices and systems will certainly help you in protecting your funds from losses. Mental discipline is also needed to become a successful foreign exchange trader.

I hope this is enough to inform you about what you need to trade it safe in the foreign exchange markets!

Open minds & flexibility are needed in the forex market

Fri, 13 Oct 2006 03:48:10 -0700

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In order to profit from the forex market, you will need strategies and also the will to change these strategies. Traders who lack a well thought out trading plan are prone to panic and confusion, when unexpected swings in the forex market occur. Many traders will tell you that trade driven by emotion is the fastest way to deplete your funds. Whether or not you are using a technical or fundamental style, it is still essential that you have a proper view of the market.

Developing your own trading style is a time consuming process and is often acquired through trail and error. It is unfortunate that there is no ‘golden’ rule’ to trade in the forex market and technical and fundamental styles of trade won’t be successful all the time. Successful traders often have a unique style of trading and take up various strategies during a trading session. Only continuous practice will help you gain a feel for the movements of the forex market.

In the foreign exchange market, it is critical to remain flexible and have the ability to change your strategies when needed. When deciding on a trading strategy, there are four important questions.
1. Which pairs of currency will you trade?
2. What is the best time to make the trade?
3. How will you trade?
4. Which market will you trade in?

The preference of most traders is the currencies which are the most volatile and liquid. These currencies are also known as the major currencies and the pairings include the EUR/USD, USD/JPY, USD/AUD and the GBP/USD. This helps to reduce the possibilities for currency traders, which is an advantage in comparison to share traders who pick shares from 1709 listed on the Australian Stock Exchange (ASX). Some traders may also trade at one currency pair in order to focus on announcements and data which are related to the single trade.

The best times to trade on the foreign exchange markets are between 10pm and 5am. Its because it coincides with the European market’s second session and the American market’s first session. The forex market is appealing because it is a 24 hour market and full time professionals can trade early at night or early in the morning before they work.

Currency markets don’t suffer from bullish market conditions unlike the stockmarket. Traders have the option of buying/short selling currency pairs in order to take advantage of upward and downward movements on the price. Most brokers provide access to the spot, forward and option markets for forex. In the spot market which is a popular market for day traders, positions are very unlikely to be held longer than a week. Forex traders enter and exit trades within hours and even seconds and market movements of up to 150 points can greatly increase profits or loss within a few minutes.

If you want keep a trade for longer than 30 days, then the forward market is more suitable. It isn’t as popular as the spot market due to its long term nature and transactions in the forward market are a lot more complicated. For example, if you predict that the Australian Dollar will rise against the US Dollar in the upcoming three months, you could purchase Australian Dollars with the agreement to sell them in the future. Forex requires two separate transactions, so here you will also agree to sell the US dollar with the intention of buying it back on this date. Forward contract price will take into account the interest cost on lending and borrowing the funds involved in the transaction ( in this eg. You borrow Australian Dollars and lend US Dollars). The price of the contract is the spot rate plus the interest rate differential between these two currencies.

Currency options, like forward contracts are also long term instruments that do not require daily monitoring of your position. You will determine a date in the future to close your position and on that date, you currency option will be ‘in the money’ and deliver you a profit, or ‘out of the money’ which means you will lose your original deposit. The main advantage of currency options is the fact that you will only lose you original deposit.

A well organized and a well defined trading strategy which is applied consistently and also flexible enough to change when required, will give the trader a higher chance of making gains over time. This is an important ingredient to consider in order to trade further in the future. I hope this is enough inform you about the needs and requirements in order to trade in the foreign exchange market!