A Day in the Life of a Forex Trader

Are you looking into breaking into the field of professional foreign exchange trading? Or are you already a forex trader doing it regularly? Either way, this article may be of interest to you.
The forex trader is a different breed of human being. They utilize the markets to earn a living everyday. We have a look into the insight of a day in the life of a forex trader.
Any professional forex trader has the potential to make massive returns from their initial investment or on the nastier side any trader can make massive losses. It is not a game of chance, trading is a skill of emotional control and sound decision making. Traders have an understanding of market mechanics and their behaviour as a response of economic trends.
Traders make their living from taking advantage of price differences between the buy and sell price of currency pairs and more importantly they make their money by following the market trend. If you yourself have studies forex charts you may notice how the price fluctuates - there are only three directions the price can do: rise, fall or stay the same. Currency prices only stay the same if the currency value is not floated and fixed to a certain value. Traders make their money on the difference on price so the trader can either buy long and hope the currency rises or sell short as the currency drops in price and still makes a profit. The advanced forex trader waits for a new trade or rather waits for the right time to open a new trade by looking for the right indicators and signs to signal an entry into the foreign exchange market.
There are two things that the forex trader can do at home to watch out for an entry signal: look at charts or wait for news.
Traders watch for the right trending signals to enter a trade. And the primary rule for the trader is that the trend is your friend. Stick to the trend and you wont get hurt.
Secondly, traders also watch the news. They must know what economic data is coming out on which days and what that data means to the future of the economy of the respective countries. If they dont keep track of these facts and economic data and indicators they may find that some currencies are especially volatile during these news announcement events and see the market jump. The forex trader must be ready for these economic announcements to ensure they can anticipate the increased market activity.
Once the forex trader has successfully entered into a trade, a trade that is going well the trader then simply rides the trend to completion, implementing a trailing stop to lock in profits as the price trends the way the trader wanted the trend to go. But if the trade goes sour, the forex traders needs to exit the trade with grace. The trader must cut their losses to succeed in the business of foreign exchange trading. Hopefully this has given you an overview of what a professional forex trader does to make a living from simply taking advantage over the price difference. The technique is to enter a trade correctly using trend analysis or a news announcement and then follow the rules of "riding the trend" or the "trend is your friend" with "cutting your losses quickly."

How to Choose a Forex Broker

When it comes to getting started in Forex trading, there are quite a few things that you have to consider. The first thing to do is to find and choose the right broker to help you in making your trades.
Here are some things that you need to look for in making your choice:
Low Spreads
The spread, which is calculated in pips, is the difference between the price at which a currency can be bought and the price at which it can be sold at any specific point in time.
Forex brokers don't charge a commission, so this difference is how they are going to make money.
When you're comparing brokers, you'll find that the difference in spreads in Forex is as large as the difference in commissions in the stock arena. What this means is that lower spreads will save you money and therefore, look for a broker that offers low spreads.
Quality of the Institution
Unlike equity brokers, Forex brokers are usually attached to large banks or lending institutions because of the large amounts of capital that are required. Also, Forex brokers should be registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Futures Trading Commission (CFTC).
You can find this and other financial information and statistics about a Forex brokerage on the company’s website or the website of its parent company. You'll want to make sure that your broker is backed by a reliable institution.
Extensive Tools and Research
Forex brokers offer many different trading platforms for their clients just like brokers in other markets do. These different trading platforms often show realtime charts, technical analysis tools, real-time news and data, and even support for the various trading systems.
Before you commit to any one broker, you'll need to be sure to request free trials so that you can test their different trading platforms. Brokers usually provide technical as well as fundamental commentaries, economic calendars, and other research as a means of assisting you.
Basically, you'll want to find a broker who will give you everything that you need to succeed.
A Variety of Leverage Options
Leverage is a key necessity in Forex trading because the price deviations (the sources of profit) are just set at mere fractions of a cent. Leverage, which is expressed as a ratio between total capitals that is available to actual capital, which is the amount of money a broker will lend you for trading. For example, when you have a ratio of 100:1, this means that your broker would lend you $100 for every $1 of actual capital. Many brokerage firms will offer you as much as 250:1.

Of course, you need to remember that lower leverage also means lower risk of a margin call, but it also means that you will get a lower bang for your buck (and vice-versa).
Basically if you have limited capital, you need to make sure that your broker offers high leverage. If capital is not a problem, you can rest assured that any broker that has a wide variety of leverage options should suffice.
A variety of options lets you vary the amount of risk you are willing to take. For example, less leverage (and therefore less risk) may be preferable if you are dealing with highly volatile (exotic) currency pairs.

Forex Trading Online - 7 Reasons Why You Should!

Forex trading online is a fast way to use your investment capital to it's fullest. The Forex markets offer distinct advantages to the small and large traders alike, making Forex currency trading in many ways preferable to other markets such as stocks, options or traditional futures.
Here are seven reasons why you'll want to look into Forex Trading online.
1 - Forex is the largest market.
Forex trading volume of more than 1.9 billion, more than 3 times larger than the equities market and more than 5 times bigger than futures, give Forex traders nearly unlimited liquidity and flexibility.
2 - Forex never sleeps!
You can execute forex trading online 24/7, from 7AM New Zealand time on Monday morning, to 5PM New York time on Friday evening. No waiting for markets to open: they're open all night! This makes Forex trading online a very attractive component that fits easily into your day (or night!)
3 - No Bulls or Bears!
Because Forex trading online involves the buying of one currency while simultaneously selling another, you have an equal opportunity for profit no matter which direction thecurrency is headed. Another advantage is that there are only around 14 pairs of currencies to trade, as opposed to many thousands of stocks, options and futures.
4 - Forex Trading online offers great leverage!
You can make the most of your investment resources with Forex trading online. Some brokers offer 200:1 margin ratios in your trading accounts. Mini-FX accounts, which can typically be opened with only $200-300, offer 0.5% margin, meaning that $50 in trading capital can control a 10,000 unit currency position. This is why people are flocking to Forex trading online as a way to highly leverage their investments.
5 - Forex prices are predictable.
Currency prices, though volatile, tend to create and follow trends, allowing the technically trained Forex trader to spot and take advantage of many entry and exit points.
6 - Forex trading online is commission free!

That's right! No commissions, no exchange fees or any other hidden fees. This is a very transparent market, and you'll find it very easy to research the currencies and the countries involved. Forex brokers make a small percentage of the bid/ask spread, and that's it. No longer any need to compute commissions and fees when executing a trade.
7 - Forex trading online is instant!
The FX market is astoundingly fast! Your orders are executed, filled and confirmed usually within 1-2 seconds. Since this is all done electronically with no humans involved, there is little to slow it down!
Forex trading online can get you where you want to go quicker and more profitably than any other form of trading.

Forex Trading - Advantages and Disadvantages

What is Forex Trading?
Forex, or Foreign Exchange, is the simultaneous exchange of one country’s currency for that of another. This market of exchange has more daily volume, both buyers and sellers, than any other in the world. Taking place in the major financial institutions across the globe, the forex market is open 24-hours a day.
Currencies are quoted in pairs. The first listed currency is known as the base currency, while the second is called the counter or quote currency. In the wholesale market, currencies are quoted using five significant numbers, with the last placeholder called a point or a pip.
The forex market is one of the most popular markets for speculation due to its enormous size, liquidity, and tendency for currencies to move in strong trends. An enticing aspect of trading currencies is the high degree of leverage available.
Advantages of Forex trading
Leverage. Huge leverage is available in Forex trading, often up to 100:1 meaning that large profits can be generated from small margin deposits.
Liquidity. The enormous size and global trading of the forex markets means that the markets in the major currency pairs are very liquid making trade executions almost instant with little slippage.
Ability to go short. Since currency trading always involves buying one currency and selling another, there is no structural bias to the market. This means a trader has equal potential to profit in a rising or falling market.
Trends. Fundamentally, the value of a country's currency is determined by interest rates and the strength of the economy in relation to other countries. Currencies, therefore, have a greater tendency to trend until the fundamentals change.
Disadvantages of Forex trading
Leverage. With huge leverage available to forex traders the danger is that positions which carry too much risk for the account size can be taken on, leading to margin calls. Effective money management rules must be adhered to.

Brokers. Retail traders must use a broker rather than dealing directly in the interbank market. The broker will be the counterparty in all transactions and is, effectively, making the market. They can, therefore, widen spreads or even refuse to trade during volatile trading conditions. To avoid dealing with brokers an alternative to forex is to use futures. See online futures trading for more details.
Spreads. As the retail trader must use a broker to trade, they cannot deal at the interbank rates. A broker will generally quote a fixed spread of 3-20 pips depending on the currency pair. The underlying interbank rate might be as little as 1 pip.
Forex is a very large market but for most retail traders dealing with brokers the odds are shifted against them.
Online futures trading provides a much more level playing field for most traders who want to take part in forex trading.

Is Forex Trading Better Than Stocks?

For hundreds of years stocks have been a popular investment. Companies issue stocks to raise capital for expansion and new projects. Each share of the stock represents a partial ownership in the company. When the company makes a profit, the value of the stocks rise. Stock owners can sell their shares for a profit, or hold on to the stock for even more gain in the future. Sometimes companies will issue dividends -- part of the profits that are distributed to share holders.
Stock Exchanges
Stocks are traded on stock exchanges. Most stocks are bought and sold through brokers who charge a commission or fee for this service. United States stock exchanges include the New York Stock Exchange (NYSE), the American Stock Exchange, and the National Association of Securities Dealers Automated Quotation System (NASDAQ). Most stocks are listed only on 1 exchange.
Long-Term Trading Vs. Day Trading
Stocks were traditionally seen as long-term investments. So-called "blue chip" stocks, those having proven value over many years, often formed the basis of an investment portfolio.
Short-term trading is a relatively new phenomenon in stock trading, made possible by the advent of the internet. Day traders attempt to take advantage of large daily fluctuations in the market by buying and selling many times in a single trading day. This is relatively risky, and any profits are reduced by the broker commissions charged on each transaction.
FOREX
The Foreign Exchange Market (FOREX) is quite different from the stock exchange. FOREX is primarily a short-term market. Most traders enter and exit deals within a 24 hour period -- sometimes within a few minutes. Many FOREX trades can be made in 1 day without building up a large brokerage fee, because FOREX trades are commission-free. Brokers earn money by setting a spread -- the difference between asking and selling prices.
The FOREX is the largest financial market in the world, with transactions worth $1.5 trillion every day. By comparison, all the American stock exchanges combined handle about $100 billion. The huge volume of FOREX allows it to be 1 of the most liquid markets in the world. There is always a buyer and seller for any type of currency, because the world economy relies on the movement of goods from country to country. The stock market is less liquid because participants may choose to hold their investments indefinitely or move on to other markets.
Non-Stop Trading 5 Days A Week
The FOREX is not based in any 1 location. Trading markets are located worldwide and, due to time zone differences, trades can be made 24 hours a day, 5 days a week. Trading begins in Sydney, Australia on Monday morning (Sunday afternoon New York time) and continues non-stop until Friday afternoon New York time. Stock exchanges have more limited trading hours. While it is possible to trade on exchanges worldwide, each exchange is independent and operates for just 7 hours a day. It is not possible to buy or sell a certain stock that is traded only on 1 stock exchange when that exchange is closed.

Other FOREX Advantages
It is more predictable than stocks; it follows well-established trends.
It allows high leverage -- typically 100:1 as opposed to 2:1 on the stock market
It doesn't require a large investment -- mini accounts as small as $250 can get you started in FOREX.
FOREX trading is not without risk. Neither is the stock market. Either trading vehicle requires education, planning, discipline, and some disposable income.

A Traders Mission And Goal

It is the mission of the trader to become a financially successful long-term
trader. This can be achieved when the trader adopts and accepts The 10 Keys
of Successful Trading. The trader must commit to live by the three disciplines
that create the successful trader.
1. The trader must believe in The 10 Keys to Successful
Trading and merge them into his personality. His
success is dependent on creating a trading plan, and
maintaining the discipline to TRADE THE PLAN!
2. The trader must commit himself to continued education
and learn as much as he can about technical analysis and
the psychology of successful trading. He must use logic,
and not his emotions, in trading. The trader must learn to
trade in control, not out of control!
3. The trader must map out a sound plan of equity
management to insure a return on his investment. A
successful plan is to trade no more than 20% of a margin
account and risk no more than 5 to 10% of that account on
any single trade.

Currency Trading - How Much Do You Need to Spend to Learn How to Trade Forex?

In a short space of time forex trading has become one of the most talked about online business opportunities. Anyone who wants to work at home and is looking for ideas has probably encountered one of the many providers of tuition or forex education. Without doubt, the rewards can be high. So high in fact that the education providers can charge a premium price for their services. It is easy to find a forex course or forex ebook selling for thousands. Yes, selling, not just for sale.
With sound forex trading strategies and good discipline you can make a lot of money. Therefore, a tutor who can show you how to trade effectively can probably charge a lot for their course, seminar or book.
So, if you are considering the various options of learning how to trade forex, do you need to spend so much money?
First, we'll look at these options available to people who want to learn to trade the forex markets. There are basically four, listed on order of cost.
1. Work with a forex trading mentor, who is successfully trading.
2. Enroll or buy a course on line or by mail order.
3. Go to your library or book shop and get a few well-chosen books on forex trading.
4. Read all you can of the free information you can find online.
The Forex Mentor. This is likely to be the most expensive option and is probably only considered by people who have quite a large amount of cash to start with. If you find a good mentor then your tuition fees will be returned many times over. Obviously, if you choose badly then your money go be going down the drain, not just on your training fees but also because you'll probably lose all your money trading too.
Forex Course, Seminar, or Ebook.
How successful you'll be after buying a course or paying to attend a seminar will again depend on the quality of what is on offer. If it is expensive, and it could be, then make sure that it covers the vital subject of trader psychology. This is an area where any trader must do all they can to gain experience and insight. It is no good having fool proof system if your mindset is such that your gains are given back or your winning trades are converted into losers through poor discipline.
There is no guarantee that paying a high price, possibly more than $5,000, is going to make you a wealthy trader.
Forex Books.
There is a huge quantity of them available, some well-recognised classics such as Market Wizards, and Reminiscences of a Stock Operator, are essential reading for a forex trader or any financial trader for that matter. There are many others though, some focusing more on the psychology of trading others on technical trading and more still on understanding how the fundamentals affect the markets. Buying, borrowing and then reading books is a very cost effective way of learning and this certainly applies to forex trading.
Online Forex Information
If you want to learn how to trade forex, you have the biggest resource at your fingertips. From trader psychology to understanding financial charts, all the information you will ever need is available on line. And, most of it is free and easy to access. It is all out there, it just takes a bit of finding. Trading forums, such as trade2win are fantastic resources because many contributors share their experiences of various systems and even publicly evaluate courses and books. It is, however, sometimes worth spending a small amount of money to get some nicely packaged education. A highly recommended ebook is called Bird Watching in Lion Country and similarly a good manual is called The Affluent Desktop Currency Trader. Neither of these two will break the bank and they both offer a very good foundation in an exciting and hopefully rewarding trading enterprise.
So, to return to our original question "Currency Trading - How Much do you Need to Spend to Learn How to Trade Forex?".
The answer is absolutely nothing. Although, for a few dollars, the titles mentioned above are indeed very worthwhile. What about the expensive courses? Forget them and add the money you save to your trading account because experience is the best forex trading education you can buy. Be careful though, it's very dangerous out there.Graham Chapman

Graham Chapman has worked in publishing for nearly 20 years and has been self employed for more than 25. He is a trained life coach and is qualified in sports psychology. He now runs Neesh Enterprises assisting people who work from home or small office particularly in publishing

currrency markets

The main participants of a foreign exchange market are:
Commercial banks
Exchange markets
Central banks
Firms that conduct foreign trade transactions
Investment funds
Broker companies
Private persons Commercial banks conduct the main volume of exchange transactions. Other participants of the market have their accounts at the banks, conducting necessary conversion transactions. Banks accumulate (through transactions with the clients) the combined needs of the market in exchange conversions as well as in calling and distributing money, breaking with it into new banks. Besides satisfying clients' requests, banks can operate independently, using their own assets. In the end, a foreign exchange market is a market of interbank dealings, and when speaking about the exchange rates movement, one should bear in mind the existence of an interbank foreign exchange market. In international foreign exchange markets, international banks with the daily volume of transactions of billions dollars have the biggest influence. These are Barclays Bank, Citibank, Chase Manhatten Bank, Deutsche Bank, Swiss Bank Corporation, Union Bank of Switzerland, etc.
Exchange markets Contrary to stock markets and markets for terminal exchange dealings, exchange markets do not work in a definite building and they do not have definite business hours. Thanks to the development of telecommunications most of the leading financial institutions of the world use services of exchange markets directly and via mediators 24 hours a day. The biggest international exchange markets are the London, New York and Tokyo exchange markets. In some countries with transitional economies there are exchange markets for currency exchange by juristic persons and for forming a market exchange rate. The state usually regulates the exchange rate in an active manner, using the compactness of the exchange market.
Central banks control currency reserves, realize interventions that influence the exchange rate, and regulate the interest investment rate in the national currency. The central bank of the United States, the US Federal Reserve Bank, or "FED", has the greatest influence in the international exchange markets. It is followed by the central banks of Germany, (the Deutsche Bundesbank or BUBA) and of Great Britain (the Bank of England, nicknamed the "Old Lady").
Firms that conduct foreign trade transactions. Companies participating in international trade have a stable demand for foreign currency (importers) and supply (exporters). As a rule, these organizations do not have direct access to exchange markets, and they conduct their conversion and deposit transactions via commercial banks.
Investment funds. These companies, represented by various international investment, pension,and mutual funds, insurance companies, and trusts, realize the policy of diversified management of portfolio of assets by placing there money in securities of the governments and corporations of different countries. The world-know fund, Quantum, is owned by George Soros, and it executes successful exchange speculations. Big international corporations as Xerox, Nestle, General Motors a.o. that make foreign industrial investments (creating branches, joint ventures etc.), also are firms of this kind.
Broker companies bring together a buyer and a seller of foreign currency and conduct a conversion dealing between them. Broker companies take a broker's fee. As a rule, in the FOREX market there is no fee as a per cent from the sum of a transaction, or as a sum agreed in advance. Usually the dealers of broker companies quote currency with a spread, that includes their fee. A broker company, having the information about the asked rates, is a place where the real exchange rate is formed according to closed deals. Commersial banks get their information about the current exchange rate from broker companies. The biggest international broker companies are Lasser Marshall, Harlow Butler, Tullett and Tokio, Coutts, and Tradition.
Private persons. Natural persons realize a wide range of non-commercial transactions in the sphere of foreign tourism, transfers of salaries, pensions, royalties, buying and selling foreign currency. This is also the biggest group that realizes speculative exchange transactions.The working hours of the markets Exchange markets work all the time. Their work in the calendar twenty-four-hour period is started in the Far East, in New Zealand (Wellington), passing the time zones in Sydney, Tokyo, Hong Kong, Singapore, Moscow, Frankfurt-on-Main, London, then finishing the day in New York and Los Angeles. The count of time zones begins from the zero meridian in Greenwich near London, and the time itself is called

. Depending on the season (summer or winter), the time in different financial centers of the globe will differ from the GMT.
The working day of exchange brokers of Western commercial banks starts, as a rule, at 7:30 am by local time. At 8:00 am the dealers are already closing deals. The morning hours are usually devoted to short analyses of events on the international exchange markets at the moment. The dealers use economic and technical analyses of the situation in the market, read analytical articles in newspapers, then exchange points of view and the latest rumors with each other and with dealers from other commercial banks. On the basis of various data, a picture of possible behavior of the exchange rate on the coming day is put together, with variants of all sorts of possible events.
By 8:00 am the market, consisting of individual dealers, will have worked out the tactics of its behavior, and it enters the operations of the international exchange market, giving a new and powerful impulse to the movement of the exchange rate. Various territorial markets can be given the following characteristics of an average typical activity during a 24 hour day.
Far East. Here the most active deals in the market are conversion transactions with the dollar to the Japanese yen, the dollar to Euro, Euro to yen, and the dollar to the Australian dollar. Very often fluctuations of exchange rates at that time are insignificant, but there are days when currencies, especially the dollar against the yen, make breath-taking flights. Especially so when the central bank of Japan makes an intervention. In Moscow its night and morning at that time, so till noon one can work with Tokyo, till mid-day with Singapore.
Western Europe. At 10:00 am Moscow time the market in the European financial centers of Zurich, Frankfurt-on-Main, Paris, Luxembourg are open. However, the really powerful movement of the exchange rate against the main currencies starts after 11:00 am Moscow time, when the London market is opened. This continues, as a rule, for 2 to 3 hours, after that the dealers of the European banks go to have lunch, and the activity of the market falls down a bit.
North America. The situation livens up with the opening of the New York market at 4:00 pm Moscow time, when dealers of American banks start working, and when European dealers come back from their lunch. Powers of European and American banks are about equal, that is why fluctuations of the rate do not go out of the limits of usual European fluctuations. Nevertheless, exchange dealers look forward to the opening of the New York market in order to receive fresh data about a possible movement of the rate (the more so if the European market has been sluggish). But when the European market is closed about 7p m or 8pm Moscow time, aggressive American banks, left alone on the "thin" market, are able to cause a sharp change of the exchange rate of the dollar against other currencies.

is fforex the best way to invest money?

There are many things deemed to be the best way to invest money, but in all honesty the answer differs depending on what you are wanting that investment to do.
If you are looking for an opportunity to make you large amounts of profit from your investment then probably the best way to invest money is in Forex Trading.
Although it is one of, if not the best way to invest money not many investers seem to understand what Forex Trading is.
Forex(the abbreviation for the Foreign Exchange market) trading is an international exchange market where currencies from all countries across the globe are bought and sold for profit. Forex Trading began in the 1970's and is unique because unlike other markets Forex is not based in any particular place, and it also has very few qualifications for investing.
Forex is largely controlled by investors as the currencies value is determined by the demand, there are no external controls. Almost anyone can invest in FOREX, and anyone can make money whether from a long term investment strategy or those looking for short term gains.
Forex Trading is also unique in that it runs 24 hours a day from Sunday afternoon to Friday afternoon, therefore Forex transactions can take place at almost any time, anywhere, all over the world.
As an investor all you have to do is decide what currency he or she wants to purchase, contact the dealer, and then make the purchase. Many investors purchase using a credit line (money they do not have). This is called marginal trading.
Forex trading may be the best way to invest money but it still involves a calculated risk but if you analyze the market you should have no problems. Two ways to calculate these risks are though Technical Analysis and Fundamental Analysis.
Fundamental Analysis is an analysis of an entire countries situation. Investors utilizing this technique look at the situation of the country in which the currency finds its base. Factors such as the countries economic status, political status, and global status are taken into account. FOREX currency values are largely determined by the investors. That being said, Fundamental Analysis assumes that other FOREX traders will view a countries situation in the same way and respond accordingly.
Technical Analysis is based on the idea that trends through history will continue. A Forex investor will notice that a certain currency is very strong and seems to be rising at a normal rate. The same investor will also suppose that the currency will not decline in value, and will continue to rise, as it has done in the past. This investment entails a large assumption but is relatively safe.
Forex currency values are largely determined by the investors so technical analysis is the basis most investors use. That being said, Fundamental Analysis assumes that other Forex traders will view a countries situation in the same way and respond accordingly.
Forex trading can gain investors a large amount of money either over a long period of time, or in a short period of time. Investors who choose to invest in FOREX are generally well informed about the market and understand the current situations in many countries of the world.If looking for the best way to invest money then Forex is simple and highly recommended for anyone who wants to enjoy profits from their investments.

Things You Should Know About Forex TradingHow difficult is it to make money trading the Forex market? How much time does it take to actually be able to make a living trading the Forex market? These and other important aspects of trading are to be discussed in this article.Trading the Forex market has many benefits over other financial markets, among the most important are: superior liquidity, 24hrs market, better execution, and others. Traders and investor see the Forex market as a new speculation or diversifying opportunity because of these benefits. Does this mean that it is easy to make money trading the Forex Market? Not at all.Forex brokers agree that 90% of traders end up losing money, 5% of traders end up at break even and only 5% of them achieve consistent profitable results. With these statistics shown, I don't consider trading to be an easy task. But, is it harder to master any other endeavor? I don't think so, consider musicians, writers, or even other businesses, the success rates are about the same, there are a whole bunch of them who never got to the top.Now that we know it is not easy to achieve consistent profitable results, a must question would be, Why is it that some traders succeed while others fail to trade successfully in the Forex market? There is no hard answer to this question, or a recipe to follow to achieve consistent profitable results. What we do know is that traders that reach the top think different. That's right, they don't follow the crowd, they are an independent part of the crowd.A few things that separate the top traders from the rest are:Education: They are very well educated in the matter; they have chosen to learn every single and important aspect of trading. The best traders know that every trade is a learning experience. They approach the Forex market with humility, otherwise the market will prove them wrong.

WHAT IS FOREX

FOREX = FOReign EXchange
You can trade 24 hours a day
The FOREX is larger than al other financial markets COMBINED
The Foreign Exchange (FOREX) market is a cash (or “spot”) interbank market established in 1971 when floating exchange rates began to materialize. This market is the arena in which the curency of one country is exchanged for those of another and where setlements for international business are made.
The FOREX is a group of approximately 4500 curency trading institutions, including international banks, government central banks and commercial companies. Payments for exports and imports flow through the Foreign Exchange Market, as wel as payments for purchases and sales of assets. This is caled the “consumer” foreign exchange market. There is also a “speculator” segment in the FOREX Companies, which have large financial exposures to overseas economies participate in the FOREX to ofset the risks of international investing.Historicaly, the FOREX interbrain market was not available for smal speculators. With a previous minimum transaction size and often-stringent financial requirements, the smal trader was excluded from participation in this market. But today market maker brokers are alowed to break down the large interbank units and ofer smal traders the opportunity to buy or sel any number of these smaler units (lots).
Commercial banks play two roles in the FOREX market:
They facilitate transactions between two parties, such as companies wishing to exchange curencies (consumers), and
They speculate by buying and seling curencies. The banks take positions in certain curencies because they believe they wil be worth more (if “buyinglong”) or less (if “seling short”) in the future. It has been estimated that international banks generate up to70% of their revenues fromcurency speculation.Other speculators include many of the worlds’ most successful traders, such as George Soros.
The third category of the FOREX includes various countries’ central banks, like the U.S. Federal Reserve. They participate in the FOREX to serve the financial interests of their country. When a central bank buys and sels its or a foreign curency the purpose is to stabilize their own curency’s value.
The FOREX is so large and is composed of so many participants, that no one player, even the government central banks, can control the market. In comparison to the daily trading volume averages of the $300 bilion in the U.S. Treasury Bond market and the approximately $100 bilion exchanged in the U.S. stock markets, the FOREX is huge, and has grown in excess of $1.5 trilion daily.
The word “market” is a slight misnomer in describing FOREX trading. There is no centralized locationfor tradingactivity (“pit”) as there is in thecurency futures(andmany other) markets. Trading occurs over the phone and through the computer terminals at hundreds of locations worldwide. The bulk of the trading is between approximately 300 large international banks, which process transactions for large companies, governments and for their own accounts. These banks are continualy providing prices (“bid” to buy and “ask” to sel) for each other and the broader market. The most recent quotation from one of these banks is considered the market’s curent price for that curency. Various private data reporting services provide this “live” price information via the Internet.
There are numerous advantages for parties wishing to trade in the FOREX. They include:Liquidity: In the FOREX market there is always a buyer and a seler! The FOREX absorbs trading volumes and per trade sizes which dwarfs the capacity of any other market. On the simplest level, liquidity is a powerful atraction to any investor as it suggests the freedom to open or close a position at wil 24 hours a day.
Once purchased, many other high-return investments are dificult to sel at wil. FOREX traders never have to wory about being “stuck” in a position due to lack of market interest. In the 1.5 trilion U.S. dolar per day market, major international banks a “bid” (buying) and “ask” (seling) price
Access: The FOREX is open 24 hours daily from about 6:00 P.M. Sunday to about 4:00 P.M. Friday. An individual trader can react to news when it breaks, rather than waiting for the opening bel of other markets when everyone else-has the same information. This alows traders to take positions before the news details are fuly factored into the exchange rates. High liquidity and 24 hour trading permit market participants to take positions or exit regardless of the hour. There are FOREX dealers in every time zone, in every majormarket center (Tokyo, Hong Kong, Sydney, Paris,London, United States, etc.) wiling to continualy quote buy and sel prices.
Since no money is left on the market “table,” this is what is refered to as a “Zero Sum Game” or “Zero-Sum Gain.” Providing the trader picks the right side, money can always be made.
Two-Way Market: Curenciesaretraded in pairs, for example dolar/yen, or dolar/Swiss franc. Every position involves the seling of one curency and the buying of another. If a trader believes the Swiss franc wil appreciate against thedolar, the tradercan seldolarsand buyfrancs (“seling short!’).
If one holds the opposite belief, that trader can buy dolars and sel Swiss francs (“buying long”). Thepotentialfor profit exists because thereis always movement in the exchange rates (prices).
FOREX trading permits profit taking from both rising and faling currency values in relation to the dolar. In every curency trading transaction, one of the sides of the pair is always gaining and the other side is losing.
Leverage: Trading on the FOREX is done in curency “lots.” Each lot is approximately 100,000 U.S. dolars worth of a foreign curency. To trade on the FOREX market, a “margin account” mustbeestablished with a curency broker. This is, in efect, a bank account into whichprofits maybe depositedand losses may be deducted. These deposits and deductions are made instantly upon exiting a position.
Brokers have difering margin account regulations, with many requiring a $1,000 deposit to “day-trade” a currency lot. Day-trading is entering and exiting positions during the same trading day. For longer-term positions, many require a $2,000 per lot deposit. In comparison to trading in stocks and other markets, which may require a 50% margin account, FOREX speculators excelent leverage of 1% to 2% of the $100,000 lot value. The trader can control each lot for I to 2 cents on the dolar!
Execution Quality: Because the FOREX is so liquid, most trades can be executed at the curent market price. In al fast moving markets, slippage is inevitable in al trading (stocks, commodities, etc.), but can be avoided with some curency broker’s software, which informs you of your exact entering price just prior to execution. You are given the option of avoiding or accepting the slippage. The huge FOREX market liquidity ofers the ability for high quality execution.
Confirmations of trades are immediate and the Internet trader has only to print a copy of the computer screen for a writen record of al trading activities. Many individuals feel these features of Internet trading make it safer that using the telephone to trade. Respected firms such as Charles Schwab, Quick & Reily and T.D. Waterhouse ofer Internet trading. They would not risk their reputations by ofering Internet service if it were not reliable and safe. In the event of a temporary technical computer problem with the broker’s ordering system, the trader can telephone the broker 24 hours a day to immediately get in or out of a trade.
Internet brokers’ computer systems are protected by “firewals” to keep accountinformationfrom prying eyes. Account securityis abroker’s highest concern. They have taken multiple steps to eliminate any risk associated with transacting on the Internet.
AFOREXInternet trader does nothave to speak with a brokerby telephone. The elimination of the middleman (broker salesman) lowers expenses and makes the process of entering an order faster and has eliminated the possibility for misunderstanding.
Execution Costs: Unlike other markets, the FOREX does not charge commissions. The cost of a trade is represented in a Bid/Ask spread established by the broker. (Approximately 4 pips)
Trendiness: Over long and short historical periods, curencieshavedemonstrated substantial and identifiable trends. Each individual curency has its own “personality,” and each ofers a unique historical patern of trends, providing diversified trading opportunities within the spot FOREX market.
Focus: Instead of atempting to choose a stock, bond, mutual fund or commodity from the tens of thousands available in those markets, FOREX traders generaly focus on I to 4 curencies. The most common and mostliquid are theJapanese Yen,BritishPound, Swiss Franc and the new EURO. Highly successful traders have always focused on a limited number of investment options. Beginning FOREX traders usualy wil focus on one curency and later incorporate one to three more into their trading activities.
Margin Accounts: Trading on the FOREX requires a margin account. You are commiting to trade and take positions today. As a speculator trader you wil not be taking delivery on your product that you are trading. As a Stock Day Trader, you wil only hold a trading position for a few minutes to afew hours, and then you needto close out your position by the end of the trading session.
All orders must be placed through a broker. To trade stocks you wil need a stockbroker and to trade curencies you wil need a Forex curency broker. Most brokerage firms have diferent margin requirements. You need to ask them their margin requirements to trade stocks and curencies.
A margin account is nothing more than a performance bond. Al traders need a margin account to trade. When you gain profits, they place your profits into your margin account the same day you profited. When you lose profits, they need an account to take out the losses you incured that day. Al accounts are setled daily.A very important part of trading is, taking out some of your winnings or profits. When the time comes to take out your personal gains from your margin account, al you need to do is contact your broker and ask them to send you your requested dolar amount, and they wil send you a check. They can also wire transfer your money.