Successful Online Forex Trading

Trade Simulators

2009-08-20T12:47:00.000-07:00

With the trade simulator anybody could try trading with no obligation, no cost and no risk. It is important to feel the excitement of Forex, explore innovative features of the forex trading platforms, and see how easy it is to start trading.

If you make the most of the trade simulator and explore platform features; including the viewers that shows you the most popularly traded currency pairs or the Controllers that enables you to visually set your risk management strategy.

If you are already trader then the simulator is a great way to sharpen your trading skills or to test some trading strategies.

Currency Trading Signals

2009-02-09T12:55:00.000-08:00

DailyFX+ forex trading signals have had a reasonably successful week of trade, but sharp countertrend moves in key currencies clearly hurt the accuracy of our momentum-based trading systems. The sheer unpredictability of recent price action has clearly put our trading signals to the test, and we expect conditions to remain challenging through the foreseeable future. We all the same expect that our momentum and breakout-based currency trading strategies will continue to provide good risk-adjusted forecasts. A sharp drop in volatility expectations tells us that currency markets may slow down through the near term, but we are reminded that market conditions can deteriorate with little warning.

This article is from: www.dailyfx.com

Glossary of FOREX terms

2009-01-31T15:12:00.000-08:00

American-style option An option contract that may be exercised at any time before it expires.

Ask The quoted price at which a customer can buy a currency pair. Also referred to as the 'offer,' 'ask price,' or 'ask rate.'

Base Currency For foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. For example, in a USD/JPY currency pair, the US dollar is the base currency. Also may be referred to as the primary currency.

Bid The quoted price where a customer can sell a currency pair. Also known as the 'bid price' or 'bid rate.'

Bid/Ask Spread The point difference between the bid and ask (offer) price.

Call A call option gives the option buyer the right to purchase a particular currency pair at a stated exchange rate.

Counterparty The counterparty is the person who is on the other side of an OTC trade. For retail customers, the dealer will always be the counterparty.

Cross-rate The exchange rate between two currencies where neither of the currencies are the US dollar.

Currency pair The two currencies that make up a foreign exchange rate. For example, USD/JPY is a currency pair.

Dealer A firm in the business of acting as a counterparty to foreign currency transactions.

Euro The common currency adopted by eleven European nations (i.e., Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain) on January 1, 1999.

European-style option An option contract that can be exercised only on or near its expiration date.

Expiration This is the last day on which an option may either be exercised or offset.

Forward transaction A true forward transaction is an agreement that expects actual delivery of and full payment for the currency to occur on a future date. This term may also be usedto refer to transactions that the parties expect to offset at some time in the future, but these transactions are not true forward transactions and are governed by the federal Commodity Exchange Act.

Interbank market A loose network of currency transactions negotiated between financial institutions and other large companies.

Leverage The ability to control large dollar amount of a commodity with a comparatively small amount of capital. Also known as 'gearing.

Margin See Security Deposit.

Offer See ask.

Open position Any transaction that has not been closed out by a corresponding opposite transaction.

Pip The smallest unit of trading in a foreign currency price.

Premium The price an option buyer pays for the option, not including commissions.

Put A put option gives the option buyer the right to sell a particular currency pair at a stated exchange rate.

Quote currency The second currency in a currency pair is referred to as the quote currency. For example, in a USD/JPY currency pair, the Japanese yen is the quote currency. Also referred to as the secondary currency or the counter currency.

Rollover The process of extending the settlement date on an open position by rolling it over to the next settlement date.

Security deposit The amount of money needed to open or maintain a position. Also known as 'margin.'

Settlement The actual delivery of currencies made on the maturity date of a trade.

Spot market A market of immediate delivery of and payment for the product, in this case, currency.

Spot transaction A true spot transaction is a transaction requiring prompt delivery of and full payment for the currency. In the interbank market, spot transactions are usually settled in two business days. This term may also be used to refer to transactions that the parties expect to offset or roll over within two business days, but these transactions are not true spot transactions and are governed by the federal Commodity Exchange Act.

Spread The point or pip difference between the ask and bid price of a currency pair.

Sterling Another term for British currency, the pound.

Strike price The exchange rate at which the buyer of a call has the right to purchase a specific currency pair or at which the buyer of a put has the right to sell a specific currency pair. Also known as the 'exercise price.

Day Trading

2007-11-12T13:36:00.000-08:00

During the whole week (except Saturday and Sunday) there is the so called “day-trading zone” and you are allowed to perform every kind of daily currency rate deals. These deals are renewing automatically every night at 22:00 (GMT) until the deal ends of course and are charged the daily renewal fees.

These are the simplest ways to trade on the Forex market. You only need to choose the right time and currency pair. You buy and only 15 minutes later you could have higher rate of return than what the banks are giving for whole year.

Spot transactions

2007-11-06T12:39:00.000-08:00

When you buy or sell on the spot market the deals are completed immediately so it is the base for all other operations. They use the so called “benchmark price”. Although they are instant deals their settlement is processed on the second business day after the inquiry which gives the opportunities the involved institutions to do the necessary clearing operations.

These spot deals are the ABC of forex trading. Most simply said you have to choose the best moment to buy a currency pair (the cheapest the best) and then choose the best time to sell it (when the price is bigger). It is not that easy, indeed, and if you get the wrong timing you can put yourself in a dangerous situation when you currency pair start to devaluate. Then you have the choice to sell it in order to reduce the loose (damage control) or to wait until it gets higher values again.

Dealing on the spot market is the most common forex trading and it has certainly its secrets.

The forex biggest advantage

2007-11-04T04:02:00.000-08:00

The biggest advantage of trading on the Forex market is the so called “Leverage”. It allows to trade with amounts much greater than the actual money you have. For example you can use only $100 to buy a Forex contract for $10 000. It means that you can profit from a contract for $ 10 000 but the only sum you can actually loose is the $100. Sounds great, doesn’t it!

The leverage can seriously vary but the most common is at a 1:100 ratio. Obviously, the bigger the leverage ratio is the best. It depends on the trading platform and the currency pair but you should always try to use the biggest possible ratio.

And don’t forget the risk: you will never loose $10 000. The only money you can jeopardize is the actual $100.

Forex is not for everybody

2007-10-27T04:02:00.000-07:00

Speaking frankly Forex is a great way to earn easy money and work only a few hours a day (even a few minutes) but let’s be honest it is not for everybody. You need to have supreme mental abilities and self control if you want to take advantage of Forex not to get Forex to take advantage of you.

I know many people who started trading currencies with the great ambitions to change their lives and make good money but most of them failed. It appears that this is work only for those who can survive under serious pressure. When you play demo accounts it looks really easy (and this is why most of the brokers have this option for new comers). You can even create a really working system and double even treble you demo money only in a couple of days. The truth is that this is what causes many people to put on the platform money which they cannot afford to lose. And here is the problem: it appears that many players know exactly what to do when they win but when they are not mentally prepared to loose. They easily turn a small lose into disaster making a consequence of wrong decisions.

It is really good to have in mind that the money someone is winning in Forex is the same money that somebody else is loosing there. Our advice is trivial but precious: “Never to play with more than you can afford to loose”.

Exchange rates in forex market

2007-10-21T10:23:00.000-07:00

The currencies are traded in pairs and therefore exchanged one for the other this is the reason this is called the exchange rate. The most of the currencies are traded against the US dollar, the euro, the Japanese yen, the British pound or the Swiss franc. These currencies have the greatest importance on the market and this is why are called the major currencies. According to a few other researchers we should include as well the Australian dollar within the group of major currencies.

When we analyze a pair we refer the first currency as the base currency and the second as the counter or quote currency. It is important that the counter or quote currency is the numerator in the ratio, and the so called base currency is the denominator. As a strict rule the value of the base currency always equals 1, which is the reason why the exchange rate tells how much of the quote currency should be paid to obtain 1 unit of the base currency. This same exchange rate as well tells the seller how much quantity is received in the quote currency for one of the base currency.

If we have an investor who buys a currency and immediately sells it and there is no change in the exchange rate this investor will certainly lose money. This is because there are: the so called “bid price”, which shows how many units will be received in quote currency when selling one unit of the base currency. It is always lower than the so called “ask price”, which represents the number of units which must be paid in the quote currency when buying one unit of the base currency. Generally, the smaller spreads are the better for Forex speculators because they need a smaller movement in the rates to profit from a certain trade.

Speculating on the forex market

2007-10-20T06:11:00.000-07:00

The speculator aim in Forex trading is to profit from the movements of foreign currencies. The price of currency pair is referred to as a "Forex rate" or just "rate" for short. The proof that forex is really good investment option we need to compare it to other similar solutions. At its very minimum, the return on investment in forex should be compared to the return on the so called "risk-free" investments. Classical example of a risk-free investment is the U.S. government bonds because practically there is no chance for a default or the U.S. government going bankrupt.

If you are trading currencies, it is advisable to trade only when your expectations are that currency you are buying is going to increase in value compared to the currency you are selling. If it happens, you should sell back the other currency in order to lock in a profit. This open trade (sometimes called “open position”) is a classical example of trade in which the player has bought or has sold a particular currency pair and relatively has not yet sold or bought back the equivalent amount in order to close this position.

It is clear that about from 70% to 90% of the forex market is exclusively speculative. People and institutions that bought or sold the currency have not planned to actually take delivery of the currency at all. Their sole purpose is to gain profit.

Brief overview of the foreign exchange market

2007-10-19T08:26:00.001-07:00

Forex market is a very specific nonstop cash market where different currencies are being traded, usually by brokers. All the currencies are constantly bought and sold on many local and global markets. Investments increase or decrease in value following every movement of the currency pairs. Foreign exchange market is very vulnerable to real-time events.

Typically Forex offers:

v 24/5 nonstop access by the online platforms.

v Enormously liquid market.

v Volatile markets offering excellent opportunities.

v Different instruments giving easy control over risk exposure.

v Ability to gain profit in both rising and falling markets.

v Leveraged trading having low margin requirements.

v Many possibilities for zero commission trading.

Participants in Forex market and their importance

2007-10-18T11:18:00.000-07:00

One of the specifications of forex market is that it is divided into several levels of access. The top is market between the banks, which consists of the largest investment banking companies. Within this market the so called “spreads” or the difference between the “ask” and the “bid” prices, are razor sharp and normally not known to players outside this circle. The general rule is that descending the levels of access, the difference between the prices widens. This is caused by the volume of the traded currencies. When a trader guarantees large numbers of transactions for large amounts, he/she can demand a much smaller spread. These levels of access to the forex market are determined mainly by the so called “size of the line” or the amount of money they are trading with. The highest level inter-bank market accounts for about 50% of all transactions in forex. The next level is presented by usually smaller investment banks, followed by large multi-national corporations which main reason for participation is to hedge risk and pay employees in different countries. Insurance companies, pension funds, mutual funds, and other similar institutional investors are playing more and more significant role in forex. And the other very important participants in the market are central banks which need is to align currencies to their economic needs.

Liquidity and Market size of Forex

2007-10-17T12:39:00.000-07:00

There are a few reasons why Forex is considered unique.

There are varieties of factors which affect the rates.
There is geographical dispersion
Large number of traders are performing in the market
The market is extremely liquid
Trading volume is enormous
The trading hours are 24 hours a day (breaks only on weekends).

What is Forex

2007-10-17T11:39:00.000-07:00

The foreign exchange market (called as well currency or forex or just FX) exists when one currency is traded for another. By all means this is the largest financial market on the globe. It includes trading between central banks, governments, significant banks, currency speculators, multinational corporations and many other institutions and financial markets. The importance of these operations is described by the average daily trade which is over USD 3 trillion. The individuals are just a small fraction of this market and they are limited only to indirectly transaction through brokers or banks.