Forex: Understanding Fundamental and Technical Analysis
Technical analysis
Focuses on price patterns and uses charting to differentiate them. Technical analysis focuses on price action and market behavior. With the use of various indicators, you will be able to locate and combine pattern recognition with your favorite indicator for confirmation to take a trade.
The indicators are available on most trading software, and all calculations are done automatically within the software.
The problem with trading indicators only is that, first they are lagging price, and then you are only looking at the right side of your chart, waiting to see what will happen. What about the left side, or the side of your chart that is telling you what has already happened? This is a very important aspect of trading. A good chart is priceless if it helps to identify a great opportunity.
Momentum analysis is a measure of the change in Forex trading trends over a certain period of time. Certain momentum indicators will show if a currency is overbought or oversold, and these are common and very helpful tools for technical analysis.
Fundamental analysis
Regards price behavior as a product of economic and political events. Fundamental analysis involves the use of economic data, critical political decisions or the different social issues that influence prices. Interest and employment are major economic data that could move the market considerably. Fundamental trading is a very effective way to forecast economic conditions, but not necessarily exact market prices.
Don't fill your mind with too much information, the best way to trade is the simple way. However, it is very important to understand fundamental and technical analysis in order to use them for your Forex trading.
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Showing posts with label Potential profit. Show all posts
Showing posts with label Potential profit. Show all posts
Saturday, August 15, 2009
Start To Trade in Forex
Forex: Finding The Best Time To Trade
Here, if you know how, when, and what to trade, you can be sure that you can earn huge amounts of profit. It is a fact that a lot of people who traded in this financial market became successful and became very rich almost overnight.
The Forex market is the largest and the most liquid financial market in the world. Unlike the stock market and other financial market, Forex has no centralized location as it operates 24 hours a day at different locations around the world. Trades in this financial market are done through an electronic network.
Forex was only limited to large multinational corporations and financial institutions, such as banks. However, because of the advancement of the communications technology and also the existence of high speed internet, Forex in the late 90s is now available for everyone who is interested in trading in the Forex market.
For a beginner trader, is simply the buying and selling of different currencies of the world. This may seem simple enough for everyone, but you should also consider that a lot of inexperienced traders and some experienced traders have suffered huge financial losses in Forex.
Keep in mind that aside from the fact that Forex can give you a great money-making potential, Forex also has equal risks. Therefore, before you enter this market and trade, you should first consider a few things in order for you be successful in this money making venture.
First of all, you have to know how to trade currencies. In Forex trading, all you need is a personal computer with an active internet connection, a funded Forex account and a Forex trading system. There are numerous websites that offer Forex trading. In order to start trading, you have to open and fund an account first with your chosen website. After that, you can now start trading in the most liquid market in the world.
You need to have a fast internet connection in order to keep up with the updates and price movements and prevent slippages from happening. Another thing you have to consider is that as much as possible, you should register in a Forex website that offer dummy accounts so that you can practice your skills and strategies in Forex trading.
Here, if you know how, when, and what to trade, you can be sure that you can earn huge amounts of profit. It is a fact that a lot of people who traded in this financial market became successful and became very rich almost overnight.
The Forex market is the largest and the most liquid financial market in the world. Unlike the stock market and other financial market, Forex has no centralized location as it operates 24 hours a day at different locations around the world. Trades in this financial market are done through an electronic network.
Forex was only limited to large multinational corporations and financial institutions, such as banks. However, because of the advancement of the communications technology and also the existence of high speed internet, Forex in the late 90s is now available for everyone who is interested in trading in the Forex market.
For a beginner trader, is simply the buying and selling of different currencies of the world. This may seem simple enough for everyone, but you should also consider that a lot of inexperienced traders and some experienced traders have suffered huge financial losses in Forex.
Keep in mind that aside from the fact that Forex can give you a great money-making potential, Forex also has equal risks. Therefore, before you enter this market and trade, you should first consider a few things in order for you be successful in this money making venture.
First of all, you have to know how to trade currencies. In Forex trading, all you need is a personal computer with an active internet connection, a funded Forex account and a Forex trading system. There are numerous websites that offer Forex trading. In order to start trading, you have to open and fund an account first with your chosen website. After that, you can now start trading in the most liquid market in the world.
You need to have a fast internet connection in order to keep up with the updates and price movements and prevent slippages from happening. Another thing you have to consider is that as much as possible, you should register in a Forex website that offer dummy accounts so that you can practice your skills and strategies in Forex trading.
Thursday, August 13, 2009
Transactions
FOREX: Spot transactions
This type of transaction accounts for almost a third of all FX market transactions. Two parties agree on an exchange rate and trade currencies at that rate.
* A trader calls another trader and asks for a price of a currency, say British pounds.
This expresses only a potential interest in a deal, without the caller saying whether he wants to buy or sell.
* The second trader provides the first trader with prices for both buying and selling (two-way price).
* When the traders agree to do business, one will send pounds and the other will send dollars.
By convention the payment is actually made two days later, but next day settlements are used as well.
Although spot transactions are popular, they leave the currency buyer exposed to some potentially dangerous financial risks. Exchange rate fluctuations can effectively raise or lower prices and can be a financial planning ordeal for companies and individuals.
This type of transaction accounts for almost a third of all FX market transactions. Two parties agree on an exchange rate and trade currencies at that rate.
* A trader calls another trader and asks for a price of a currency, say British pounds.
This expresses only a potential interest in a deal, without the caller saying whether he wants to buy or sell.
* The second trader provides the first trader with prices for both buying and selling (two-way price).
* When the traders agree to do business, one will send pounds and the other will send dollars.
By convention the payment is actually made two days later, but next day settlements are used as well.
Although spot transactions are popular, they leave the currency buyer exposed to some potentially dangerous financial risks. Exchange rate fluctuations can effectively raise or lower prices and can be a financial planning ordeal for companies and individuals.
Traders
Forex: Trading Deal
Traders in the foreign exchange market make thousands of trades daily, buying and selling currencies while exchanging market information. The $1.2 trillion that is traded everyday may be used for varied purposes:
"Yoshi, it’s Maria in New York. May I have a price on twenty cable."
"Sure. One seventy-five, twenty-thirty."
"Mine twenty."
"All right. At 1.7530, I sell you twenty million pounds."
"Done."
"What do you think about the Japanese yen? It’s up 100 pips."
"I saw that. A few German banks have been buying steadily all day…."
* For the import and export needs of companies and individuals
* For direct foreign investment
* To profit from the short-term fluctuations in exchange rates
* To manage existing positions or
* To purchase foreign financial instruments
In the volatile FX market, traders constantly try to predict the behavior of other market participants. If they correctly anticipate their opponents’ strategies, they can act first and beat the competition.
Traders make money by purchasing currency and selling it later at a higher price, or, anticipating the market is heading down, selling at a high price and buying back at a lower price later.
Trader purchases a lot of currency = long on the currency (e.g. long dollar, long yen)
Trader sells a lot of a currency = short on the currency (e.g. short sterling)
To predict the movements of currencies, traders often try to determine whether the currency’s price reflects its fundamental value in terms of current economic conditions. Examining inflation, interest rates, and the relative strength of the country’s economy helps them make a determination.
Currency underpriced = price will go up
Currency overpriced = price will go down
Traders in the foreign exchange market make thousands of trades daily, buying and selling currencies while exchanging market information. The $1.2 trillion that is traded everyday may be used for varied purposes:
"Yoshi, it’s Maria in New York. May I have a price on twenty cable."
"Sure. One seventy-five, twenty-thirty."
"Mine twenty."
"All right. At 1.7530, I sell you twenty million pounds."
"Done."
"What do you think about the Japanese yen? It’s up 100 pips."
"I saw that. A few German banks have been buying steadily all day…."
* For the import and export needs of companies and individuals
* For direct foreign investment
* To profit from the short-term fluctuations in exchange rates
* To manage existing positions or
* To purchase foreign financial instruments
In the volatile FX market, traders constantly try to predict the behavior of other market participants. If they correctly anticipate their opponents’ strategies, they can act first and beat the competition.
Traders make money by purchasing currency and selling it later at a higher price, or, anticipating the market is heading down, selling at a high price and buying back at a lower price later.
Trader purchases a lot of currency = long on the currency (e.g. long dollar, long yen)
Trader sells a lot of a currency = short on the currency (e.g. short sterling)
To predict the movements of currencies, traders often try to determine whether the currency’s price reflects its fundamental value in terms of current economic conditions. Examining inflation, interest rates, and the relative strength of the country’s economy helps them make a determination.
Currency underpriced = price will go up
Currency overpriced = price will go down
Brokers
There are four types of market participants;
Banks, Brokers, Customers, Central banks.
* Banks and other financial institutions are the biggest participants. They earn profits by buying and selling currencies from and to each other. Roughly two-thirds of all FX transactions involve banks dealing directly with each other.
* Brokers act as intermediaries between banks. Dealers call them to find out where they can get the best price for currencies. Such arrangements are beneficial since they afford anonymity to the buyer/seller. Brokers earn profit by charging a commission on the transactions they arrange.
* Customers, mainly large companies, require foreign currency in the course of doing business or making investments. Some even have their own trading desks if their requirements are large. Other types of customers are individuals who buy foreign exchange to travel abroad or make purchases in foreign countries.
* Central banks, which act on behalf of their governments, sometimes participate in the FX market to influence the value of their currencies.
With more than $1.2 trillion changing hands every day, the activity of these participants affects the value of every dollar, pound, yen or euro.
The participants in the FX market trade for a variety of reasons:
* To earn short-term profits from fluctuations in exchange rates,
* To protect themselves from loss due to changes in exchange rates, and
* To acquire the foreign currency necessary to buy goods and services from other countries.
Banks, Brokers, Customers, Central banks.
* Banks and other financial institutions are the biggest participants. They earn profits by buying and selling currencies from and to each other. Roughly two-thirds of all FX transactions involve banks dealing directly with each other.
* Brokers act as intermediaries between banks. Dealers call them to find out where they can get the best price for currencies. Such arrangements are beneficial since they afford anonymity to the buyer/seller. Brokers earn profit by charging a commission on the transactions they arrange.
* Customers, mainly large companies, require foreign currency in the course of doing business or making investments. Some even have their own trading desks if their requirements are large. Other types of customers are individuals who buy foreign exchange to travel abroad or make purchases in foreign countries.
* Central banks, which act on behalf of their governments, sometimes participate in the FX market to influence the value of their currencies.
With more than $1.2 trillion changing hands every day, the activity of these participants affects the value of every dollar, pound, yen or euro.
The participants in the FX market trade for a variety of reasons:
* To earn short-term profits from fluctuations in exchange rates,
* To protect themselves from loss due to changes in exchange rates, and
* To acquire the foreign currency necessary to buy goods and services from other countries.
Thursday, August 6, 2009
Currency Risk
Are fortunes made and lost in FX and who trades on the FOREX market?
Profit potential is enormous in the spot currency market. Potential losses can be capped by STOP-LOSS orders automatically executed by computerized dealing systems the moment price levels pre-set by the client are reached in a currency's fluctuation.
Profits on the other hand can be left to run on and on. You can let the profits run and cut your losses short. Trading strategy, assisted by our consultants and traders on request, is entirely up to the client's free choice, being tailored to fit varying preferences of market participation, hedging, or risk tolerance level.
Unfortunately, too many people enter the forex market and expect to get rich quick. Forex trading is not gambling, it's a skill which can return good profits if you enter with the correct mindset and are prepared to learn the various tricks and techniques.
In any form of investment where the potential profit is high, then so too are the potential losses. Even the most skilled and experienced traders will lose money and should not be put off when you do. The important thing is to make more gains than losses, so start small and learn from your mistakes.
Always trade with a stop loss, particularly if you are using any form of automated trading software, this will protect you from huge losses if the market should suddenly turn against you.
Profit potential is enormous in the spot currency market. Potential losses can be capped by STOP-LOSS orders automatically executed by computerized dealing systems the moment price levels pre-set by the client are reached in a currency's fluctuation.
Profits on the other hand can be left to run on and on. You can let the profits run and cut your losses short. Trading strategy, assisted by our consultants and traders on request, is entirely up to the client's free choice, being tailored to fit varying preferences of market participation, hedging, or risk tolerance level.
Unfortunately, too many people enter the forex market and expect to get rich quick. Forex trading is not gambling, it's a skill which can return good profits if you enter with the correct mindset and are prepared to learn the various tricks and techniques.
In any form of investment where the potential profit is high, then so too are the potential losses. Even the most skilled and experienced traders will lose money and should not be put off when you do. The important thing is to make more gains than losses, so start small and learn from your mistakes.
Always trade with a stop loss, particularly if you are using any form of automated trading software, this will protect you from huge losses if the market should suddenly turn against you.
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