Understanding the Scope of Forex Exchange

Conceptualized in 1971, the forex market has witnessed steep rise in its trade since then. It provides a platform to the traders, of all over the world, to exchange their currencies as they stipulate it according to their needs and profits. The average daily exchange accounts for a bulky volume of 1.5 trillion U.S. dollars; of which one billion traders daily pack in the same amount at the end of the day.

A little knowledge of the forex can earn you a substantial amount of profits. The market deals with the exchange of currency of one nation with the other; or one can also define “foreign exchange” as the way a currency is bought or sold (valued) with respect to another currency. Sometimes, it is also regarded as the way by which debts between two nations that use different currencies are paid.

The scope of the term “foreign exchange” is not limited to a basic definition; rather it covers in several aspect including:

• Forex Exchange Rate: The forex exchange rate determines the value a particular currency holds with respect to another. You can also state it as the purchasing power of currency A with respect to currency B of some other nation. For example, 1.30 Canadian Dollar is equivalent to a U.S Dollar.
  
  
• Foreign Exchange Services: It can be regarded as the various services that let you get linked with the forex trading market. It is basically the communication network that establishes your link with the same.
  
  
• Foreign Exchange Markets: These can be looked up as those business centers where in the actual process of buying and selling of the various currencies are carried out. It is important to note here that forex is not some central trade market, rather it is operated through banks, corporations, individual’s and other such organizations located all over the world. There is no chief trading center or head office of the forex. However, the major trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Paris, and Frankfurt. These operate by telephone lines or via Internet, for complete 24hrs a day servicing only for 5 days a week.

Trading in the Forex Requires Some Caution

Whether it is in the millions or thousands, trading in the Forex is a bit risky. There are a lot of players involved and if you don't arm yourself properly with knowledge about the Forex you may just get swamped.

The Forex is the largest most vibrant market in the whole wide world. The financial world has never had a market that involves so much transaction. Over a trillion dollars worth of different currencies exchange hands everyday. Some losing in the trade, while some hit the jackpot and make tons of money. The Forex is characterized by its unpredictability and the liquidity because it deals with foreign currencies and each one's value influenced by their own country. That's why anyone who is greatly considering joining the Forex trade should think twice, thrice and maybe even ten times before doing so. This is not an arena for the weak and nervous.

The Forex is a very complex financial arena and only those with enough knowledge, experience and financial capability can join the foray. Managing the risk factors is a priority task for those professionals who do this everyday. They direct and manage accounts from their investors, full confidence is placed on them and their client's success is also their success. Some professional Forex brokers have placed high-value on their credibility. The more clients they have the more they earn as well. They make a profit by eating a slice of their client's profit. If they have made a name for themselves in the Forex trade, they don't need to go look for clients; the clients will look for them and invest.

There are those however who wants to manage their own portfolios. A word of caution though, educate yourself first about the trade. Learn the ropes and tricks of the game before throwing your hat in the ring. Try to gain access to many self learn and self study websites that can impart their knowledge with you. Try out the website of the federal Commodities Futures Trading Commission (CFTC), there they offer consumer reports as well as articles about applicable laws in Forex trading. Many Forex management firms maintain a website that offers free online tutorials and brochures. You may need all the educational information about the Forex that you can get your hands on.

They may not outright say it, but the best and the finest and most skilled Forex traders have learned all the secrets of the game. From trading signals technical indicators, and theories that could explain about the market behavior. When you have mastered these skills, you can have a more accurate prediction of the direction of the market resulting to lower risks and higher profits. Even when dealing with money managers they have to be knowledgeable about the trade so they can be on top of their investments. Have a constant conversation with your broker and be updated about your account.

For the self-traders, some of them are very admirable to have the courage to act as their own money managers. As with any business, success will come only after hard work and diligent research. With Forex trading you should always be on your toes for developments. A wise Forex trader knows that that learning and educating about Forex trading never ceases.

By Sara Jenkins
http://www.ezinearticles.com

The Major Requirements in Forex Software

Forex trading is possible via its specially designed software that is available in two modules and forms; one is an online form while the other is client server software. Forex software is type of software that is especially designed for smooth transactions and trading of customers from all over the world to trade currencies online in a real time, secure, private and efficient manner.

A Forex software is designed keeping in view the following factors and issues and it has to address them as much as possible, the first major thing for the software whether it is an online module or a client server module that it should be based over the real time rates that are running in the market right now. Because these are the rates on which the investors play and they must be as accurate and as based on real time as possible. These rates are known as tradable Forex quotes because that is on which you trade over a currency. That is hence the major factor for any Forex Softwrae that it should provide the latest update with in seconds so that when a buyer wants to invest money it can lock a rate and trade over that.

The second major important factor required for forex software is it’s been Secure, can handle privacy and data integrity – because these are major issues for any one who is investing and trading money online. As the forex is all value games, so no sort of negligence is accepted as everything needs to be in the perfect condition for the people. Because if there is difference in the central market Forex system and the client system, then forex trading system may not be of any use.

Keeping in view the two major requirements, a lot of Forex trading software are running in the market right now that mainly come in the two forms, either in the form of online websites or client side forex software, both have their own pros and cons and must be designed for the highest level of data security, integrity and privacy.

Revealed - Million Dollar Forex Investing Mistakes

Anytime that you are investing in the Forex market, you are going into the Market blind. You don’t know what point of the investing trend you are entering in at.

You might be investing in a Forex stock just before the trend changes. Smart investing means you need to protect your trading float and set up a stop loss.

This needs to be done before you enter a trade, so that there is no room for error, or last minute indecision.

A stop loss is simply a predefined point at which you exit the stock.

Effectively, it’s like drawing a line in the sand underneath the share price, saying, “If the share price falls below this line, then the stock hasn’t done what I thought it was going to do, and I’ll exit the position.”

This allows you to protect your investing trading plan, because it cuts your losses short, and guards against an all too human tendency to want to believe you must be right.

95% of investing in an entry Forex position means you are expecting to profit from the trade.

If, however, the share-investing price goes against you, you might feel the need to justify why you bought the stock by holding onto it until it turns a profit.

You might have heard the idea that all big investing losses once started as small losses. Well, while the share price continues to go in the wrong direction, those losses grow in lockstep.

This is why you need to have a stop loss in place – it’s like having an ejector seat that tells you when to abort the mission.

One of the most common question I’m asked when traders are introduced to a stop loss is “How wide should I set my stop?”

In other words, how much room should I give the stock to move? There are no definitive answers to this question because it depends on what time frame you’re investing in.

If you’re a shorter-term investing trader, you’re going to have a stop loss that’s set closer to the share price. If you’re a longer-term investing trader, you’ll give the share price a little bit more room to move and set your stop loss lower.

Once you’ve identified what time frame you’re looking at trading, you need to be able to remove the normal market noise (volatility) in that particular time frame.

You don’t want to have to close out of an investing position just because a share price moved a little bit due to its normal trading volatility.

In fact, there are some serious drawbacks to setting tight stops.

First, you’ll decrease the reliability of your system because you get stopped out more often.

Second, and probably a little bit more importantly, you dramatically increase your transaction costs, because you’re trading transaction costs make up a major proportion of your business expenses.

To give yourself a fighting chance, you want to trade a system that doesn’t chew through excessive brokerage fees.

This is one of the major reasons I steer my clients into developing a trading system that runs over a slightly longer time frame. With the correct system in place, and your investing risk minimized, you are well positioned to maximize your trading profits.

By David Jenyns
http://www.forex-tips-and-techniques.com

Origins of the Foreign Exchange

In order to gain a complete understanding of what Foreign Exchange or Forex is, it is useful to examine the reasons that lead to its existence in the first place.

Exhaustively detailing the historical events that shaped the Forex Market - Foreign Exchange Market into what it is today is of no great importance to the forex trader and therefore we happily will omit lengthy explanations of historical events such as the Bretton Woods accord in favor of a more specific insight into the reasoning behind foreign exchange as a medium of exchange of goods and services.

Originally our ancestors conducted trading of goods against other goods this system of bartering was of course quite inefficient and required lengthy negotiation and searching to be able to strike a deal. Eventually forms of metal like bronze, silver and gold came to be used in standardized sizes and later grades (purity) to facilitate the exchange of merchandise. The basis for these mediums of exchange was acceptance by the general public and practical variables like durability and storage. Eventually during the late middle ages, a variety of paper IOU started gaining popularity as an exchange medium.

The obvious advantage of carrying around 'precious' paper versus carrying around bags of precious metal was slowly recognized through the ages. Eventually stable governments adopted paper currency and backed the value of the paper with gold reserves.

This came to be known as the gold standard. The Bretton Woods accord in July 1944 fixed the dollar to 35 USD per ounce and other currencies to the dollar. In 1971, president Nixon suspended the convertibility to gold and let the US dollar 'float' against other currencies.

Since then the foreign exchange market has developed into the largest market in the world with a total daily turnover of about 1.5 trillion USD. Traditionally an institutional (inter-bank) market, the popularity of online currency trading offered to the private individual is democratising foreign exchange and widening the retail market.

by Nicholas H. Bang
http://www.marksforex.com

Introduction To Fundamental Analysis: Forex

FOREX traders almost always rely on analysis to make plan their trading strategies. There are two basic types of FOREX analysis – technical and fundamental. This article will look at fundamental analysis and how it used in FOREX trading.

Fundamental analysis refers to political and economic conditions that may affect currency prices. FOREX traders using fundamental analysis rely on news reports to gather information about unemployment rates, economic policies, inflation, and growth rates.

Fundamental analysis is often used to get an overview of currency movements and to provide a broad picture of economic conditions affecting a specific currency. Most traders rely on technical analysis for plotting entry and exit points into the market and supplement their findings with fundamental analysis.

Currency prices on the FOREX are affected by the forces of supply and demand, which in turn are affected by economic conditions. The two most important economic factors affecting supply and demand are interest rates and the strength of the economy. The strength of the economy is affected by the Gross Domestic Product (GDP), foreign investment and trade balance.

Indicators

Various indicators are released by government and academic sources. They are reliable measures of economic health and are followed by all sectors of the investment market. Indicators are usually released on a monthly basis but some are released weekly.

Two of the most important fundamental indicators are interest rates and international trade. Other indicators include the Consumer Price Index (CPI), Durable Goods Orders, Producer Price Index (PPI), Purchasing Manager's Index (PMI), and retail sales.

Interest Rates - can have either a strengthening or weakening effect on a particular currency. On the one hand, high interest rates attract foreign investment which will strengthen the local currency. On the other hand, stock market investors often react to interest rate increases by selling off their holdings in the belief that higher borrowing costs will adversely affect many companies. Stock investors may sell off their holdings causing a downturn in the stock market and the national economy.

Determining which of these two effects will predominate depends on many complex factors, but there is usually a consensus amongst economic observers of how particular interest rate changes will affect the economy and the price of a currency.

International Trade – Trade balance which shows a deficit (more imports than exports) is usually an unfavourable indicator. Deficit trade balances means that money is flowing out of the country to purchase foreign-made goods and this may have a devaluing effect on the currency. Usually, however, market expectations dictate whether a deficit trade balance is unfavourable or not. If a county habitually operates with a deficit trade balance this has already been factored into the price of its currency. Trade deficits will only affect currency prices when they are more than market expectations.

Other indicators include the CPI – a measurement of the cost of living, and the PPI – a measurement of the cost of producing goods. The GDP measures the value of all goods and services within a country, while the M2 Money Supply measures the total amount of all currency.

There are 28 major indicators used in the United States. Indicators have strong effects on financial markets so FOREX traders should be aware of them when preparing strategies. Up-to-date information is available on many websites and many FOREX brokers supply this information as part of their trading service.

By John Sanderson
http://www.hotlib.com

How to Proceed for Successful Mini Forex Trading

Before analyzing any aspects related to FOREX, one should provide a reliable definition of what FOREX actually stands for. Thus, FOREX is a short name for foreign exchange. Furthermore, it is important to mention that anytime a FOREX market customer refers to FOREX profit or loss, he is actually talking about the percentage with which the value of an investment increased or decreased, during a certain period of time, as a result of unpredicted currency.

Before starting an investment on the FOREX market, one has to carefully analyze the steps that will take him or her towards a profitable experience on this market. Opening a Mini FOREX account is one of the most essential steps for any new trader who does not have the necessary financial resources able to allow him to open a regular trading account.

The great thing is that opening a mini FOREX account does not require an investment more substantial than $250, while, on the other hand, a regular FOREX account could require as high as a $2500 investment. Obviously, in order to maximize as much as possible the trading potential of your account, you have to constantly invest money as the potential is directly influenced by the sum of money available in your account.

Due to the nowadays incredible technology, you can open a mini trading account by simply filling in an online application form. In what concerns the size of the contracts that take place on the mini FOREX market, you should be aware of the fact that, as a general rule, they are approximately 1/10 of the size of a contract that takes place on the regular FOREX market.

Many traders, especially the ones who are new on the market are wondering whether there are any advantages that come along when opening a mini FOREX account, instead of a regular one. The answer can only be positive, due to the fact this type of account entitles the trader to perform the same actions on the market, as if he had a regular FOREX account. In other words, with a small investment of only $250 you can trade currency that worth $10,000, as, on this market, the so called “leverage” system is very popular, allowing traders to invest more money than their account normally permits them.

Due to the mentioned characteristics, mini FOREX accounts can be considered reliable investment options.