Tag Archives: Forex

16 Potential Trade Setups – Forex Market Preview June 17, 2013

Forex Trading For Beginners – Fundamental Analysis & Forex Trading Strategies #5

Having a basic knowledge of Fundamental analysis will give you a better foundation for your investment decisions on the Forex Market. It looks to measure a company’s true value, in which the Forex trader evaluate the country and its currencies just like companies. With Fundamental analysis, it shows the true value of the currency.

Read more about Forex Trading Strategy – Buy The Rumor Sell The Fact In Price Action

In order to have an idea of the currency’s value, Forex traders will take note on the economic reports issued by the country, political events, and other significant reports that could be at play in affecting the movement of the currency. The value is in a constant move due to many possible factors (such as economic growth and financial strength). With all of these factors, a Forex trader could start doing Fundamental analysis.

What is Fundamental Analysis?

A fundamental analysis is all about getting an understanding of a country, the health of its business and its future prospects. It includes reading and analyzing annual reports and financial statements to get an understanding of the country’s comparative advantages, competitors and its market environment.

Forex Trading Strategies – Carry Trade:

There are plenty of Forex Trading Strategies out there but I would like to focus more on “Carry Trade”:

A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates, which can often be substantial, depending on the amount of leverage used.

In simple words, you borrow at a low rate and lend at a higher rate. A Forex trader could make a highly profitable trade when leverage is used because even with a small difference between two rates it could yield a higher profit. A good example is the “Yen Carry Trade” during the 1990’s. Japan decreased its interest rate to almost zero. Forex traders borrow at a very low rate large sum of Japanese yen, then converted into U.S. dollars (which are used to buy U.S. Treasury bonds which yields and coupons at around 4.5 – 5%). With this, Forex traders earn almost all the yield from the U.S. Treasury bonds. Not only that, with leverage, returns are greatly increased.

For example, if you have a U.S. $1,000 in your trading account and have a 10 times leverage, you can control a position of U.S. $10,000. If you would use the currency carry trade with the example above, you will earn 3% per year, or $300 gain annually, if and only if the currency pair’s value remains constant or appreciates. Hence, Forex carry traders look not only to earn the interest rate differential but also capital appreciation.

Read more about Forex Trading Strategy – Price Action For Dummies

In reality, the exchange rates between two countries are ever changing. There is an erratic movement of price that is why most carry traders would prefer lower-yielding safer currency since the carry trade strategy is longer term in nature, it is much susceptible to a variety of changes over time.

Bottom line is that acquiring an idea of the fundamental factors that affect the movement of price of currencies and applying Best Forex Trading Strategies are important steps to a well-informed investment decision. With your on-going reading of  our free Forex Course for Beginners, you will in no time have a good foundation of the Forex Market and be able to trade successfully. Learning Forex Trading for Beginners is a continuous effort so I hope you will not skip on your daily reading diet of Forex Strategies and Free Forex Tips! Once again, Happy investing!

Source:

  • Forex Tutorial: Fundamental Analysis & Fundamentals Trading Strategies. Retrieved April 14, 2013. http://www.investopedia.com/university/forexmarket/forex6.asp

FOREX TRADING FOR BEGINNERS:

  1. Introduction to Forex Market
  2. History Of Forex Market
  3. Common Used Forex Terms
  4. Risk And Benefits
  5. Fundamental Analysis & Forex Trading Strategies

Forex Trading For Beginners – Risk And Benefits #4

In every investment, there is always a risk involved. In this article, we will take a look at some of the risks associated with the Forex market as well as the benefits it has to offer. Also, we will differentiate the Forex market from the Equity Market so that we will fully understand how Forex works in order to learn to trade Forex.

Read more about Forex Trading Strategy: Price Action Trading Patterns

We have already discussed some of the important factors (size, volatility, structure among other things) about the Forex market, that contributed to its successful and growing state. In terms of liquidity, the Forex market is highly liquid in nature where in a trader could invest huge amounts of money without affecting any given exchange rate. This is made possible by the low margin being required by most Forex brokers. For example, it is possible for a trader to invest US $1,000 for a position of US $100,000, a 100:1 leverage. This amount of leverage acts as a double-edged sword because investors could either rip large gains or run the risk of a massive loss when movements aren’t favorable. Because of the leverage that the Forex market could offer, it attracts many speculators in the midst of many foreign exchange risks.

Read more about Forex Trading Strategy Made Very Simple – Price Action

Not only that the Forex market is highly liquid but also it is mostly open 24 hours a day, which is favorable for traders who have a tight schedule. In the chart below shows the major trading hubs and their trading hours.

Time Zone Time (ET)
Tokyo Open 7:00 pm
Tokyo Close 4:00 am
London Open 3:00 am
London Close 12:00 pm
New York Open 8:00 am
New York Close 5:00 pm

With the high leverage of the Forex market, it poses a higher risk in comparison to trading equities. It is important to understand that because of the large amount of money involved and some of the impulsive moves made by traders, it will lead to a sharp change in the price of a currency pair. Though currencies don’t tend to move as sharply as equities on a percentage basis, it is the leverage that creates the volatility. For example, in a 100:1 leverage, if you put US $100,000 into a currency and the currency’s price moves 1$ against you, the value of the capital will have decreased to US $99,000, which means a loss of US $1,000 (a 100% loss). On the other hand, in the equity market, there is no leverage being used most of the time, so if there is a 1% loss in stock’s value on a US $1,000 investment, it will only give you a US $10 loss.

Read more about Forex Trading Strategy – Buy The Rumor Sell The Fact In Price Action

To go deeper regarding the difference between the Forex Market and  Equity Market, let’s look at the number of traded instruments. The Forex market has only a few in comparison to the Equity Market. There are only seven different currency pairs and the four major includes: EUR/USD, USD/JPY, GBP/USD, and USD/CHF. Also, there are three commodity pairs USD/CAD, AUD/USD, and NZD/USD. All other pairs are just different combinations of the same currencies – called cross currencies. It makes it easier to choose and monitor the instruments in the Forex market compared to trading in equity that you have to carefully pick thousands of stocks of the best value.

In trading equity, it is difficult to open and close positions because of the shrinking volumes and activities of the stock. Furthermore, one could make a profit in a declining equity market only while one could make profit both in the rising and declining Forex market. It is a simultaneous buying and selling and even short-selling. In addition, since the Forex market is so liquid, waiting is not required for an uptick (A transaction occurring at a price above the previous transaction) before they can enter into a position as they are required in the equity market. Furthermore, not only that the Forex market offers a low margin, it also has a lesser commission fee compared to in the equity market.

Read more about Forex Trading Strategy – Price Action For Dummies

By now you already have a good grasp of the risk and benefits that a Forex market contains. In the next chapters, we will be tackling about fundamental analysis, trading strategies, technical analysis and technical indicators. Keep on reading about Forex trading strategies and Forex trading for beginners to learn to trade Forex. Understanding Forex Trading is not a quick and easy process but it requires utmost patience and determination to be able to Learn the Market and eventually Learn How to Trade Currencies. With this continuous effort to gather Best Forex Trading Strategies in order to come up with a step by step Forex Course: Learning Forex Trading for Beginner for everyone all for FREE. Once again, keep learning and happy investing!

Source:

  • Forex Tutorial: Foreign Exchange Risk and Benefits. Retrieved April 13, 2013. http://www.investopedia.com/university/forexmarket/forex3.asp

FOREX TRADING FOR BEGINNERS:

  1. Introduction to Forex Market
  2. History Of Forex Market
  3. Common Used Forex Terms
  4. Risk And Benefits

Forex Trading Strategy – Price Action For Dummies

In trading in the Forex Market, you should remember the word “KISS” which means “KEEP IT SIMPLE STUPID”. With almost every Forex trader utilizing trade off indicators and trading software, he somehow neglects one of the basic Forex Trading Strategy which is the Price Action.

Read more about Forex Trading Strategy Made Very Simple – Price Action

Forex Trading Strategy – Price Action Definition

Price Action is a Forex Trader’s way of looking at the market’s movement without using any technical indicators. It is basically the footprint of money. The exchange of money in the market leaves a trail and this trail is considered as the price action which is apparent on the price chart. If you will use the Price Action as a Forex Trading Strategy, you will be harnessing the power of price and be considered as a price action trader.

Forex Trading Strategy – Price Action VS. Technical Indicators

Most Forex trading systems are made of  technical indicators or trade off indicators such as Moving Average Crossover, Overbought Conditions, Oversold Conditions and many more. Technical indicators are series of data points plotted on the price chart and these points are derived from a mathematical formula applied to the price of any given paired currencies. In short, it helps us see the other aspects of price.

Because of all these overwhelming technical indicators, one might be focusing more in using trading tools which draws him away from using the Price Action itself. Similarly to following other people’s hunches, one might hold on to these technical indicators to hope for a positive outcome of the movement in the market even though they really don’t understand or don’t feel confident about their decision in their trading.

Read more about Forex Trading Strategy: Price Action Trading Patterns

The reality of the Forex Market is that the price action itself is the end result of everything including all the variables connected to the market, so taking the price action for granted is considered to be a bad move. Most traders if not all tend to fall in the traps of easy money schemes through widely advertised Forex technical indicators, trading tools and other software which give off false promises. The truth is there is no easy way to success.

In order not to delay one’s success in Forex trading, it is strictly prescribed to use Price Action in Forex Trading. It is a strategy to eliminate useless tools and focus on important things. Not only that your time is saved and effort is lessen, it gives you a more accurate edge in identifying the direction of where the market is going. With that being said, the use of Price Action will give you a less hassle, no frill, type of trading from a naked chart than all the technical indicators combined.

Forex Trading Strategy –  Three Points In Learning Price Action

  1. One Price Action Strategy At A Time  – It is better to focus and master on one thing first then the next than having to learn plenty of things with little mastery of it.
  2. High Time Frames First – It is a way to prevent oneself from doing an over trade. With over trading, it will lead you to a natural death in the Forex Market. It is better to focus on high time frames first because you can benefit from the filtered price movement “noise” coming from the lower time frames hence improving your position towards the winning side.
  3. Learn From The Best – A wise Forex trader always learn from other people’s trading mistakes as to avoid any trial and error style of trading. It is a way to control the risk that trading poses. Mistakes that are made once are okay but when repeated, it is way beyond tolerable. Always learn from the best and proven Forex trader.

Bottom line is always remember the word “KISS” (one of the Best Forex Day Trading Strategies) and you will have an easier time in the Forex Market. Also, never ignore Price Action Forex Trading Strategy because it is one of the Winning Forex Strategies out there. For more Free Forex Trading Strategies, keep on reading! Happy investing everyone.

Source:

  • Price Action Basics. Retrieved April 11, 2013. http://www.stratsforextrading.com/dokuwiki/doku.php?id=path_of_learning:price_action_basics
  • A Beginner’s Guide to Forex Price Action Trading. Retrieved April 11, 2013. http://www.learntotradethemarket.com/forex-trading-strategies/a-beginners-guide-to-forex-price-action-trading

Forex Trading For Beginners – Common Used Forex Terms #3

Forex Trading For Beginners – Common Used Forex Terms #3

In the world of Forex, there are plenty of jargon that you will likely to encounter. It is important that you should be able to familiarize first with the common used Forex terms before delving into deeper level to learn to trade Forex in general and use the many major Forex trading strategy / strategies available.

Read more about Forex Trading Strategy Made Very Simple – Price Action

Common Used Terms:

  • Cross Rate – The currency exchange rate between two currencies, both of which are not the official currencies of the country in which the exchange rate quote is given in. This phrase is also sometimes used to refer to currency quotes which do not involve the U.S. dollar, regardless of which country the quote is provided in.

For example, if an exchange rate between the Australian Dollar and the Korean Won was quoted in an American newspaper, this would be considered a cross rate in this context, because neither the Australian Dollar or the Korean Won is the standard currency of the U.S. However, if the exchange rate between the Australian Dollar and the U.S. dollar were quoted in that same newspaper, it would not be considered a cross rate because the quote involves the U.S. official currency.

  • Leverage – The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.

For example, if a trader opens an account with a $200,000 position from a $2,000 margin, his leverage accounts for a 1:100 ratio.

  • Margin – The capital required to hold on a certain position in the market. It is either “free” or “used” margin, where in the “free” margin is the available money to be allocated for future positions, while “used” margin is the money already invested in a certain position.
  • Exchange Rate – It is the price of one country’s currency expressed in another country’s currency.
  • Pip – The movement of price that a given currency can make.
  • Spread – The difference between the bid and ask price.
  • Bid Price – The bid is the price that you will quote a broker.
  • Ask Price – The ask price is the price that your broker will quote you.
  • Currency Pair – The quotation and pricing structure of the currencies traded in the forex market: the value of a currency is determined by its comparison to another currency. The first currency of a currency pair is called the “base currency”, and the second currency is called the “quote currency”. The currency pair shows how much of the quote currency is needed to purchase one unit of the base currency.

Read more about Forex Trading Strategy: Price Action Trading Patterns

The ones mentioned are the most common terms being used but there are more terms that you need to learn as we go along with our journey to learn to trade Forex. I would recommend the site Investopedia for more Forex terminology for a good reference and also Learn What Is the Forex Exchange and Learn How to Trade Currencies. I understand that it is difficult Learning Forex but with great perseverance and determination, nothing is impossible. With this being said, Understanding Forex Trading should be an everyday goal! Don’t worry there are many resources available online to Learn to Trade Forex Free of charge. What are you waiting for? Learn and invest!

Source:

  • Forex Trading Terminology by Nial Fuller. Retrieved April 08, 2013. http://www.learntotradethemarket.com/forex-university/forex-trading-terminology
  • Forex Trading Terms. Retrieved April 08, 2013. http://www.investopedia.com/categories/forex.asp

FOREX TRADING FOR BEGINNERS:

  1. Introduction to Forex Market
  2. History of Forex Market
  3. Common Used Forex Terms

Forex Trading For Beginners – Introduction to Forex Market #1

Forex Trading For Beginners – Introduction to Forex Market #1

Least volatile financial market in existence, the Foreign Market is one of the most dynamic, fast paced and exciting place to engage financial transactions – currency exchange. Here I am going to give you a concise introduction to the complex world of the Forex Market. It will be a step-by-step beginner guide to learn to trade Forex.  As much as possible, I’ll make things simple and of course, fun because learning is supposed to be fun!

Read more about Forex Trading Strategy: Price Action Trading Patterns

Forex Market also known as Forex Exchange Market, FX Market, Currency Market, Foreign Exchange Currency Market, or Foreign Currency Market, is a place where currencies are traded. It has been a place for currency speculation of large financial institutions, corporations, banks, governments, investors, hedge funds and of course, traders. This speculation and exchanges of currencies are important in order for countries to thrive through foreign trades and businesses. For example, an exporter from the Philippines will sell corn and wheat to the U.S., the consumer country needs to pay the seller country in Philippine pesos. With this, the U.S. importer will need to exchange the equivalent value of U.S. dollars into Philippines pesos. The same principle goes for traveling as well.

The Forex Market is the largest, and most liquid financial market in the world. With an average traded value of around $2,000 billion per day, it somehow belittles other markets including the stock market. As of August 2012, the Bank of International Settlements (BIS), reported that the Forex Market traded beyond U.S. $4.9 trillion per day. It is open 24 hours a day, 5 times a week, with its world trading centers located in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney.

With the advent of technology and emergence of the internet, it is possible for average investors to engage in currency exchanges easily within a click of a mouse through online brokerage firms. One unique aspect to be noted is that there is no central marketplace for the Forex Market. Currency trading is conducted “Over the counter”, where in all transactions are made online between traders through out the world. Unlike stocks where in there is a central market with all orders processed, the Forex Market relies on the different quotations made by all major banks in differing prices, then the brokerage firms take all these quotes from these banks. The quotes are an approximate average of the exact price. Basically, the broker is the one making the market for you. When you buy a currency, the broker is the one selling it for you and not another trader.

Read more about Forex Trading Strategy Made Very Simple – Price Action

In order to be a successful currency trader, one has to understand the basics behind currency movements and fluctuations. It is definitely a place that could provide vast opportunities but also it could be a double-edge sword, which poses threats for large losses.

Bottom line is the goal of this step by step learn to trade Forex for Beginners tutorial is to lay down a good and firm foundation for traders, who are still new to the Forex Market. In the coming chapters of our Forex Trading Tutorial, I’ll be sharing  the history of Forex Market, Terminologies, Basic Exchange Rates and many more! There are just plenty of things to learn from Best Forex Platform for Beginners to Best Forex Trading Strategies. All we need is time and a warm cup of coffee to be able to sit back, relax and enjoy every learning that we get from reading. Above all, happy investing and most importantly happy learning Forex Trading For Beginners!

Source:

  • What is Forex Trading? – A Definition & Introduction by Nial Fuller. Retrieved April 02, 2013. http://www.learntotradethemarket.com/forex-university/introduction-what-is-forex-trading
  • Forex Tutorial: Introduction to Currency Trading. Retrieved April 02, 2013. http://www.investopedia.com/university/forexmarket/

FOREX TRADING FOR BEGINNERS:

  1. Introduction to Forex Market
  2. History Of Forex Market
  3. Common Used Forex Terms