Forex Trading Articles

Forex Trading Terms For Beginners

As you enter the Forex trading world you might be introduced to a number of different terms. You may not know what they mean, and you might need further explanation.

Understanding Forex trading jargon is vital to your success as a trader. Therefore, some of the most commonly used terms are defined below:

Bid-This is what the buyer of a currency would be willing to pay for a foreign currency. This amount is usually based on current market trends. This is the price that the seller is usually expecting to pay in order to purchase currency they later can sell for a profit.

Ask-This amount is what the seller is expecting to make when selling a particular foreign currency. Just like the bid it is based on current market price. It may not be exactly what a seller will get but it is the goal of the seller to make a profit and sell for at least the current market price.

Spread-The simplest way to define this term is this: It is the difference between ask and the bid price. This is the key to profit (or unfortunately sometimes to loss).

PIP-The smallest price of a currency is referred to as this. Calculations based on this unit is what helps figure out exchange rates more accurately.

Base currency-The currency that you start with is called by this term. It would be compared to another (base currency to determine exchange rate, as well as profit or loss.

Secondary currency-This term is used to describe the current that is exchanged with the base currency. For instance, if you originally traded in the British pound and want to switch to the American dollar the American dollar would become the secondary currency.

Margin-When referring to working with a broker this term is usually used. It is the amount that you would be expected to deposit in a new financial account opened. It is also the commission that would be paid to a broker every time a trade is made.

Leverage-This term describes the weight of a margin. Forex trading deposit accounts are usually set up in this way so that large amounts of security deposits are managed with as little capital as possible.

Margin call-This is a phrase that is used to describe a time when a trader’s deposit does not even cover the transaction made. It is in some ways like having taken out a business loan and not making a profit. Worse yet, it could be a significant loss.

Currency pair-This is simply the two different mediums of financial media being exchanged. It is made up of the base currency and the secondary or “quote” currency. A trading duo such as this can also be thought of as a single unit being bought/sold.

Volatility-This is the measure of the amount of risk involved in making a specific Forex trading transaction. This is an evaluation tool that helps determine whether making a certain type of investment is potentially profitable or not.

Clearing price-The value of a currency pair is described by using this phrase. It is the specific monetary value assigned to a security or asset and it is determined by current bid and ask price.

Forex Trading Articles

Fx Trading Hours – Three Advantages Of Forex Trading Hours

Forex trading hours give investors three wonderful advantages. These investors can work any time from Sunday afternoon through Friday afternoon. Because the market is always open somewhere, the market instantly reacts to worldwide events 24 hours a day. Best of all, investors make money while they are sleeping. Successful investors understand what Forex is and how it works.

As the largest financial market in the world, Forex trading, which is short for foreign exchange trading, cannot be manipulated by any one country or industry. Every trading day between 1 billion and 1 1/2 billion dollars is exchanged in this active marketplace. The commodities are the values of different countries money and are traded in pairs. The seven most popular currency pairs are Euro/US dollar, US dollars/Japanese yen, Great Britain Pound/US dollar, US dollar/Swiss franc, Australian dollar/US dollar, US dollars/Canadian dollar and New Zealand dollars/US dollar. Currency investing is simple; good news for one country is usually bad news for another. When the price of oil rises, oil-producing countries make more money causing their currency to be worth more.

Investors can work any time with the expanded Forex trading hours. Part-time traders working around a full-time job enjoy the flexibility and freedom. For example, the Australian market opens at 5 PM Eastern Standard Time, followed by Tokyo at 7 PM, Singapore/Hong Kong at 9 PM, Frankfurt at 2 AM and London at 3 AM. New York City, of course, opens at 8 AM and closes at 5 PM.

No matter what happens in the world, the market is ready to react. If war erupts in an oil-producing country, all of the countries affected have changes in the value of their money. Good economic news in the United States increases the value of the US dollar while higher than expected unemployment claims reduces this commodity.

The most exciting advantage to Forex trading hours is investors can make money while they sleep. Because the market is actively trading around the clock, the value of the currency pair changes from minute to minute. Investors able to correctly forecast the value of money reap great rewards as the market rolls from one time frame to another without shutting down.

As Forex trading hours allow people to choose when they work, they can work any time from Sunday afternoon until Friday afternoon. Because the market does not close during this time, this marketplace responds quickly to anything that happens. Finally, investors make money while they sleep.

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Capital Protected Forex Products How Safe Are They

An increasing number of investors looking to play the highly volatile forex market are choosing to invest in capital protected schemes, which at least protect the original capital invested. With the forex market see-sawing in wild swings, making money is becoming more and more difficult. There are also groups of investors such as pension funds, life insurance companies and pensioners who can ill-afford to bear capital losses but still wish to have some kind of exposure to risky assets in commodities, forex, and stock indices.

That is why an increasing number of forex investment firms, forex hedge funds or even forex startups are offering capital protected products to attract investors. Here is how the scheme works.

The bulk of the money raised from investors, about 92-95% is placed in zero coupon bonds, with the objective that at the end of the period, the total will amount to at least 100 or equal to the original sum invested.

The remaining 5-8% is then invested in purchasing options so that in the event that the underlying asset appreciates or depreciates in line with the investment objective of the fund, the investors will receive the percentage gain of that particular market moving in their direction. In such a positive return, the investor will get the proceeds of the maturing bonds, 100, plus the positive return earned on the profit generated on the options.

If on the other hand, the market goes against the underlying investment, the options expire worthless and there is no additional loss on the investment. This means the investors get back their money as the maturing bonds expire.

The main risk is for the bond issuer defaulting. As with all capital protected schemes, the issuer does not take responsibility if the company whose bonds have been purchased goes bust. The risk is always with the investor.

For this reason, investors are strongly recommended to diversify their investments and select a variety of investments, so that even if the underlying bonds in a capital protected scheme default, the rest of their investments will be safe.

Unfortunately, the investor cannot instruct his forex broker or forex fund manager to apply stop loss protection since the capital protected products are tailor made for specific periods and will benefit if the underlying asset moves in the direction stated when the original investment is made.

Forex Trading Articles

How Profits Are Earned In The Forex

Not having the right risk management skills might make you lose in the trading industry. Profits from the forex can be big but it can also involve a lot of risks. More than 90 per cent of novice forex traders are said to lose money, usually because they are ill prepared for the challenges of trading currencies.

The leverage offered to traders will determine how much they earn or lose. The amount of returns the clients will be having will depend on where the money will be invested by the broker. Most traders get left behind due the fast pace currency movement. These days it is normal that the market move about 100 pips in a few minutes.

For those with limited capital to invest in the first place, rapid swings can present a serious problem. Forex trading platforms will often automatically close a position that moves into a loss that can’t be covered by the funds in a trader’s account, crystallizing those losses even if markets start to move back in a trader’s favor. Still, it is possible to eliminate the very real risk of being wiped out by following several tried and tested techniques for moving the odds in your favor.

Firstly what you need to do is obvious. When it comes to the Trading spot forex, it can be hard to learn it. With understanding the technicalities of how the market works and how to trade in currencies, you’ll need to understand how to reach a trading decision, be it based on technical or fundamental analysis, and develop a trading strategy that suits your style.

So, regardless of whether you use charts or economic data to inspire your trades, you will need to make sure you keep yourself informed of the latest market developments. Always note that in forex trading learning is always happening. If you want to get a feel for what forex trading is like, you can get cracking straight away using one of the currency trading simulators that many brokers now offer. This system will help you with seeing what trading techniques and strategies will suit you, and make mistakes without risking any of your own cash, until you feel that you’ve come up with a system that will allow you to win more than you lose.

Losing money is always something that goes on in the market. It is important that traders know how to look forward and respond to this types of occurrences. It is important that you still keep an open mind when you experience losses.

People can get emotional when it comes to losses and this can affect them negatively. Fast moving markets can create the fear that you’re missing out. One should keep in mind that the market will have its time to offer positive results so it will just be a matter of time.

Your emotions should also be normal when you win big. Greedy traders will quickly lose what they have won. Forex trading and any investment really involves Psychology.

Before a person can truly trade in the forex, they should always gain more knowledge about it. Managing your finances will help you lessen the chances of risk. See to it that your account has the necessary finances for trading.

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Forex Trading Courses

If you’re looking to cash in on day trading on the foreign exchange market, also known as the Forex or FX, Forex training is a great place to start. Understanding day trading and developing a trading strategy is difficult, so don’t try to go it alone. Whether you’re completely new to trading, or you’re an established trader that’s struggling with the market, a course in Forex trading can help you increase your earning potential. Day trading courses are available to help you get into this great career or hobby today!

Forex training will teach you the ins and outs of the foreign exchange market. You’ll learn how to interpret FX currencies trading information to spot which currencies are trending up or down. You won’t have to go it alone – day trading courses offer guidance and feedback. Forex courses are taught by professionals that are experts in the field of day trading. These are people that have made a career out of day trading, and they’re ready to show you how to do the same. If you’re having trouble spotting profitable currencies, an instructor will work with you, explain in detail what you’re looking for, and make suggestions to improve your trading strategy.

Learn real trading skills that will make you money:

– How to get into forex trading, including information on investment needed to get started
– How to spot profitable trends on the foreign exchange market
– How and why to buy and sell currencies
– Managing profits and losses
– Balancing your investment portfolio for optimum performance

You’ll learn how to utilise computer applications to keep constant track of currencies that are trending up and down, on a daily, monthly, and yearly basis.

Forex trading is a proven money-maker, but you have to have the skills and the know-how to become a successful day trader. Trying to figure out the foreign exchange market on your own is nearly impossible unless you’re already well-versed in the field of finance. Don’t spend a penny of your hard-earned cash on foreign exchange trading before you learn how to do it right. Courses are available in person and online, and can have you day trading in a matter of weeks! If you’d like to start a money-making hobby or begin a lucrative career as a Forex day trader, sign up for a traders’ skills course today to make your financial dreams come true!