Entries Tagged 'FX Trading Education' ↓

Most people are familiar with stocks which have been central to many investment portfolios for many years now, but should you continue to hold stocks as an investment or move over to a portfolio of currencies?

Traditionally, companies have issued stock whenever they have needed to raise money and sold that stock on the open market giving buyers a stake and part ownership in the company. When the company does well stock holders benefit by receiving a share of the profits in the form on dividends which are paid out each year or twice yearly. In addition, stock holders can also benefit from the good fortunes of a company as the value of the company’s stock will also rise on the open market.

Stocks are traded freely through the world’s major stock exchanges with American stocks for example being traded on such exchanges as the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation System (NASDAQ). In general most stocks will only be traded through a single exchange, but the stocks of major companies can be listed on several different exchanges.

The problem with stocks is that, while they are great as long as a company is doing well, you can run into problems if the company, its market sector or the market as a whole takes a downturn. In these circumstances you can find that your dividends fall as does the value of your stock on the open market and that, in order to recover your investment, you will need to wait until an upturn in the market. For this reason stocks are seen very much as a long term investment and you must be prepared to hang onto your stock for many years in some cases in order to see a good profit.

The Forex or foreign exchange market is however quite a different matter and is a market which has attracted a great deal of attention since it was opened up to the small investor some years ago.

While you can purchase and hold currencies for the longer term this is rarely done and most Forex trading is done on much smaller time frames than those seen in the stock markets. Indeed, many traders ‘day trade’ the market literally buying and selling on the same trading day and frequently holding currencies for only a matter of a few minutes or an hour or two. Day trading is not however not for the novice and requires considerable knowledge and experience of the market so that most novices will trade on slightly longer time frames.

The Forex is the world’s largest financial market and handles transactions worth trillions of dollars every day. To put this in perspective, the combined turnover of all of the American stock exchanges reaches a daily figure of only about one hundred billion dollars. This huge turnover on the Forex also means that it is the world’s most liquid market and so it is very easy to buy and sell with many more opportunities than are seen in the stock markets.

Another great benefit of the Forex however lies in the fact that there is no center for trading and trading takes place around the world. Also, because of the different time zones across the globe it is possible to trade literally 24 hours a day 7 days a week, unlike the stock exchanges which operate on fixed and very limited hours. As long as you have an Internet connection you can trade from the comfort of your own home at whatever time suits you.

Perhaps the greatest benefit of the Forex however is its predictability. Unlike stocks, currencies tend to follow very well established trends and, once you have learned to work with the many excellent predictive tools available, it is easier than you might think to follow the progress of many of the world’s major currencies.

There is no enormous investment required to enter the world of Forex trading and many online brokers will allow you to open a Forex trading account with as little as $250 and trade on leverage of 100:1, rather than the commonly available leverage of just 2:1 in stock trading. In other words, for your initial investment of $250 you can participate in trading lots of up to $25,000. This in itself is a very attractive reason for giving this exciting and lucrative form of investment a try.
 

To sign up for a free account with Forexyard

Forex Trading

To sign up for a free account with Forexyard

Forex trading goes under a few different names. Some call it forex, others foreign exchange but for many it is simply FX.

The forex market is the largest and most liquid in the world. About $3 trillion is exchanged every day in this gigantic market which never sleeps, except on Sundays. This 24 hour trading cycle provides its own advantages, most notable of which is the elimination of overnight “price gaps” so commonplace on stock exchanges.

The forex trading market is also unique in that it is not conducted through a central exchange but on the “interbank market”. This essentially means short term borrowing and lending directly between banks on electronic networks all over the globe, rather than through a third party such as a stock exchange.

The main banking centres are Sydney, Tokyo, London, Frankfurt and New York. Since these centres are located around the globe, there is always an overlap where at least two banks are open at the same time. This is what creates the 24 trading cycle.

Different currencies are exchanged as part of the supply and demand for money used to purchase or sell local products. For example, the Australian resource boom in 2007 created a demand for Australian Dollars (AUD) because foreign countries had to pay for these natural resources in that currency. This caused a strengthening of the AUD exchange rate against other major currencies, including the US Dollar.

As one currency is exchanged simultaneously for another, it creates what is called a “cross” rate. This rate is expressed in terms of the value of one currency against the other. For example, if the AUD/USD cross rate is 0.8542 this means that for every one Australian dollar you can only buy 85.42 US cents. The most commonly traded and consequently most liquid currencies are called the “majors”. These are USD/EUR, USD/JPY, USD/CHF and GBP/USD.

The best forex trading market to focus on is called the “Spot Market” because there trades are settled immediately or “on the spot”. Other less liquid forex markets include futures and options markets.

Trading on Margin

If you trade on margin, it means that your capital outlay is only a small percentage of the total value of the assets traded and that someone else finances the balance. The smaller the margin deposit, the greater the remainder that is financed. So if your margin is only 1 percent it means that your dealer or broker is financing the other 99 percent of the trade value. The advantage to you is leverage, but this can also work against you. At 1% margin you can use 1,000 units of your capital to purchase 100,000 units of currency. Your leverage is 100:1 in this case and your returns or losses correspond to the price fluctuation of 100,000 units of currency.

This is why you should not maximise your leverage (reduce your margin) too much. Whilst your profits may be spectacular, your losses could easily be more than your original capital and wipe you out. The percentage of your capital outlayed on any one trade should be a major part of your money management system.

In summary then, these are the major advantages of forex trading over other financial instruments:-

1. 24 hour trading cycle - no price gaps
2. Better liquidity - up to $3trillion exchanged daily
3. No commissions - dealers make their money on the spread
4. Margin and leverage - provided it is used wisely
5. Profit in falling markets - you have the choice how you pair the currencies - e.g. EUR/USD or USD/EUR

Finally, there are a couple of terms to be familiar with. The first is the “spread”. This is the difference between the buying and selling price of one currency, usually called the “Bid” and the “Ask”. The second concept is about “pips”. The “pip” is the smallest unit by which a cross price quote changes. In the case of a major like the US Dollar for example, one pip equals 0.0001 dollar, since the bid and ask prices run out to the 4th decimal place.

Forex brokers and dealers compete by offering tight spreads. You’ll hear offers like “only a 3 pip spread on the majors”.

You can become familiar with the above concepts by opening a free demo account with Forexyard. They provide a “virtual trading” account where you get an imaginary $25,000 and can use it to trade live prices using their state of the art charting program.

To sign up for a free account with Forexyard

Foreign currency trading, or forex trading, has become a very popular market worldwide, mainly because of its liquidity and 24 hour trading cycle. This tends to eliminate those nasty “price gaps” which traders of the stock market fear.

To make a living from forex trading, you need a reliable trading platform that is easy and convenient to use and offers the same tight spreads to large and small players alike. You also want a system that offers the ability to test your trading approach before committing real money.

Forexyard has become one of the better known online foreign currency trading facilitators in today’s market. One of the clear advantages with their system is that you can use it pretty much anywhere there is an internet connection. The reason for this, is that you have the choice of trading using a Java based system. This is another way of saying you don’t have to download any special software which could only be used on your PC or laptop.

This is a big plus, because it means you’re not tied to your own computer in order to trade. You can do it at the library, internet cafes, even at your work PC.

They also have free trading station software that you can also download. This provides you with charts and other decision making tools.

Forexyard has brought together some very talented and well educated professionals, to produce a system that offers excellence in online FX Trading. They provide a single service to a global client base, which means that their websites and trading platform are also available in a number of different languages.

Another attractive feature of their facility, is that you can make a decision to sign up online and start trading within minutes using your credit card to fund your account. You can make a decision to join them and be “out there doing it” almost immediately. They are also very big on credit card security and your personal privacy as well. With a “SuperMini” account, you can start trading with as little as $100. Withdrawing funds is easy too.

Forexyard boasts that they never freeze their spread prices. This is common with other market makers when price spikes occur. A trader’s worst nightmare is getting frozen out and unable to exit when a sudden price move, either in your favour or otherwise, takes place.

Forexyard has a policy of fairness for all. They want to provide their less experienced clients with every possible advantage and consequently, provide tighter spreads across the board. These were once only available to more experienced account holders, while less experienced clients were given spreads 1-3 pips higher. Their “universal pip rate” has dispensed with this discrimmination, so that new traders receive exactly the same spreads as professional clients.

Trade Without Using Real Money

Forexyard offers a neat little “virtual trading” demo-account facility. You can practice trade, using real-time quotes and full platform functionality, but only risking “pretend” money. This is a great way of testing out trading systems, particularly if you use technical analysis as your decision making tool.

Finally, they dedicate a whole section of their website to forex training and education. This includes a section on charts and technical analysis techniques.

One comment on a forum from a current user is worthy of note: “I am not rich just yet but I do know that if I use the information and training that I have learned from them I sure I will be counting plenty of dollars soon”.

To sign up for a free account with Forexyard