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foreign exchange trading

You will hear differing views about foreign exchange trading as you immerse yourself into this world. Most of the views you come across will focus on how you can make your trading process more elaborate to break through the complexities of the forex market.

However, there will also be a few which will counsel exactly the opposite of this, i.e. making things simpler and simpler till the entire process of foreign exchange becomes a breeze for you. Here is a lowdown of what these voices will tell you.

What Does It Mean to Be Simple?

The first thing you need to understand is what these voices are actually trying to convey and what their messages really are. Simplifying foreign exchange trading means that you use the concept of minimalism in the analysis and implementation of your strategy.

In other words, you will be using fewer forex charts, time frames, indicators, and filters. Simplifying your forex trading system is extremely beneficial in the long term. Here are some reasons for this.

Eradicating Unnecessary Confusion

The forex market, as it is, is quite a complex beast to handle even for the most experienced of traders. If you complicate your own procedure then you are only adding to this complexity which can make the whole exercise extremely confusing. Therefore, the most important benefit of simplifying your entire foreign exchange trading process is that you will be eradicating unnecessary confusion.

Understanding Your System in Detail

This is a basic concept. The more complex a process is the harder it is to understand and master. In contrast, the simpler it is the more you will understand it, and understanding your system in extreme detail is something that will bring you profits because your forex signals will be clearer and more actionable. For instance, if you understand your system properly then the chances of you making a mistake with its implementation will be lower.

Being Able to Make Quick Changes

Simpler foreign exchange trading systems also happen to be very easy to modify or improve. This is important because of the dynamic nature of the forex market. The dynamic nature of the forex market means that its state is always changing and since your system will be designed for particular situations, this change can result in losses. If you can easily make changes to your forex trading process then you would be able to cope with the dynamic nature of the market better.

Easy to Review Performance

A simple foreign exchange trading process will also make it easier for you to review your performance because there will be considerably less information to analyse. Most traders lose a lot of time in reviewing their performance every weekend. This time can be saved and put to better use with a simpler system.

Benefits For Automation

There is also an added benefit of simplifying your foreign exchange trading process. This is the fact that the simpler a process is the easier it is to automate it. Automation, needless to say, means more profits for less effort.

 

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Forex

Forex day trading has evolved greatly since it first became available to the public and was greatly facilitated by the advent of digital platforms. Forex trading was first launched in 1975 as a means of trading stocks and currency, back when the SEC agreed that fixed commission rates – formerly set at 1pc of each trade – were not legal. This allowed brokers to offer lesser commission rates and opened up the market directly to amateur and professional day traders alike.

Different Forex trading strategies

There are a multitude of strategies for day trading in forex. Some are particularly unique to daily forex trading activity and others follow more general patterns of broker-driven trade activity. Essentially the driver behind each approach is to maximise profits, by making advantageous bets against micro price movements in currency indexes and exchanges. Often, traders will leverage additional capital – sometimes in large sums – to access greater funding to place their trades and potentially realise even greater gains (however, the reverse situation – of magnified losses – is the flipside risk of leverage).
When you look at your strategy, consider first your entry approach. You will want to select financial instruments that work best for day trading. Forex is ideal for this, as currencies are both volatile and liquid. Liquidity is important as it gives you the opportunity to buy and sell with a tight spread and the right price. Volatility measures price movements within a day and can lead to potentially bigger gains or losses, depending on the movement.

Decide your approach to risk and whether you wish to simply trade with your own money – particularly whilst you are building up knowledge and experience – or whether you plan to leverage your bets by borrowing capital. This approach is generally recommended for more experienced day traders. It is also wise to research the different approaches to market analysis, such as learning to read trend lines and candlestick charts. Another important approach is to stay up to date and current with the latest financial news, as this will provide you with vital broader context as well as data around market movements. Day traders can also use online platforms to see where orders are popular within the market and see how volumes are being affected during the day.

Stop losses

This is another important strategy for day trading. When you are trading on a margin, you accept risk, as price movements can be steep. However, by setting a stop loss, you can limit your potential loss by triggering a stop-point at a pre-arranged price, where the trade will cease. The trick is to pick a price that suits your tolerance and appetite for risk. This stop loss can either be set up directly via your platform, or it can be a mental strategy that you employ to guide your decision making. This approach can greatly lessen stress and worry and it is a popular approach for more experienced Forex traders. Novice traders are at more risk without this approach, as they often refuse to stop trading when they experience a loss and take extra risks to try to break even – potentially further worsening their position.

 

 

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broker

You may be using a broker to make your currency deals for you, but how can you be sure your money will be handled as you expect? Check a few details with your broker to make the picture clear.

1. Bigger is sometimes better

You need to know how large a firm you are dealing with to assess its financial clout. FX markets are about volume, and the more trading an institution does the more it benefits from economies of scale when it comes to trade prices, the advantages of which get passed on to you, the client.

2. Opening hours

Forex markets run on a 24 hour basis. Does you firm offer 24 hour facilities? If not, you could be missing out on valuable market action.

3. How are rates quoted?

If your broker works through a dealing desk, he will be pricing and executing your trades himself. The result is usually fixed spreads, which tend to be above the average variable spread, however there may be limitations placed on trading while news is being released or major economic events are occurring. If these are key trading periods for you this could be a problem. On the other hand, your broker may not go through a dealing desk, relying instead on bank streaming for pricing and trades. This method is usually unaffected by restrictions during news or economic events.

4. Does your broker use Fractional Pip Pricing?

Traditionally FX brokers have rounded prices up and down to the fourth decimal place, or Pip. Modern brokers are starting to use Fractional Pip Pricing, which allows a tighter and more accurate spread by adding an extra decimal place or Pip.

5. Does your broker scalp the market?

Scalping means to place an order within a spread. However what makes profit for the client makes loss for the market maker, so not all brokers will use this strategy. Scalping can be profitable but carries a high risk.

6. Does your broker offer Positive Rollovers?

Interest gained or paid on FX trades held overnight are called rollover. Quantities vary on a daily basis and rely on fluctuating interest rates. If you sell a currency paying a higher interest rate than its pair, you are subject to a Negative Roll, where you have to pay that interest. A Positive Roll actually earns you interest from a currency purchase that pays a higher rate. Negative Rolls are standard, but Positive Roll are only available from certain brokers.

FX trading can be a risky business, so consider carefully your investment aims before choosing foreign exchange and only invest what you can afford to lose. Quiz your broker carefully before laying down any funds and if you are not happy with his responses, consider finding another broker.

 

 

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forex

To a beginner, trading on the Forex, or foreign exchange market, can be a daunting prospect, not least for its many exclusive terminologies and terms. However, this initial complexity need not be a deterrent. If you are just starting out in the market there are a number of easy-to-understand basics that can make your first steps simple ones. Below are a handful of words that are vital to any successful foray into the Forex world.

Currency Jargon

Before you start, it is imperative you know what it is you are actually trading. The Forex market has eight main players, known as ‘majors’, which are the world’s most traded currencies. These eight comprise of the Euro, US Dollar, Japanese Yen, British Pound Sterling, Swiss Franc, Canadian Dollar and Australian and New Zealand Dollars.

Each of these currencies also has its own nicknames that are commonly used amongst traders on the market. The GB pound is also known as the ‘cable’ and the US Dollar as the ‘buck’ or ‘Greenback’ while the Canadian Dollar is generally referred to as the ‘Loonie’. Easier to decipher are the ‘Aussie’ (Australian Dollar), ‘Kiwi’ (New Zealand Dollar) and the ‘Swissie’ (Swiss Franc).

Basic Terms of Play

Once you have understood what you are trading, it is important to then get a grip on the lingo associated with the forex trading process itself.

Currencies on the Foreign Exchange are always traded in twos, with each coupling known as a ‘Currency Pair’. In any listed pairing, the ‘Base Currency’ is the first listed in the quote, whilst the second listed currency is known as the ‘Counter Currency’. Each piece of currency is known as a ‘Unit’, with a ‘Lot’ representing the amount of a base currency to buy or sell.

The ‘Ask Price’ is the price at which currencies are bought, shown at the right side of any quote, while the ‘Bid Price’, on the left side of any quote, is the price at which each currency is sold. The ‘Bid/Ask Spread’ is the difference between the two and represents the amount made in broker’s fees.

One word that arises frequently in any Forex discussion is ‘Pip’. A ‘Pip’, which stands for ‘percentage in point’, is the smallest price change that can occur between any currency pair. For most currencies, this is 0.0001. The Pip can be measured either in terms of the currency or in terms of the quote and it is this that is used to calculate any profit or loss that a trader may make on the market.

 

 

 

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Forex Broker

Anyone who is looking to venture into the world of the forex trading will probably be wondering how on earth they go about finding the best forex broker. Of course they all say that they can make you money, but how can you be sure that you are dealing with someone reputable? There are a few things to look out for when it comes to finding the right forex broker for you.

Check their credentials

Security is absolutely essential when it comes to finding a forex broker and if you are going to hand over money, then you want to be sure that you aren’t trusting the wrong person. Fortunately, checking whether a broker is reputable is relatively easy as they have to register with the relevant regulatory body. If you are looking for a broker in the UK, they will need to be registered with the Financial Services Authority as they oversee all financial professionals and help protect their clients.

Work out their rates

As with any transaction, using a broker will attract fees but sometimes it isn’t as simple as a flat cost to you, so you need to be sure that you understand the fee structure for any transactions you enter into. Some forex brokers charge a commission on any trade you enter, whereas some will expect you to pay for the spread the difference between the bid price and the asking price so you need to ascertain which is the best for you and make sure that you have a full understanding of how you will be charged.

Platform particulars

The digital age has made the process of forex trading a lot easier than it used to be and most forex brokers offer their clients a trading interface which they can use to keep track of their investments. It is always worth checking out the interface offered in order to ensure that it suits you and learn whether their reporting tools are easy to use. Whether you can understand the system enough to have confidence in your trades will be a good indicator of whether any given broker is right for you.

Go with your gut

To some extent, assuming you have done all the checks about the reputability of a forex broker, your instincts could be the best indicator of whether a broker is right for you. You need to feel as though you can trust your forex broker and that you will get good customer service otherwise every trade could leave you feeling uncertain. There is no point in being able to make the trades you wish to if you can never get hold of your broker when you need to, can’t raise any queries you might have or feel as though you’re being brushed off.

 

 

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Forex

If you’re new to Forex trading, then one of the first things that you’ll need to choose is your trading platform. Foreign exchange traders will use one of the online platforms offered commercially and often log on several times a day to check the latest market indices, trading results, spread bets and industry news.

Essentially, a trading platform is a software platform that provides real time information between the broker and trader. The forex platform will provide a range of essential information such as charts and quotes and it will provide an interface for entering orders. These will then be carried out by the broker.

The forex platform software can be installed onto the trader’s laptop, computer or even mobile phone for a mobile application. Most can be used with a variety of operating systems, including Windows, Linus and Macs. Each broker will offer a different range of options. Others will offer web-based software, which usually run with Java, which is a dynamical web code.

Web-based forex trading platforms have the advantage of being highly accessible by any device with internet access. The majority of basic level trading platforms are free, but some brokers will offer additional functionalities for a cost. Others will offer different platform levels depending on activity.

Online trading

Online forex trading will use similar security protocols as other online systems. They provide a go-between for the trader and broker. Platforms will provide historical data to traders, as well as real-time data. Access will also be provided to the full range of forex orders available to trade.

A common type of trading software is third-party, thanks to application progamme interface software (APIs), which allow traders to integrate proprietary or third-party add-ons into their platforms.

Questions to consider when choosing your Platform

Find out if the platform is free, or whether there are charges. If there are charges, what extra features do these buy?
What technical indicators are provided in the charts of the system? Can you trade from the charts?

Is the platform based on Windows, internet, Mac or Linux? Make sure the operating system is compatible with your own and that your firewalls and other security settings allow it to run.

Can you access historical data? This is important to establish trends and long-term patterns.

Can you back-test trading strategies? This is an important strategy for new traders looking to develop more sophisticated approaches.

Can you get on with the graphical user interface? Everyone will have their own preferred interface, but generally you want something clean, simple and easy to navigate.

Is there a demo account that you can get to grips with before making a buy decision? Most providers will offer a free demo of their forex trading account so that potential users can explore the features before committing to a sign-up.

Another good approach is to read trading forums and find out which platforms are recommended by more experienced users. It is well worth taking some time to make the right decision with regards to the best platform for your particular needs, as, once you are trading, it will become more difficult to switch at a later date.

 

 

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forex

You do not have to be an expert in the forex markets to know that currency rates are in a constant state of flux, with values seemingly changing at the drop of a hat. One minute a national currency is performing strongly and on the rise, the next it is starting to struggle and lose ground against other currencies. Just what are the main factors which come into play when it comes to the forex markets? Here are some of the more common reasons for value changes.

Politics

Perhaps not surprisingly, the field of politics is probably the biggest determining factor when it comes to forex rates. Government budgets, trading policies and political stability all have a huge influence over foreign exchange rates. For instance, a country which exports more than it imports will have a strong national currency rate, while countries which have trading deficits will find their currency weak compared to its competitors.

National elections often have an impact on the markets, particularly if the final outcome of that election in in doubt. A close election, where the result is in doubt right until the closing stages, is seen as possible political instability by the exchange markets, causing the currency to fall in value. Conversely, if it looks like the current Government is going to stay in power, the status quo will have a stabilising effect on the currency rate.

Inflation Rates

The rate of inflation in a particular country will have a large bearing on the perceived strength or weakness of the national currency. High inflation rates will usually see a decrease in the value of the currency.

World Events

Along with politics in general, world events are a huge determining factor for forex rates. After all, the foreign exchange market covers the entire globe, so an impending crisis can have an immediate impact on rates. A good current example is the escalating crisis in Syria. With a possible interruption to oil supplies from the Middle East, much uncertainty will grip the foreign exchange markets.

Apart from the obvious devastating effect war can have on human lives, the uncertain future of a nation gripped by war means its currency value will normally plummet and have a knock-on effect on foreign exchange markets around the globe.

When all is said and done, traders on the forex market are in the predictions game. Their job is to try and forecast future events which, of course, is not an easy thing to do.

 

 

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Trading

Trading on foreign exchange markets is seen by some to be a good and valid way to make a living, but by others as simply another way of gambling. In reality it is the approach of the individual trader that makes the difference as to whether they are merely gambling or not; it is the set-up and strategy used to determine when trades are made that makes the difference between a gamble and an informed decision.

Types of trader

There are two main camps of Forex traders, those that look purely at mathematical trends in the markets and the numbers around the changes and fluctuations in exchange rates and those that take into account what could be called the larger picture and include global events, news and other relevent factors. The former groups are generally known as technical traders, where the latter are called fundamental traders, but it is unlikely that a trader in real life will follow one or the other with compete exclusivity.

How to choose?

A new trader will have little chance of becoming instantly successful; the best way (and really the only sensible option) to begin a trading career is to use a dummy account first, for as long as it takes to begin making a profit consistently. This allows you to create a model for yourself and begin to learn how to read the trends in the market and therefore the best times to buy and sell, or the limits and stop levels that you set yourself or a trading robot if you decide to use one. Initially reading and learning the trends in the market will be the main focus, but keeping an eye on economic and news items that affect the markets is also important, although at first it will be unlikely that you will be able to spot an effect before it happens.

In reality it is likely that a trader will use charts and trends as a basis for creating a trading model, while building up knowledge about external factors that can affect the currency markets. There are a number of unforeseeable events that can have a major effect on the markets such as natural disasters and this is the reason why limits and stops are vital, especially for a new Forex trader so that you do not lose everything in an unpredictable crash.

Overall a new trader needs to begin with a dummy account, build a method and learn how to predict future movements, but always remember to limit losses and follow their method scrupulously. If these steps are adhered to, Forex trading becomes a viable career rather than a gamble.

 

 

 

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forex

Forex trading (also known as the Foreign Exchange market, fx market and the Currency market) involves buying and selling foreign currencies. With trading volumes of between $1.5 and $2 trillion US dollars every day, it is the largest worldwide investment market, with vast numbers of traders all buying and selling identical products.

Unlike stocks, the focus for fx trading is small. Trading on seven major currencies makes up 85% of all transactions. Leading broker centres are found in London, Tokyo, New York, Singapore, Frankfurt, Hong Kong, Zurich, Sydney and Paris.

Benefits of Forex Trading

The fx market is considered extremely accessible. There are minimal barriers for participation and with no charge for brokerage, the cost of transactions is relatively small. It is easy to source relevant data to assist in decision making, especially as many brokers are happy to provide necessary information free of charge.

Forex trading is an Over-the-Counter (OTC) market and as such, the only tools required to participate are an Internet connection and a computer. Transactions can be carried out via a broker websites, phone, fax or email.

It is possible to trade with limited capital and the trader remains in full control. Funds can be accessed at any time as there are no tie in or holding periods. As in all trade, risk can never be completely eliminated, but this does help to keep it as low as possible. Investors can open a ‘mini’ Forex account with as little as $100.

How Trading Works

Currencies are traded in twos. Four main currency pairs used are: Euro/US Dollar (EUR/USD), US dollar/Japanese yen (USD/JPY), British pound/US dollar (GPD/USD) and US dollar/Swiss franc (USD/CHF). Dealers based at Forex brokerage companies and major banks will carry out transactions. The execution of these is very nearly immediate.

Due to the high levels of liquidity in the markets and in contrast to trading stocks, Forex trades utilise high leverage. Typically this can be 100:1. As a result, $1000 investment will enable the investor to take control of $100,000 and consequently potential return increases.

Political and economic factors will cause currency price fluctuation. These include International trade, political instability, interest rates and inflation.

Trading on the Forex market may be open to all, but it is certainly not as easy as it might first appear. It requires commitment, discipline and a lot of patience. It is important to become as knowledgeable as possible before beginning to trade. It is certainly possible to make a profit, but that is not to say it isn’t also hard work.

 

 

 

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Trading

Success in foreign exchange trading is, like many high-stakes markets, reliant on the instincts of the individual trader. This takes many forms. A major part of it is the ability to make educated guesses about the future, whether a particular currency will rise or fall, and the ability therefore to read patterns in the changing fortunes of any one particular unit.

As valuable as this is, much of its potency is lost if it is not coupled with a good sense of timing. Deciding when it is the right time to make your move is crucial to maximising profit or, in less fortuitous circumstances, minimising loss. One aspect of this is being able to make a split-second decision and jumping in when the odds are in your favour, but perhaps a more difficult element is exercising patience. The following article explores the value of patience in forex trading.

Holding back and reining in

The fast pace that is associated with trading in many markets can often appear to naturally reward those who act with knee-jerk reactions and do not hang around to see how things resolve themselves. Although there is some credit to be attached to this, the virtue of patience is much more valuable, in no small part because it is so rare and requires some real talent to develop and master it in an effective fashion.

It is quite common for a trader to sell urgently when a currency does not behave in the way they predicted, going for a lower point and doing no good. This is an example of emotion dominating a trading technique and this cannot be permitted if you are to succeed. Denying that need for a quick result, learning to hold back and rein in your instinctive urges are the most important techniques to develop, and patience is integral throughout. The best way to utilise patience in foreign exchange trading is to set up your own personal rules.

Play by the rules

If you have a set of rules to govern your decision-making when you are playing the market, and you can be sure that you will adhere to them, then you can avoid the pitfalls of sudden reactions and rushing into rash decisions. Granted, this is easier said than done, but there are some simple steps to help employ patience to your benefit.

Firstly, decide what kind of profit you are aiming for. Small-scale traders can therefore feel content to sell as soon as they see even a slight rise in their chosen currency. Meanwhile, those hunting for a bigger profit have to be prepared to accept greater risks and here patience is especially crucial. If at first your currency declines, don’t jump ship immediately but ride the wave and see if it increases, bringing you back into the regions of big profit. Another tip is find ways to take yourself out of the intense arena of trading. For instance, examine graphs or predictors as this will help slow your reactions and allow more time for contemplation.

Overall, nowhere is patience a greater virtue than in the fast-paced, risky world of foreign exchange trading. Taking your time will help to make your trades less stressful and more profitable.

 

 

 

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