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Saturday, 20 September 2008 03:32
The forex market is well trended, the liquidity is the highest, there are no insiders and transaction cost is the lowest. Buy and sell sides are treated equally, as when you buy one currency you simultaneously sell another. And you always stay in money, no illiquid investment holdings. Even on September 11, 2001 when the US stock market became blocked for more than one week, the forex market was trading world-wide.

Currency investments are perfect for diversification as performance does not depend on the business cycle phase and correlation of annual returns for major currencies and stock indices are negative and very small (varies from -0.01 to -0.39).

The flexibility of using leverage on forex spot market allows to design any level of portfolio conservatism, even principal amount guarantee is available for decent accounts.

The Forex market is basically a worldwide currency exchange market which is similar to the stock market except instead of trading stocks you buy and sell currency pairs from different countries. It is one of the fastest growing markets on the planet with its daily turnover of more than 2.5 trillion dollars a day. This turnover is more than 100 times of what the NASDAQ exchange does daily.
The Forex, and also known as "The Foreign Exchange" market exists wherever one currency is traded for another. It's the largest financial market in the world. Simply if we compare the New York Stock Exchange trades vs changing hands in forex, we will discover Forex market is a lot of times larger than both Equity and Treasury markets combined.

Forex or "Foreign Exchange" is where the money of one nation is traded with another. The most important and popular pairs of exchange in the forex market are "Euro Dollar", and you will see this pairs in all forex display screens as "EUR/USD". There are also a lot of others pairs but sure not important and not famous as "EUR/USD" pairs, like:-

There are currency rates at which these currency exchange values for example, $1.00 USD will exchange in RS 60.00. These rates changes as the stock / currency market changes.
  1. The British Pound, and you will see this pairs in all forex display screens as "GBP/USD".

  2. The Japanese Yen, and you will see this pairs in all forex display screens as "USD/JPY".

  3. The Swiss Franc, and you will see this pairs in all forex display screens as "USD/CHF".

However there is a problem in the forex market until this day, there is no one central exchange where everyone can exchange the currency. All the currency traded are done over the telephone and online through a very big networks that connects all the banks, brokers and currency traders with each others.

How Do You Make Money With Forex?
The way that you make money from the Forex market is the really nothing more than buying a currency at a cheap price and selling it for more. The profit is from the very small fluctuations that take place in the currency exchange market.

The average daily fluctuations in the Forex market are around 1% but the investment profit are multiplied by over 100. If you bought a pair of currencies that increased by 0.3% in a couple of hours after the purchase your profit would be over 30% return on investment. This is a much bigger and faster rate of return compared to the average 8% the stock market gives to investors. The other great thing about the Forex market is that these returns can happen in one day or even a few minutes!

When investing in the Forex market you can never lose more than your margin. You can profit as much as you want but never have to risk more than you originally invested. You can choose the pair of currencies in any direction the market is moving in and still make a profit. Whether the exchange rate is moving up or down you can either buy Euro and sell dollars or buy dollars and sell Euro.
How Do You Trade In The Forex Market?
When you start trading in the market you can select a pair of currencies and decide the volume or the amount of the deal you wish to trade with. Next you deposit the margin which collateral is needed to complete the process. This is usually a tiny portion of the deal around 1%.
Before you decide to make the deal live you still have the option to "freeze" it for a few seconds. During this time you can change the terms, go through with it or forget about the whole deal. When you decide to accept the deal and it is running you hold an "open position" in which you can monitor the status of the deal. Once the deal is running you may change some terms or close it. By closing the deal you can take your profit or minimize ant losses that you might have incurred.
Below are some tips that might help you:

There are numerous of online networks where they give you a demo account to learn where you can spend whole lot of cash but those cash are just for learning and everything you invest will not be returned to you, if you're thinking of earning something you will need to invest and earn that.
Forex is a very complicated, you will see plenty of mind games being played on but on the other part if you're well experienced you won't be that intiminated, its also sometimes a matter of bad or good. You have to be upto date with all the forex market and what is going on in there.

Try It Before You Buy
Before you spend any money on an online Forex trading program or subscription, ask about free trial offers. Many companies will allow potential customers to try out their software and tools before making an investment. This is a quick and easy way to begin trading immediately.

Spend some time reading through the system tutorials and practice a few test trades. There will no doubt be a learning curve, and you want to make sure that you don't have a large investment riding on that curve. If you have a friend or family member that is in the online Forex trading market, find out what program or system they use. They may be willing to walk you through a trade and give you their opinion on the program. This is an excellent way to find out if a program is really worth it or not.

Some codes, numbers and definitions.
Each currency is assigned a three-letter code. For example, US dollar is coded - USD (United States Dollar), euro is coded EUR (EURo), Swiss frank is coded CHF (Confederation Helvetica Franc), Japanese yen is coded JPY (JaPanese Yen), British pound is coded GBP (Great British Pound). The currency codes are defined by ISO-4217ISO-4217 standard. Usually they are formed as a two-letter ISO-3166 country code and the first letter of currency name. There are a few exceptions most notable being the euro (EUR).

Currency rates are equal to ratios of currency units of different countries relative to each other. The rates are represented by 6-letter words composed of two three-letter currency codes. The first position is occupied, as a rule, by the code of a more expensive currency. The rates are expressed in units of the second currency per unit of the first one. For example, rates USDCHF (USD-CHF) show the number of Swiss franks in one US dollar, but rates GBPUSD (GBP-USD) show the number of US dollars having to be paid for one British pound. More detailed information on the codes of financial instruments may be found in this table.this table.

Perfect Practise
One of the best ways to get a feel for the market or a particular program is to try it out. No one wants to experiment with their own money however; so many companies have come up with an innovative way to take all the risk out of trying a new program. It's called simulation trading and the premise is simple. The program is an exact copy of the broker or trading systems real-time trading program. The main difference is that they allow you to "play" the market just as you would if you were actually investing. You can do a simulation with a set amount of money, usually around 100,000 $ . You can practice setting bid and ask prices, and using their various analysis tools.

 

The benefits of such a system are two-fold. First, you get a feel for the program itself, so that you can determine if it is right for your needs and skill level. Second, you get to practice trading in the market. You can practice using the various tools and research available to you to make good trading decisions. Don't worry if you don't get it right away- since its play money, you don't lose anything!

 
The amount of time needed to understand the system will vary depending on your level of experience. Many programs offer similar functions, so if you are simply in the market for a different program you may be able to switch over quickly.
Benefits of Online Forex Trading
  1. Real-time access- this is one of the great benefits of online Forex trading. Most brokers and trading companies offer their clients real-time quotes and data. This is very important when making decisions. Currencies are a very volatile market, and things can change at anytime. So having your thumb on the pulse of the market is very important to long term success.
  2. 24-hour availability- another great feature about online Forex trading. In today's hectic world many traders find it difficult to manage their portfolio during normal business hours. The internet allows traders the ability to access their portfolio virtually anywhere and anytime. This is great for part-time traders that have a full-time day job.
  3. Speed of transactions- can't be beat! With a good computer and a high speed connection you can process a transaction within minutes. This is a far cry from having to call up your brokerage firm or worse yet make an office visit. This is perhaps the main reason that day trading has become as popular as it has!

Last Updated on Wednesday, 24 September 2008 22:57
 

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