Foreign Exchange (FOREX) is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location and no central exchange (off-exchange). It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers. Traditionally, retail investors' only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the FOREX market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets.
Saturday, October 17, 2009
Foreign Exchange
What is FOREX (Foreign Exchange)?
The simple sense of Forex (Forex currency exchange, Foreign Exchange) is simultaneous purchase and sale of the currency or the exchange of one country's currency for the one of another country. The world currencies do not have a fixed exchange rate and are always fluctuating being traded in the currency pairs like Euro/Dollar, Dollar/Yen an others. 85% of daily trades are taken by major currencies trading.
Investments usually deal with 4 major pairs: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc or EUR/USD, USD/JPY, GBP/USD, and USD/CHF used to sign these pairs accordingly. These major pairs are considered as Forex market's "blue chips". You will not receive any dividends on the currencies. Well known "buy low - sell high" gives the profit for currency trades.
In case you have a forecast that one currency would get higher to another you can exchange the second one for the first one and wait for the profit. If you are lucky to see the trades following your forecast you can make an opposite transaction and to exchange currencies back gaining the profit.
Forex transactions are carried out by Forex brokerage companies, also known as major banks dealers. Forex market is worldwide and your European colleagues may make a transaction with Japanese traders when it's time for you to sleep in the North America. There are 3 shifts for the major institutions to work in due to 24-hours a day activity of the Forex market. It's possible to ask for overnight execution for take-profit and stop-loss orders of the client.
Prices in the Forex market fluctuate without any dramatic changes unlike stock market where considerable gaps are likely to be seen. There isn't any problems entering and exit the market due to its daily turnover of about $1.2 trillion. Forex market can not ever be forced to stop. The transactions were carried out even in 2001, on September, 11th.
Foreign exchange market (also called Forex of FX to shorten the name) is the oldest market in the world. It is also seen to be the largest one. Being currencies' primary market working 24-hours a day, Forex is also the largest market with highest liquidity. This is an interbank market carrying out spot (or cash) transactions. The currency futures market, to be compared with Forex is traded only 1% as much.
Forex market doesn't have any exchange center unlike the stock market. Forex trading seem to go after the sun around the world, from banks of the United States to other parts of the world like Australia, New Zealand, the Far East or Europe and back to the US some time later.
High minimum amount of transaction and strict financial requirements used to make this interbank market unavailable for small speculators. The only dealers of currency markets were banks, huge-amount speculators and largest currency dealers. They had an ultimate access to this market dealing with lots of primary exchange rates of the world currencies, the market with an extremely high liquidity along with an unusually strong nature of trends.
Nowadays small traders have an opportunity to purchase the small lots (units), as a result of the large inter-bank units being split by market maker brokers like FX Solutions, at the amount they like.
The traders of any size like small companies and individual speculators have an access to the market at the same price fluctuations and exchange rates which only large players used to enjoy recently. Market makers monitor the rates so that produce their profit on the difference of rates at which the currency was bought and sold.
Foreign Exchange Market has an acronymic name Forex. It has the largest size and the liquidity throughout the world nowadays. Forex daily transactions are carried out at the common amount from 1 to 3 trillion dollars. There is no stock market that is able to deal with a comparable amount of money.
This enormous market is like the dangerous sea where you can meet lots of sharks and dangerous waters but at the same time it is the only one where two weeks of trading can hypothetically bring you $1,000,000 out of $1,000 of initial investment.
This is certainly hypothetically because a lot of newbie traders deal with their trades as gambling, that surely bring them to having nothing in the end. You should always keep the phrase "be careful!" in your mind. This market would give you its profit possibilities only if you learn the basic things hard and make lots of demo trading.
The statistics is that as much as 95% of traders come to losing their money at Forex, 5% have profit and less than 1% of traders make large fortune at Forex. You shouldn't produce, sell or advertise anything trading at Forex. Your assets are your knowledge, experience and a small amount of cash.
This market is a platform for banks, transnational corporations and individual traders to change the currencies they possess into other ones. This is the spot Forex market. At this market you can trade with up to 1:400 leverage which means that you'll get $400 on your account for each dollar invested. So, you can trade with the $400,000 sum having invested $1,000 onto your account.
Still, lots of experienced traders consider such leverage dangerous and won't get started with it. Though, if you know how ho use such high leverage it will do you only good. But this is the place to stop speaking about the basic things. Keep reading these articles if you want to be aware of how this market has occurred and some of its historical matters.
Now it is time to speak about the strategies and the way of making money at Forex some traders use. First we should say that the things that work in one case do not certainly work in another. The fact is that currency trading surely means risk. Still, there are a number of strategies for the newbie to use to be the winner.
Forex trading
The investor's goal in Forex trading is to profit from foreign currency movements. Forex trading or currency trading is always done in currency pairs. For example, the exchange rate of EUR/USD on Aug 26th, 2003 was 1.0857. This number is also referred to as a "Forex rate" or just "rate" for short. If the investor had bought 1000 euros on that date, he would have paid 1085.70 U.S. dollars. One year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. dollar. The investor could now sell the 1000 euros in order to receive 1208.30 dollars. Therefore, the investor would have USD 122.60 more than what he had started one year earlier. However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a "risk-free" investment. One example of a risk-free investment is long-term U.S. government bonds since there is practically no chance for a default, i.e. the U.S. government going bankrupt or being unable or unwilling to pay its debt obligation.
When trading currencies, trade only when you expect the currency you are buying to increase in value relative to the currency you are selling. If the currency you are buying does increase in value, you must sell back the other currency in order to lock in a profit. An open trade (also called an open position) is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position.
However, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency.
Forex market
The Forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.
The main enticements of currency dealing to private investors and attractions for short-term Forex trading are:
. 24-hour trading, 5 days a week with non-stop access to global Forex dealers.
. An enormous liquid market making it easy to trade most currencies.
. Volatile markets offering profit opportunities.
. Standard instruments for controlling risk exposure.
. The ability to profit in rising or falling markets.
. Leveraged trading with low margin requirements.
. Many options for zero commission trading.
Forex Strategies
Forex trading can't be consistently profitable without adhering to some Forex strategy. It takes time and effort to build your own Forex trading strategy or to adapt an existing one to your trading needs and style. It's important to choose a strategy or system that is easy to follow with your daily trading schedule and that can be applied successfully with your account balance size. In this Forex strategy repository you'll find various strategies that are divided into three major categories
. Indicator Forex Strategies
. Price Action Forex Strategies
. Fundamental Forex Strategies
Indicator Forex Strategies are such trading strategies that are based on the standard Forex chart indicators and can be used by anyone who has an access to some charting software (e.g. MetaTrader platform). These Forex strategies are recommended to traders that prefer technical analysis indicators over everything else
Moving Average Cross Strategy
Parabolic SAR Strategy
Stochastic Oscillator Strategy
Price Action Forex Strategies are the trading strategies that don't use any chart or fundamental indicators but instead are based purely on the price action. These strategies will fit both short-term and long-term traders that don't like the delay of the standard indicators and prefer to listen as the market is speaking. Various candlestick patterns, waves, tick-based strategies, grid and pending position systems — they all fall into this category:
Inside Bar Strategy
Simple Price Based Trading System
Martingale Trading System
Scalping Forex Strategy
Fundamental Forex Strategies are the based on purely fundamental factors that stand behind the bought and sold currencies. Various fundamental indicators, such as interest rates and macroeconomic statistics, affect the behavior of the Forex market. These strategies are quite popular and will benefit long-term traders that prefer fundamental data analysis over technical factors:
Important News Trading Strategy
Carry Trade Strategy
WebMoney
WebMoney is an electronic currency system operated by WM Transfer Ltd. There are several e-currencies circulating in this system, with the most popular being - WMZ (equals to $1 U.S.), WME (equals 1 euro) and WMR (equals 1 Russian ruble).
WebMoney utilizes several methods for their customers to access system accounts - WebMoney Keeper Classic (the most secure and fully functional access with highly sophisticated software), WebMoney Keep Lite (less secure, but still protected access - via Internet browser). Other methods are available but are rarely used. WebMoney can boast more than 100 million dollars daily turnaround funds and millions customers around the world. Though, WebMoney started as a Russian payment system, it is now became an internationally popular e-currency system with a large number of representatives in all over the world and the developed deposit/withdrawal system.
WebMoney is a highly secure on-line payment system, offering security through the special protected key-files - even if your password is hacked your funds are still secure. While generic WebMoney accounts are anonymous, money withdrawal transaction involve personal identification. These ways make WebMoney far more secured than e-gold or any other on-line payment system.
WebMoney is a good alternative for those Forex traders which search for fast, secure and easy-to-use method to fund their accounts without the troublesome worries with credit cards or bank wires. Many Forex brokers support WebMoney as the deposit/withdrawal option.
Here is a short list of recommended Forex brokers supporting WebMoney.
. InstaForex
. FXOpen
. FXCast
. LiteForex
. Marketiva
PayPal
PayPal is an electronic payment, storage and money transfer method that is operated by PayPal Inc., which is owned by eBay Inc. Founded in 2000 PayPal was one of the first and currently is one of the most popular on-line services for money transferring. Although there is account balance associated with each PayPal account, PayPal doesn't employ virtual currency units (unlike e-gold and WebMoney), remaining a pure payment system.
PayPal accounts are anonymous and are based on the customer's e-mail address. But the credit card is required to add the funds into the balance or send payments to other customers.
PayPal charges fees for receiving funds and for withdrawing funds from the account balance to the bank accounts outside U.S. The sender of the funds doesn't pay any fees if transfer occurs only inside the payment system.
PayPal is a convenient electronic payment system to use with the Forex brokers. Because all payments are instant, you can use your credit card without exposing it to anyone except PayPal and there are enough various brokers that accept PayPal for funding purposes. Unfortunately, PayPal doesn't allow residents of certain countries (the majority of the countries) to accept PayPal payments, making it useless to the Forex traders from such countries.
Here is the short list of the Forex brokers that accept PayPal:
. AvaFX
. InstaForex
. Easy-Forex
Moneybookers
Moneybookers is a British electronic payment, storage and money transfer system that is operated by Moneybookers Ltd., which is owned by Investcorp Technology Partners. Moneybookers was founded in 2001 and by its functionality is a competitor of other popular payment system PayPal. Like PayPal, Moneybookers doesn't offer any electronic currency, but the account balance can be uploaded and is measured in the common currency units.
Moneybookers requires mandatory account owner verification, which can be done via confirming the credit card, the bank account or the physical address. All three methods can be used together to increase the transfer limits that are active for all customers.
Moneybookers charges fees for sending the funds, which is usually quite convenient for the sellers and providers of the various paid on-line services.
Moneybookers is less popular in the world than PayPal or WebMoney, but is a convenient electronic payment system to use with the Forex brokers. It's a secure payment system that isn't anonymous and complies with the British anti-fraud laws. Unlike PayPal, Moneybookers is fully available to the residents of almost all countries in the world, making it potentially more widespread system.
Here is the short list of the Forex brokers that accept Moneybookers:
. LiteForex
. AvaFX
. InstaForex
Liberty Reserve
Liberty Reserve is an e-currency account-based system operated by Liberty Reserve S.A. (based in Costa Rica). It allows fast, reliable and secure transactions between the members of the system. The customers can buy and sell Liberty Reserve e-currency via authorized dealers and various exchange services.
Since the late 2006 Liberty Reserve became one of the most popular payment method among the Forex traders from many Asian, South American and African countries, because it doesn't require credit card or bank account verification and is not strictly regulated by the authorities. Many trader-friendly Forex brokers list Liberty Reserve as one of the deposit/withdrawal option. Here is a short list of recommended Forex brokers that support Liberty Reserve:
. FXOpen
. Forex4you
. MasterForex
FXOpen Forex Broker
FXOpen is a major Forex trading service providers for the Islamic traders, but it doesn't limit itself to Muslim traders only. Anyone can benefit their "no overnight interest" system which is rare for MetaTrader 4 platform broker. They also offer trading courses which might be useful to the beginning traders. Regular contests and deposit bonuses with e-gold and WebMoney payment options make FXOpen a reasonable player on the Forex brokers market.
. Spreads — as low as 2 pips on EUR/USD.
. Minimum deposit for micro account — only $1.
. Minimum deposit for standard account — only $25.
. Instant order executions and quote handling.
. Margin leverage from 1:1 up to 1:500.
. Free unlimited demo accounts available.
. Regular technical research and market news available.
. Experienced and helpful support.
. 100$ bonus on new standard accounts.
. Trading contests.
. Trading courses for new traders.
. MetaTrader 4 platform.
. Muslim friendly trading system.
. Serious company for serious traders.
. ECN (Electronic Communication Network) execution available through MetaTrader.
. Liberty Reserve and WebMoney billing options.
LiteForex Forex Broker
LiteForex is one of the leading MetaTrader 4 Forex brokers that accept e-currencies (such as WebMoney) as the payment method. Accounts can be started with the minimum of $1, which combined with flexibility of MetaTrader platform makes LiteForex an ultimate choice for the traders that want to test their automated trading strategies on real account, but without risk of losing too much money. CFD trading is also available, so Forex traders can diversify some of their portfolio into stocks traded on NYSE.
. Start trading with $1.
. Commission free trading.
. Leverage from 1:50 to 1:500.
. Receive monthly interest on your balance.
. Competitive fixed bid/ask spreads.
. Really fast order execution.
. Account deposits via wire transfer, WebMoney, Liberty Reserve and AlertPay.
. Many different account types available.
. 33 currency pairs, 8 currency indexes, 32 CFDs and 2 metals to trade.
. One of the best trading platforms - MetaTrader 4.
. Reliable dedicated trading servers.
. 24 hours a day, 5 days a week trading support.
. Partnership opportunities for serious clients.
InstaForex Forex Broker
InstaForex is a MetaTrader Forex broker, which offers all the useful features sought by the Forex traders in their broker — convenient way to fund the account and get the earned profit back, excellent connection with the trading servers and the quote quality, helpful support and the abundance of the trading tools to choose from. All these features are well combined in InstaForex. Here's the quick glance at its advantages:
. Start trading with the low minimum of $1.
. Flexible leverage from 1:1 up to 1:500.
. Receive monthly interest on your trading account funds.
. 3 pips spread on the major USD-based currency pairs.
. Uninterrupted order execution.
. Account deposits via Moneybookers, WebMoney, e-Bullion, wire transfer, credit cards and PayPal.
. Trade on Forex, CFDs and indexes.
. MetaTrader 4 trading platform — leading Forex software solution.
. Multilingual phone and chat support.
. Swap-free accounts available on demand.
. Free bonus system on account opening.
Deposit: Bonus:
$100 $30
$800 $200
$5,000 $1,000
$50,000 $5,000
eToro Forex Platform
eToro offers of the most innovative Forex trading platforms on the on-line market. eToro Forex platform allows beginner traders to start trading almost without a traditional Forex learning:
. Minimum deposit — $50.
. Up to $1,000 bonus upon your first deposit.
. All trades are displayed visually in your platform.
. Observe trades in real-time in several convenient ways.
. Unlimited virtual money is offered if you want to improve your skills.
. Demo trading shares the same functionality as the real trading.
. Regular contests on both real and demo accounts.
. Prizes and bonuses for the most valued customers.
. Forum and real-time chat are available for the traders to discuss and share their success.
. Effective support team to answer all your questions.
. Muslim-friendly accounts are available.
. Multilingual site to offer a quality service to the international clients.
. Live news feeds to point out the best opportunities for the Forex trading.
. Real money orders are executed in a real-time mode, without delays and requotes.
. WebMoney, Moneybookers, Wire transfer, PayPal and credit cards are accepted to handle the funds transfers.
. 1:100, 1:200 and 1:400 leverage to control your risks more accurately.
Webtrader.
. Commodities trading (gold, silver and oil).
. Demo and real championships with cash prizes.
Bonus System. Upon your first deposit to the trading account you immediately receive a free bonus up to $1,000! It's that easy! Just register and deposit as much as you want. Your bonus will automatically appear in your account balance.
Deposit: Receive Bonus:
. $100–$399 $25
. $400–$999 $100
. $1,000–$4,999 $250 and get a Silver Account
. $4,999–$9,999 $500 and get a Gold Account
. $10,000–$19,999 $1,000 and get a Gold Account
. $20,000+ Special VIP bonus
Bonus is applicable only to the first deposit. It can be added only once per trading account, person or a household.
FXcast Forex Broker
FXcast is a unique Forex broker registered on Antigua and Barbuda and is an accredited member of GDCA. All traders can benefit from the MetaTrader 4 platform that allows using custom indicators and automated expert advisors. FXcast also supports almost all possible ways to deposit and withdraw trading funds — everything for the trader's comfort.
. Open account in just five minutes.
. $10 to open a real trading account.
. Professional user support.
. Trade more than 35 currency pairs.
. Fund account via e-gold, WebMoney, c-gold, E-Dinar, Liberty Reserve, E-Bullion, Wire Transfer or Credit Card.
. No slippage, even in volatile market.
. Guaranteed order execution.
. Live support during trading session.
. MetaTrader 4 trading platform.
. Segregated secure accounts available for big traders.
. Multilingual site and support.
. Partnership program available.
. FXcast is very easy to start with: register via their website, update your personal identification information and enjoy trading.
Forex Resources
This list of Forex resources contains URLs to other useful Forex sites - Forex forums, general Forex information resources, Forex signals providers and our partners. If you find a broken link, or wish to exchange links with us - please, contact me via the link exchange form.
FXstreet — Many useful articles, constantly added expert commentaries and forecasts
DailyFX — Everything happening in Forex world is covered here
Currency Newswire — daily currency news and Forex highlights.
Incredible Charts — A very good resource to learn everything about charts
Inspectd.com — practice your technical analysis skills.
Metatrader Expert Advisors and Metatrader Indicators, MQL4 Coding Service
BollingerBandsForex — Features charts with Bollinger Bands and a wide array of indicators. Lists of trades of currency pairs based on Bollinger Band trading systems.
Forex brokers
MasterForex — offers a wide variety of trade instruments (Forex, CFD, Futures), an easy and user-friendly trading platform (MT4), terminal for PDAs and Smartphones. 24/5 customer support is always online. Minimum deposit is 1$. We also have Islamic accounts. Spreads begin from 2 pips. Leverage can be up to 1:500. We have the best conditions for partners!
MagnumBroker.com interbank forex broker, futures and stocks broker — Terminals: MetaTrader 4, Strategy Runner, Laser trade, mobile trading, 1000+ trading instruments, automatic trading, catalog of trading systems, trading central research, no requotes, fast execution, direct access, currenex, licensed broker.
Forex signals and market forecasts
Profit Guide Forex — reliable Precise Trading System with free software that can generate your own signal.
Open Forex — Foreign Exchange Trading, Forex Analysis and Forecasts
Forex Training - Work at Home Business Opportunity — Offers forex training - internet home based business opportunity. Work from home job.
AceTrader - FX signal provider — Provides 24-hrs Intraday and Daily FX trading commentaries & signals. Services started on Reuters since 1989, on Internet since 2000.
ForexFactory — a popular Forex discussion forum
MoneyTec — Forex related Forum dedicated to technical analysis.
Forex trading information
Go Learn Forex — Learn how to trade forex like a professional trader at Go Learn Forex.
TradeJuice — The largest selection of FREE day trading articles in the world
Investopedia.com — a large educational Internet resource about investing and trading.
Forex Glossary — Terms and terminology used in Forex Trading. Index of financial and investment terms.
Forex trading — Forex technical and fundamental analysis, forex charts and brokers.
Forex Training with Peter Bain's Forex Currency Day Trading Course — Forex training course and forex services by professional forex traders.
Online Forex Trading — We talk about currency exchange using online platform, forex softwares and trading systems.
Forex system and MT4 indicator — Free download forex system and MT4 indicators.
Forex Directory — Whole Forex in one place
Forex Web Directory — link to forex related sites and more business information.
Business Web Directory — a large resource of all kind of financial information.
Most Visited Forex Websites — Ranking the most visited forex websites based on alexa and compete statistics. Includes website reviews and historical ranking information.
Forex Charts
The charts have features like trendlines, indicators and zoom tools.
Popular Forex Charts
.GBP USD Chart
.EUR USD Chart
.USD JPY Chart
.USD CHF Chart
.USD CAD Chart
.AUD USD Chart
More Forex Charts
. AUD CAD Chart
. AUD JPY Chart
. CHF JPY Chart
. EUR AUD Chart
. EUR CAD Chart
. EUR GBP Chart
. EUR JPY Chart
. GBP CHF Chart
. GBP JPY Chart
. NZD JPY Chart
. NZD USD Chart
Forex Trading Information
FOREX — the foreign exchange (currency or forex, or FX) market is the and the most liquid financial market with the daily volume of more than $3.2 trillion. Trading on this market involves buying and selling world currencies taking the profit from the exchange rates difference. Forex trading can yield high profits, but it is also very risky. Everyone can participate in Forex trading via the Forex brokers.
Don’t forget to check and bookmark my Forex blog to get the latest updates about Forex market and this site’s content. You can also join a friendly Forex traders community at the Forex Forum.
