1 A Computer
This is an essential tool one needed for online trading. In order to trade online, one must have a computer. The computer must very fastalso have an operating system area.
2 The Internet
This is another essential thing needed in trading after a computer,your computer need to be connected in other for you to be able to trade.
Also, there should always be a back-up internet service available for stock trading
Just in case the computer isn't working and/or both internet servers are down, every day trader should make sure he/she has access to a telephone. That way if he/she needs to exit a trade and doesn't have internet access, he/she can call the brokerage firm to exit the trade.
3 Trading Brokerage
To trade online, everyone needs a brokerage that supports Day Trading. There are many different types of brokerage firms that charge many different fees and offer many different services.
Choose wisely with what you need and want in mind.
Also, look to choose a brokerage that offers good stock charting software and good trading software. You can purchase the software separately, and you may want to do so anyway, but having it all supplied by the brokerage firm is usually the most inexpensive way to go.
You also want to choose a brokerage that provides its clients with market data. Again, an online stock trader can get this information him/herself but its often easier and more cost effective to choose a brokerage that provides their clients with all the information.
With each of the essential tools for online stock trading there are many different options. A Day
Trader needs to decide what he/she needs and wants out of each tool. Then the tools should be used their full extent.
Stock trading online is growing more and more every single day. People are realizing it's the most convenient way to trade stocks. Anyone wishing to begin trading stocks online needs to get acquire 3 essential tools: a computer, the internet, and a trading brokerage
Thursday, October 9, 2008
Forex Glossary
Accrual - The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals , over the period of each deal.
Actualize - The underlying assets or instruments which are traded in the cash market.
Adjustable Peg - Term for an exchange rate regime where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency , often the dollar or French Franc, but where the rate may be changed from time to time. This was the basis of the Bretton Woods system. See peg, and crawling peg.
Adjustment - Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or. Agent Bank -
(1) A bank acting for a foreign bank.
(2) In the Euro market - the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.
Aggregate Demand - Total demand for goods and services in the economy. It includes private and public sector demand for goods and services within the country and the demand of consumers and and firms in other countries for good and services.
Aggregate risk - Size of exposure of a bank to a single customer for both spot and forward contracts. Aggregate Supply - Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.
Agio - Difference in the value between currencies. Also used to describe percentage charges for conversion from paper money into cash, or from a weak into a strong currency. Appreciation - Describes a currency strengthening in response to market demand rather than by official action.
Arbitrage - The simultaneous purchase and sale on different markets, of the same or equivalent financial instruments to profit from price or currency differentials.
The exchange rate differential or Swap points. May be derived from Deposit Rate differentials.
Arbitrage channel - The range of prices within which there will be no possibility to arbitrage between the cash and futures market.
Around - Used in quoting forward "premium / discount". "Five-five around" would mean five point on either side of the present spot value.
Back Office - Settlement and related processes.
Backwardation - Term referring to the amount that the spot price exceeds the forward price.
Balance of Payments - A systematic record of the economic transactions during a given period for a country.
(1) The term is often used to mean either: (i) balance of payments on "current account"; or (ii) the current account plus certain long term capital movements.
(2) The combination of the trade balance, current balance, capital account and invisible balance, which together make up the balance of payments total. Prolonged balance of payment deficits tend to lead to restrictions in capital transfers, and or decline in currency values. Band - The range in which a currency is permitted to move. A system used in the ERM. Bank line - Line of credit granted by a bank to a customer, also known as a " line". Bank Rate - The rate at which a central bank is prepared to lend money to its domestic banking system. Base currency - United States Dollars.
The currency to which each transaction shall be converted at the close of each position.
Basis - The difference between the cash price and futures price. Basis point - For most currencies, denotes the fourth decimal place in exchange rate and represents 1/100 of one percent (.01%). For such currencies as the Japanese Yen, a basis point is the second decimal place when quoted in currency terms or the sixth and seventh decimal places, respectively, when quoted in reciprocal terms
. Basis trading - Taking opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.
Basket - A group of currencies normally used to manage the exchange rate of a currency. Sometimes referred to as a unit of account.
Bear market - A prolonged period of generally falling prices. Bear - An investor who believes that prices are going to fall.
Bid - The price at which a buyer has offered to purchase the currency or instrument. Book - The summary of currency positions held by a dealer, desk, or room. A total of the assets and liabilities.
If the average maturity of the book is less than that of the assets, the bank is said to be running a short and open book.
Passing the Book refers normally to transferring the trading of the Banks positions to another office at the close of the day, e.g. from London to New York. Bretton Woods - The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s.
The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.
Broker - Brings buyers and sellers together for a commission paid by the initiator of the transaction. Brokers do not take market positions.
Bull market - A prolonged period of generally rising prices.
Bull - An investor who believes that prices are going to rise. Bundesbank - Central Bank of Germany.
Buying Rate - Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate.
Asset Allocation - Dividing instrument funds among markets to achieve diversification or maximum return.
Ask - The price at which the currency or instrument is offered.
Asset - In the context of foreign exchange is the right to receive from a counterparty an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched forward Forward or spot deal.
At best - An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or Better - An order to deal at a specific rate or better. Authorized Dealer - A financial institution or bank authorized to deal in foreign exchange.
Actualize - The underlying assets or instruments which are traded in the cash market.
Adjustable Peg - Term for an exchange rate regime where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency , often the dollar or French Franc, but where the rate may be changed from time to time. This was the basis of the Bretton Woods system. See peg, and crawling peg.
Adjustment - Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or. Agent Bank -
(1) A bank acting for a foreign bank.
(2) In the Euro market - the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.
Aggregate Demand - Total demand for goods and services in the economy. It includes private and public sector demand for goods and services within the country and the demand of consumers and and firms in other countries for good and services.
Aggregate risk - Size of exposure of a bank to a single customer for both spot and forward contracts. Aggregate Supply - Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.
Agio - Difference in the value between currencies. Also used to describe percentage charges for conversion from paper money into cash, or from a weak into a strong currency. Appreciation - Describes a currency strengthening in response to market demand rather than by official action.
Arbitrage - The simultaneous purchase and sale on different markets, of the same or equivalent financial instruments to profit from price or currency differentials.
The exchange rate differential or Swap points. May be derived from Deposit Rate differentials.
Arbitrage channel - The range of prices within which there will be no possibility to arbitrage between the cash and futures market.
Around - Used in quoting forward "premium / discount". "Five-five around" would mean five point on either side of the present spot value.
Back Office - Settlement and related processes.
Backwardation - Term referring to the amount that the spot price exceeds the forward price.
Balance of Payments - A systematic record of the economic transactions during a given period for a country.
(1) The term is often used to mean either: (i) balance of payments on "current account"; or (ii) the current account plus certain long term capital movements.
(2) The combination of the trade balance, current balance, capital account and invisible balance, which together make up the balance of payments total. Prolonged balance of payment deficits tend to lead to restrictions in capital transfers, and or decline in currency values. Band - The range in which a currency is permitted to move. A system used in the ERM. Bank line - Line of credit granted by a bank to a customer, also known as a " line". Bank Rate - The rate at which a central bank is prepared to lend money to its domestic banking system. Base currency - United States Dollars.
The currency to which each transaction shall be converted at the close of each position.
Basis - The difference between the cash price and futures price. Basis point - For most currencies, denotes the fourth decimal place in exchange rate and represents 1/100 of one percent (.01%). For such currencies as the Japanese Yen, a basis point is the second decimal place when quoted in currency terms or the sixth and seventh decimal places, respectively, when quoted in reciprocal terms
. Basis trading - Taking opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.
Basket - A group of currencies normally used to manage the exchange rate of a currency. Sometimes referred to as a unit of account.
Bear market - A prolonged period of generally falling prices. Bear - An investor who believes that prices are going to fall.
Bid - The price at which a buyer has offered to purchase the currency or instrument. Book - The summary of currency positions held by a dealer, desk, or room. A total of the assets and liabilities.
If the average maturity of the book is less than that of the assets, the bank is said to be running a short and open book.
Passing the Book refers normally to transferring the trading of the Banks positions to another office at the close of the day, e.g. from London to New York. Bretton Woods - The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s.
The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.
Broker - Brings buyers and sellers together for a commission paid by the initiator of the transaction. Brokers do not take market positions.
Bull market - A prolonged period of generally rising prices.
Bull - An investor who believes that prices are going to rise. Bundesbank - Central Bank of Germany.
Buying Rate - Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate.
Asset Allocation - Dividing instrument funds among markets to achieve diversification or maximum return.
Ask - The price at which the currency or instrument is offered.
Asset - In the context of foreign exchange is the right to receive from a counterparty an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched forward Forward or spot deal.
At best - An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or Better - An order to deal at a specific rate or better. Authorized Dealer - A financial institution or bank authorized to deal in foreign exchange.
Friday, October 3, 2008
Essential Elements of a Successful Trader
Courage Under Stressful Conditions When the Outcome is Uncertain
All the foreign exchange trading knowledge in the world is not going to help, unless you have the nerve to buy and sell currencies and put your money at risk. As with the lottery “You gotta be in it to win it”. Trust me when I say that the simple task of hitting the buy or sell key is extremely difficult to do when your own real money is put at risk.
You will feel anxiety, even fear. Here lies the moment of truth. Do you have the courage to be afraid and act anyway? When a fireman runs into a burning building I assume he is afraid but he does it anyway and achieves the desired result. Unless you can overcome or accept your fear and do it anyway, you will not be a successful trader.
However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction can become an issue – you’re overconfident and not focused enough on the risk you're taking.
Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one.
Start by analyzing yourself. Are you the type of person that can control their emotions and flawlessly execute trades, oftentimes under extremely stressful conditions? Are you the type of person who’s overconfident and prone to take more risk than they should? Before your first real trade you need to look inside yourself and get the answers. We can correct any deficiencies before they result in paralysis (not pulling the trigger) or a huge loss (overconfidence). A huge loss can prematurely end your trading career, or prolong your success until you can raise additional capital.
The difficulty doesn’t end with “pulling the trigger”. In fact what comes next is equally or perhaps more difficult. Once you are in the trade the next hurdle is staying in the trade. When trading foreign exchange you exit the trade as soon as possible after entry when it is not working. Most people who have been successful in non-trading ventures find this concept difficult to implement.
For example, real estate tycoons make their fortune riding out the bad times and selling during the boom periods. The problem with trying to adapt a 'hold on until it comes back' strategy in foreign exchange is that most of the time the currencies are in long-term persistent, directional trends and your equity will be wiped out before the currency comes back.
The other side of the coin is staying in a trade that is working. The most common pitfall is closing out a winning position without a valid reason. Once again, fear is the culprit. Your subconscious demons will be scaring you non-stop with questions like “what if news comes out and you wind up with a loss”. The reality is if news comes out in a currency that is going up, the news has a higher probability of being positive than negative (more on why that is so in a later article).
So your fear is just a baseless annoyance. Don’t try and fight the fear. Accept it. Have a laugh about it and then move on to the task at hand, which is determining an exit strategy based on actual price movement. As Garth says in Waynesworld “Live in the now man”. Worrying about what could be is irrational. Studying your chart and determining an objective exit point is reality based and rational.
Another common pitfall is closing a winning position because you are bored with it; its not moving. In Football, after a star running back breaks free for a 50-yard gain, he comes out of the game temporarily for a breather. When he reenters the game he is a serious threat to gain more yards – this is indisputable. So when your position takes a breather after a winning move, the next likely event is further gains – so why close it?
If you can be courageous under fire and strategically patient, foreign exchange trading may be for you. If you’re a natural gunslinger and reckless you will need to tone your act down a notch or two and we can help you make the necessary adjustments. If putting your money at risk makes you a nervous wreck its because you lack the knowledge base to be confident in your decision making.
Patience to Gain Knowledge through Study and Focus
Many new traders believe all you need to profitably trade foreign currencies are charts, technical indicators and a small bankroll. Most of them blow up (lose all their money) within a few weeks or months; some are initially successful and it takes as long as a year before they blow up. A tiny minority with good money management skills, patience, and a market niche go on to be successful traders. Armed with charts, technical indicators, and a small bankroll, the chance of succeeding is probably 500 to 1.
To increase your chances of success to near certainty requires knowledge; acquiring knowledge takes hard work, study, dedication and focus. Compile your knowledge base without taking any shortcuts, thereby assuring a solid foundation to build upon.
Source:http://www.goforex.net/essential-elements.htm
All the foreign exchange trading knowledge in the world is not going to help, unless you have the nerve to buy and sell currencies and put your money at risk. As with the lottery “You gotta be in it to win it”. Trust me when I say that the simple task of hitting the buy or sell key is extremely difficult to do when your own real money is put at risk.
You will feel anxiety, even fear. Here lies the moment of truth. Do you have the courage to be afraid and act anyway? When a fireman runs into a burning building I assume he is afraid but he does it anyway and achieves the desired result. Unless you can overcome or accept your fear and do it anyway, you will not be a successful trader.
However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction can become an issue – you’re overconfident and not focused enough on the risk you're taking.
Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one.
Start by analyzing yourself. Are you the type of person that can control their emotions and flawlessly execute trades, oftentimes under extremely stressful conditions? Are you the type of person who’s overconfident and prone to take more risk than they should? Before your first real trade you need to look inside yourself and get the answers. We can correct any deficiencies before they result in paralysis (not pulling the trigger) or a huge loss (overconfidence). A huge loss can prematurely end your trading career, or prolong your success until you can raise additional capital.
The difficulty doesn’t end with “pulling the trigger”. In fact what comes next is equally or perhaps more difficult. Once you are in the trade the next hurdle is staying in the trade. When trading foreign exchange you exit the trade as soon as possible after entry when it is not working. Most people who have been successful in non-trading ventures find this concept difficult to implement.
For example, real estate tycoons make their fortune riding out the bad times and selling during the boom periods. The problem with trying to adapt a 'hold on until it comes back' strategy in foreign exchange is that most of the time the currencies are in long-term persistent, directional trends and your equity will be wiped out before the currency comes back.
The other side of the coin is staying in a trade that is working. The most common pitfall is closing out a winning position without a valid reason. Once again, fear is the culprit. Your subconscious demons will be scaring you non-stop with questions like “what if news comes out and you wind up with a loss”. The reality is if news comes out in a currency that is going up, the news has a higher probability of being positive than negative (more on why that is so in a later article).
So your fear is just a baseless annoyance. Don’t try and fight the fear. Accept it. Have a laugh about it and then move on to the task at hand, which is determining an exit strategy based on actual price movement. As Garth says in Waynesworld “Live in the now man”. Worrying about what could be is irrational. Studying your chart and determining an objective exit point is reality based and rational.
Another common pitfall is closing a winning position because you are bored with it; its not moving. In Football, after a star running back breaks free for a 50-yard gain, he comes out of the game temporarily for a breather. When he reenters the game he is a serious threat to gain more yards – this is indisputable. So when your position takes a breather after a winning move, the next likely event is further gains – so why close it?
If you can be courageous under fire and strategically patient, foreign exchange trading may be for you. If you’re a natural gunslinger and reckless you will need to tone your act down a notch or two and we can help you make the necessary adjustments. If putting your money at risk makes you a nervous wreck its because you lack the knowledge base to be confident in your decision making.
Patience to Gain Knowledge through Study and Focus
Many new traders believe all you need to profitably trade foreign currencies are charts, technical indicators and a small bankroll. Most of them blow up (lose all their money) within a few weeks or months; some are initially successful and it takes as long as a year before they blow up. A tiny minority with good money management skills, patience, and a market niche go on to be successful traders. Armed with charts, technical indicators, and a small bankroll, the chance of succeeding is probably 500 to 1.
To increase your chances of success to near certainty requires knowledge; acquiring knowledge takes hard work, study, dedication and focus. Compile your knowledge base without taking any shortcuts, thereby assuring a solid foundation to build upon.
Source:http://www.goforex.net/essential-elements.htm
Monday, August 11, 2008
Forex Buy and Sell Indicator
A free forex buy and sell indicator takes the guesswork out of forex trading. It makes sure you are trading based on solid facts and not just on a whim. It will also ensure you are backed with historical data on trends regarding the currencies you are trading in.
There are many sites where you can check out free forex buy and sell indicators. These sites offer customers software which can help predict whether it is wise to sell or to hold on to the currencies you are trading in. Some sites which offer buy and sell indicators are business4profitsystems and swingcurrency. You might want to try out a few sites and find out which one is best suited to your requirements.
Apart from the free indicators, there are a host of other sites which allow you to download such applications for a fee. Such paid sites might give you superior quality and better features, which a free one cannot offer. Applications like Forex AutoPilot - also called FAPS - are fast gaining popularity among users. This is an automated software which trades at anytime provided you leave your computer on. the software requires you to feed in the basic ranges in which you would like to trade and rest assured the software will take care of the rest. This might sound a little dicey to those of you who would like to be in total control of your forex trading. The Forex Autopilot has an in -built free forex buy and sell indicator. But this comes only in its demo version.
Another well received software for forex buy and sell indication is Doubling stocks. This software also helps you make cardinal decisions in the forex market regarding when to buy, sell or exit a trade. This is not an automated software, so you will need to do the trading yourself on the basis of what the software tells you. This would be reassuring for those of you who need to have complete control over what you are trading. This software application also comes with a free demo package. The demo software is definitely very rich and detailed. It would be a boon for those who are entering the forex trading business and provide valuable support for those who have experience in the forex markets.
Apart from these two there are many other sites which sell forex buy and sell indicators for a price. What you need to keep in mind when you purchase this software is the sensitivity of the software to daily fluctuations in the market.
While online equities and futures trading have enjoyed exponential growth and widespread notoriety over the past few years, online foreign exchange trading is only now gaining popularity among seasoned active traders, commodity trading advisors (CTAs), and other professional money managers.
Until recently, large international banks dominated the foreign exchange market, only allowing access via telephone trading to a select few such as Fortune 1000 companies, large funds, high-net worth individuals, and so on. But now, the tide has turned and finally there are established online trading firms that provide individual investors with direct access to the largest, most liquid financial market in the world.
In this market you may buy or sell currencies. The objective is to earn a profit from your position. Placing a trade in the foreign exchange market is simple: the mechanics of a trade are virtually identical to those found in other markets, so the transition for many traders is often seamless.
Currencies are quoted in pairs, such as EUR/USD or USD/JPY. The first listed currency is known as the base currency, while the second is called the counter or quote currency. The base currency is the "basis" for the buy or the sell.
For example, if you BUY EUR/USD you have bought euros (simultaneously sold dollars). You would do so in expectation that the euro will appreciate (go up) relative to the US dollar.
EUR/USD
In this example euro is the base currency and thus the "basis" for the buy/sell. If you believe that the US economy will continue to weaken and this will hurt the US dollar, you would execute a BUY EUR/USD order. By doing so you have bought euros in the expectation that they will appreciate versus the US dollar.
If you believe that the US economy is strong and the euro will weaken against the US dollar you would execute a SELL EUR/USD order. By doing so you have sold euros in the expectation that they will depreciate versus the US dollar.
GBP/USD
In this example the GBP is the base currency and thus the "basis" for the buy/sell. By doing so you have bought pounds in the expectation that they will appreciate versus the US dollar.
If you believe the British are going to adopt the euro and this will weaken pounds as they devalue their currency in anticipation of the merge, you would execute a SELL GBP/USD order. By doing so you have sold pounds in the expectation that they will depreciate against the US dollar.
USD/JPY
In this example the US dollar is the base currency and thus the "basis" for the buy/sell. If you think that the Japanese government is going to weaken the yen in order to help its export industry, you would execute a BUY USD/JPY order. By doing so you have bought U.S dollars in the expectation that they will appreciate versus the Japanese yen.
If you believe that Japanese investors are pulling money out of U.S. financial markets and repatriating funds back to Japan, and this will hurt the US dollar, you would execute a SELL USD/JPY order. By doing so you have sold U.S dollars in the expectation that they will depreciate against the Japanese yen.
USD/CHF
In this example the CHF is the base currency and thus the "basis" for the buy/sell. If you think the Swiss franc is overvalued, you would execute a BUY USD/CHF order. By doing so you have bought US dollars in the expectation that they will appreciate versus the Swiss Franc.
There are many sites where you can check out free forex buy and sell indicators. These sites offer customers software which can help predict whether it is wise to sell or to hold on to the currencies you are trading in. Some sites which offer buy and sell indicators are business4profitsystems and swingcurrency. You might want to try out a few sites and find out which one is best suited to your requirements.
Apart from the free indicators, there are a host of other sites which allow you to download such applications for a fee. Such paid sites might give you superior quality and better features, which a free one cannot offer. Applications like Forex AutoPilot - also called FAPS - are fast gaining popularity among users. This is an automated software which trades at anytime provided you leave your computer on. the software requires you to feed in the basic ranges in which you would like to trade and rest assured the software will take care of the rest. This might sound a little dicey to those of you who would like to be in total control of your forex trading. The Forex Autopilot has an in -built free forex buy and sell indicator. But this comes only in its demo version.
Another well received software for forex buy and sell indication is Doubling stocks. This software also helps you make cardinal decisions in the forex market regarding when to buy, sell or exit a trade. This is not an automated software, so you will need to do the trading yourself on the basis of what the software tells you. This would be reassuring for those of you who need to have complete control over what you are trading. This software application also comes with a free demo package. The demo software is definitely very rich and detailed. It would be a boon for those who are entering the forex trading business and provide valuable support for those who have experience in the forex markets.
Apart from these two there are many other sites which sell forex buy and sell indicators for a price. What you need to keep in mind when you purchase this software is the sensitivity of the software to daily fluctuations in the market.
While online equities and futures trading have enjoyed exponential growth and widespread notoriety over the past few years, online foreign exchange trading is only now gaining popularity among seasoned active traders, commodity trading advisors (CTAs), and other professional money managers.
Until recently, large international banks dominated the foreign exchange market, only allowing access via telephone trading to a select few such as Fortune 1000 companies, large funds, high-net worth individuals, and so on. But now, the tide has turned and finally there are established online trading firms that provide individual investors with direct access to the largest, most liquid financial market in the world.
In this market you may buy or sell currencies. The objective is to earn a profit from your position. Placing a trade in the foreign exchange market is simple: the mechanics of a trade are virtually identical to those found in other markets, so the transition for many traders is often seamless.
Currencies are quoted in pairs, such as EUR/USD or USD/JPY. The first listed currency is known as the base currency, while the second is called the counter or quote currency. The base currency is the "basis" for the buy or the sell.
For example, if you BUY EUR/USD you have bought euros (simultaneously sold dollars). You would do so in expectation that the euro will appreciate (go up) relative to the US dollar.
EUR/USD
In this example euro is the base currency and thus the "basis" for the buy/sell. If you believe that the US economy will continue to weaken and this will hurt the US dollar, you would execute a BUY EUR/USD order. By doing so you have bought euros in the expectation that they will appreciate versus the US dollar.
If you believe that the US economy is strong and the euro will weaken against the US dollar you would execute a SELL EUR/USD order. By doing so you have sold euros in the expectation that they will depreciate versus the US dollar.
GBP/USD
In this example the GBP is the base currency and thus the "basis" for the buy/sell. By doing so you have bought pounds in the expectation that they will appreciate versus the US dollar.
If you believe the British are going to adopt the euro and this will weaken pounds as they devalue their currency in anticipation of the merge, you would execute a SELL GBP/USD order. By doing so you have sold pounds in the expectation that they will depreciate against the US dollar.
USD/JPY
In this example the US dollar is the base currency and thus the "basis" for the buy/sell. If you think that the Japanese government is going to weaken the yen in order to help its export industry, you would execute a BUY USD/JPY order. By doing so you have bought U.S dollars in the expectation that they will appreciate versus the Japanese yen.
If you believe that Japanese investors are pulling money out of U.S. financial markets and repatriating funds back to Japan, and this will hurt the US dollar, you would execute a SELL USD/JPY order. By doing so you have sold U.S dollars in the expectation that they will depreciate against the Japanese yen.
USD/CHF
In this example the CHF is the base currency and thus the "basis" for the buy/sell. If you think the Swiss franc is overvalued, you would execute a BUY USD/CHF order. By doing so you have bought US dollars in the expectation that they will appreciate versus the Swiss Franc.
How to Choose a Trading Platform
Choosing a forex trading platform can be very hard if you dont know what to look for.
In this article you will learn the most important things that a good forex trading platform should have.
Hopefully after reading this article you will have everything you need to choose a good forex broker & platform So for you to learn how to choose the right platform the will work well for you,you just need to continue reading this article and also refer your friend to this page in other for them to get it right,when choosing a trader platform.
How reliable a company is. The easiest way to go here would just be to go to some brandname company. Of course, with smaller investments it might be complicated, but many of the big names also offer mini-accounts which start from anywhere between $300 - $2000 minimum. Additionally, get lost into some investing forums and see what other people are suggesting. And then preferrably ask about the platform/firm they suggested in some other forum as well. This way you will get general information about experiences with the firm and additionally, when people are ready to suggest something, it often means that THEY consider the firm reliable
- How big are the commissions? For forex and stocks the commissions are usually calculated differently. For stocks there is often a certain fee for a trade – anywhere between $4 - $40 or per trade...eg. $0.02 per stock. With forex the commissions are often automatically added into the spreads ( the difference between the ask and bid price), thus no extra commission is taken. I myself have looked around and considering that...
1. I want to day trade not invest for longer term and
2. My initial investing capital will be only $1k-$5k
...the commissions really need to be small. I won’t be looking to earn 10% with a stock and I won’t be working with big numbers. So a $20 commissions on stocks are pretty much killers...buy+sell=$40 only for commissions..and $40 and if I have just $1000 to play with this means that the stock price would have to move to my desired direction at least 4% just not to lose with this deal. And this is a killer. Especially if, as a day trader, I would be happy to take just 1% of profit per deal. So instead I suggest you to find a firm that offers eg. $4 per trade or $0.01 per share. With forex – I have actually already tried to play on forex, without any knowledge of the market, just to try it out. The firm I used had 10 pip spread for mini accounts ( min deposit $25 )...and as I didn’t know a thing about pips and such ( if you don’t have any clue what pip is, check the forex channel on this site..there will be an introduction to forex markets soon) and only now I can say it’s a killer. Good platforms usually offer only a 2-5 pip spread and this is a lot better, independent of your portfolio value.
- With forex and small capital you also want to know what kind of leverage they are offering. Forex is good from the perspective that you might only have $1000 but you could buy currencies for $100k ( this case of course, you are risking all your money, but the possibility here is important). The leverage is different with different online brokers, usually between 50:1 and 400:1. I guess 100:1 or 200:1 is pretty good already while 50:1 might not do it.
- How does their platform look? While other people might say that this or that platform is very good, you might end up hating it. So I suggest you to register for free demo accounts on different sites and see yourself which you would be most comfortable with. For example if you don’t have a laptop with you all the time, it might be a good choice to go for a web-based platform, while if you do have access to your computer all the time, I would suggest a non-web-based platform as these tend to be a bit faster to use. But that again might be my personal fetish. And my 10-pip firm had web-based platform so I might not be as objective here as I could.
Tip #1 Real Time Quotes
This is extremely important. Forex trading is done 24 hours a day and you want to have live quotes. With live quotes you can be in full control of your funds and check them whenever you want.
Make sure to check if the broker platform offer live quotes 24 hours a day. This is really important i cannot stress this enough.
Make sure to check so the broker don't slow the execution of the orders. This way you will enter a market at a different time than you wanted.
So make sure that the broker don't slow the execution orders.
Tip #2 Easy to Use
The software you use should be easy to understand. You should be able to start trading immediately. Skip systems that take weeks to learn. They should be easy to use, that's it.
You should also try to pick a software that doesn’t need any download, that you can access from every computer.
You could choose to download a software but make sure that it got live quotes.
Support
This is very important. Your broker shall provide 24 hours support no question about it. The forex market never rests and if you need assistance you should get it fast.
A good tip is to contact their support about any questions you have before you buy their services.
Trading Rates
Be sure to check if the software allows a freeze option when you decide to buy or sell. This way you get the rate you freeze and not the actual rate that occurs when the buy or sell is processed seconds later.
Spreads
The spread is different from broker to broker. Make sure to check which spread the broker have. If they have larger spreads then the market have to move in your favor more than it would have if the spread was smaller.
In this article you will learn the most important things that a good forex trading platform should have.
Hopefully after reading this article you will have everything you need to choose a good forex broker & platform So for you to learn how to choose the right platform the will work well for you,you just need to continue reading this article and also refer your friend to this page in other for them to get it right,when choosing a trader platform.
How reliable a company is. The easiest way to go here would just be to go to some brandname company. Of course, with smaller investments it might be complicated, but many of the big names also offer mini-accounts which start from anywhere between $300 - $2000 minimum. Additionally, get lost into some investing forums and see what other people are suggesting. And then preferrably ask about the platform/firm they suggested in some other forum as well. This way you will get general information about experiences with the firm and additionally, when people are ready to suggest something, it often means that THEY consider the firm reliable
- How big are the commissions? For forex and stocks the commissions are usually calculated differently. For stocks there is often a certain fee for a trade – anywhere between $4 - $40 or per trade...eg. $0.02 per stock. With forex the commissions are often automatically added into the spreads ( the difference between the ask and bid price), thus no extra commission is taken. I myself have looked around and considering that...
1. I want to day trade not invest for longer term and
2. My initial investing capital will be only $1k-$5k
...the commissions really need to be small. I won’t be looking to earn 10% with a stock and I won’t be working with big numbers. So a $20 commissions on stocks are pretty much killers...buy+sell=$40 only for commissions..and $40 and if I have just $1000 to play with this means that the stock price would have to move to my desired direction at least 4% just not to lose with this deal. And this is a killer. Especially if, as a day trader, I would be happy to take just 1% of profit per deal. So instead I suggest you to find a firm that offers eg. $4 per trade or $0.01 per share. With forex – I have actually already tried to play on forex, without any knowledge of the market, just to try it out. The firm I used had 10 pip spread for mini accounts ( min deposit $25 )...and as I didn’t know a thing about pips and such ( if you don’t have any clue what pip is, check the forex channel on this site..there will be an introduction to forex markets soon) and only now I can say it’s a killer. Good platforms usually offer only a 2-5 pip spread and this is a lot better, independent of your portfolio value.
- With forex and small capital you also want to know what kind of leverage they are offering. Forex is good from the perspective that you might only have $1000 but you could buy currencies for $100k ( this case of course, you are risking all your money, but the possibility here is important). The leverage is different with different online brokers, usually between 50:1 and 400:1. I guess 100:1 or 200:1 is pretty good already while 50:1 might not do it.
- How does their platform look? While other people might say that this or that platform is very good, you might end up hating it. So I suggest you to register for free demo accounts on different sites and see yourself which you would be most comfortable with. For example if you don’t have a laptop with you all the time, it might be a good choice to go for a web-based platform, while if you do have access to your computer all the time, I would suggest a non-web-based platform as these tend to be a bit faster to use. But that again might be my personal fetish. And my 10-pip firm had web-based platform so I might not be as objective here as I could.
Tip #1 Real Time Quotes
This is extremely important. Forex trading is done 24 hours a day and you want to have live quotes. With live quotes you can be in full control of your funds and check them whenever you want.
Make sure to check if the broker platform offer live quotes 24 hours a day. This is really important i cannot stress this enough.
Make sure to check so the broker don't slow the execution of the orders. This way you will enter a market at a different time than you wanted.
So make sure that the broker don't slow the execution orders.
Tip #2 Easy to Use
The software you use should be easy to understand. You should be able to start trading immediately. Skip systems that take weeks to learn. They should be easy to use, that's it.
You should also try to pick a software that doesn’t need any download, that you can access from every computer.
You could choose to download a software but make sure that it got live quotes.
Support
This is very important. Your broker shall provide 24 hours support no question about it. The forex market never rests and if you need assistance you should get it fast.
A good tip is to contact their support about any questions you have before you buy their services.
Trading Rates
Be sure to check if the software allows a freeze option when you decide to buy or sell. This way you get the rate you freeze and not the actual rate that occurs when the buy or sell is processed seconds later.
Spreads
The spread is different from broker to broker. Make sure to check which spread the broker have. If they have larger spreads then the market have to move in your favor more than it would have if the spread was smaller.
Thursday, July 3, 2008
What you Need to Start Trading.
This particular technique has been around for a long time and I first saw it used in the futures market.
Since then I have seen traders using it on just about every market and when applied well, can give amazingly accurate entry levels.
Lets first start with the basic concept. During the course of any trend, either up or down, the market will form little peaks and valleys. see the chart below:
The problem is, how do you know when to enter the market and where do you get out. This is where the 1-2-3 method comes in. First let's look at a typical 1-2-3 set up:
Nice and simple, but it still doesn't tell us if we should take the trade. For this we add an indictor. You could use just about any indictor with this method but my preferred indictor is MACD with the standard settings of 12,26,9. With the indictor added, it now looks like this:
Now here is where it gets interesting. The rules for the trade are as follows:
Uptrend
This works best as a reversal pattern so identify a previous downtrend.
Wait for the MACD to signal a buy and for the 1-2-3 set up to be in place.
As the market pulls back to point 3, the MACD should remain in buy mode or just slightly dip into sell.
Place a buy entry order 1 pip above point 2
Place a stop loss order 1 pip below point 3
Measure the distance between point 2 and 3 and project that forward for your exit.
Point 2, should not be lower than point 1
The reverse is true for short trades. As the market progresses you can trail your stop to 1 pip below the most recent low (Valley in an uptrend). You can also use a break in a trend line as an exit.
Some examples:
There are a lot of variations on the 1-2-3 setup but the basic concept is always the same. Try experimenting with it on your favorite time frame.
Good Trading
Since then I have seen traders using it on just about every market and when applied well, can give amazingly accurate entry levels.
Lets first start with the basic concept. During the course of any trend, either up or down, the market will form little peaks and valleys. see the chart below:
The problem is, how do you know when to enter the market and where do you get out. This is where the 1-2-3 method comes in. First let's look at a typical 1-2-3 set up:
Nice and simple, but it still doesn't tell us if we should take the trade. For this we add an indictor. You could use just about any indictor with this method but my preferred indictor is MACD with the standard settings of 12,26,9. With the indictor added, it now looks like this:
Now here is where it gets interesting. The rules for the trade are as follows:
Uptrend
This works best as a reversal pattern so identify a previous downtrend.
Wait for the MACD to signal a buy and for the 1-2-3 set up to be in place.
As the market pulls back to point 3, the MACD should remain in buy mode or just slightly dip into sell.
Place a buy entry order 1 pip above point 2
Place a stop loss order 1 pip below point 3
Measure the distance between point 2 and 3 and project that forward for your exit.
Point 2, should not be lower than point 1
The reverse is true for short trades. As the market progresses you can trail your stop to 1 pip below the most recent low (Valley in an uptrend). You can also use a break in a trend line as an exit.
Some examples:
There are a lot of variations on the 1-2-3 setup but the basic concept is always the same. Try experimenting with it on your favorite time frame.
Good Trading
What is FOREx all about?
The Forex market is a non-stop cash market where currencies of nations are traded, typically through brokers. Foreign currencies are constantly and simultaneously bought and sold across local and interntional markets and traders' investments increase or decrease in value based upon currency movements of foreign exchange.Foreign exchange exists wherever one currency is traded for another. It is the largest financial market in the world,The average daily trade in the global forex and related markets currently is over US$ 7 trillion.
It is a 24-hour trading, 5 days a week with non-stop access to global Forex dealers. An enormous liquid market making it easy to trade most currencies. Volatile markets offering profit opportunities. Standard instruments for controlling risk exposure. The ability to profit in rising or falling markets. Leveraged trading with low margin requirements. Many options for zero commission trading.
Market size and liquidity
The foreign exchange market is unique because of
its trading volumes,
the extreme liquidity of the market,
the large number of, and variety of, traders in the market,
its geographical dispersion,
its long trading hours: 24 hours a day except on weekends (from 5pm EST on Sunday until 4pm EST Friday),
the variety of factors that affect exchange rates.
the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
the use of leverage
Foreign exchange market turnover, 1988 - 2007, measured in billions of USD.
As such, it has been referred to as the market closest to the ideal perfect competition, notwithstanding market manipulation by central banks. According to the BIS, average daily turnover in traditional foreign exchange markets is estimated at $7.28 trillion. down as follows:
Market participants
Unlike a stock market, where all participants have access to the same prices, the forex market is divided into levels of access. At the top is the inter-bank market, which is made up of the largest investment banking firms. Within the inter-bank market, spreads, which are the difference between the bid and ask prices, are razor sharp and usually unavailable, and not known to players outside the inner circle. As you descend the levels of access, the difference between the bid and ask prices widens (from 0-1 pip to 1-2 pips for some currencies such as the EUR). This is due to volume.
Banks
The interbank market caters for both the majority of commercial turnover and large amounts of speculative trading every day. A large bank may trade billions of dollars daily. Some of this trading is undertaken on behalf of customers, but much is conducted by proprietary desks, trading for the bank's own account.
Until recently, foreign exchange brokers did large amounts of business, facilitating interbank trading and matching anonymous counterparts for small fees. Today, however, much of this business has moved on to more efficient electronic systems. The broker squawk box lets traders listen in on ongoing interbank trading and is heard in most trading rooms, but turnover is noticeably smaller than just a few years ago.
Commercial companies
An important part of this market comes from the financial activities of companies seeking foreign exchange to pay for goods or services. Commercial companies often trade fairly small amounts compared to those of banks or speculators, and their trades often have little short term impact on market rates. Nevertheless, trade flows are an important factor in the long-term direction of a currency's exchange rate. Some multinational companies can have an unpredictable impact when very large positions are covered due to exposures that are not widely known by other market participants.
Central banks
National central banks play an important role in the foreign exchange markets. They try to control the money supply, inflation, and/or interest rates and often have official or unofficial target rates for their currencies. They can use their often substantial foreign exchange reserves to stabilize the market. Milton Friedman argued that the best stabilization strategy would be for central banks to buy when the exchange rate is too low, and to sell when the rate is too high — that is, to trade for a profit based on their more precise information. Nevertheless, the effectiveness of central bank "stabilizing speculation" is doubtful because central banks do not go bankrupt if they make large losses, like other traders would, and there is no convincing evidence that they do make a profit trading.
The mere expectation or rumor of central bank intervention might be enough to stabilize a currency, but aggressive intervention might be used several times each year in countries with a dirty float currency regime. Central banks do not always achieve their objectives. The combined resources of the market can easily overwhelm any central bank.[3] Several scenarios of this nature were seen in the 1992–93 ERM collapse, and in more recent times in Southeast Asia.
Hedge funds
Hedge funds have gained a reputation for aggressive currency speculation since 1996. They control billions of dollars of equity and may borrow billions more, and thus may overwhelm intervention by central banks to support almost any currency, if the economic fundamentals are in the hedge funds' favor.
Investment management firms
Investment management firms (who typically manage large accounts on behalf of customers such as pension funds and endowments) use the foreign exchange market to facilitate transactions in foreign securities. For example, an investment manager with an international equity portfolio will need to buy and sell foreign currencies in the spot market in order to pay for purchases of foreign equities. Since the forex transactions are secondary to the actual investment decision, they are not seen as speculative or aimed at profit-maximization.
Some investment management firms also have more speculative specialist currency overlay operations, which manage clients' currency exposures with the aim of generating profits as well as limiting risk. Whilst the number of this type of specialist firms is quite small, many have a large value of assets under management (AUM), and hence can generate large trades.
Retail forex brokers
There are two types of retail broker: brokers offering speculative trading. Retail forex brokers or market maker handle a minute fraction of the total volume of the foreign exchange market. According to CNN, one retail broker estimates retail volume at $25–50 billion daily, which is about 2% of the whole market. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks, and might be subject to forex scam
Other
Non-bank foreign exchange companies offer currency exchange and international payments to private individuals and companies. These are also known as Foreign Exchange Brokers but are distinct from Forex Brokers as they do not offer speculative trading but currency exchange with payments. i.e. there is usually a physical delivery of currency to a bank account.
It is estimated that in the UK, 14% of currency transfers/payments are made via Foreign Exchange Companies. These companies' selling point is usually that they will offer better exchange rates or cheaper payments than the customer's bank. These companies differ from Money Transfer/Remittance Companies in that they generally offer higher-value services.
Money Transfer/Remittance Companies perform high-volume low-value transfers generally by economic migrants back to their home country. In 2007, the Aite Group estimated that there were $7.69 billion of remittances (an increase of 8% on the previous year). The four largest markets (India, China, Mexico and the Philippines) receive $95 billion. The largest and best known provider is Western Union with 345,000 agents globally.
It is a 24-hour trading, 5 days a week with non-stop access to global Forex dealers. An enormous liquid market making it easy to trade most currencies. Volatile markets offering profit opportunities. Standard instruments for controlling risk exposure. The ability to profit in rising or falling markets. Leveraged trading with low margin requirements. Many options for zero commission trading.
Market size and liquidity
The foreign exchange market is unique because of
its trading volumes,
the extreme liquidity of the market,
the large number of, and variety of, traders in the market,
its geographical dispersion,
its long trading hours: 24 hours a day except on weekends (from 5pm EST on Sunday until 4pm EST Friday),
the variety of factors that affect exchange rates.
the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
the use of leverage
Foreign exchange market turnover, 1988 - 2007, measured in billions of USD.
As such, it has been referred to as the market closest to the ideal perfect competition, notwithstanding market manipulation by central banks. According to the BIS, average daily turnover in traditional foreign exchange markets is estimated at $7.28 trillion. down as follows:
Market participants
Unlike a stock market, where all participants have access to the same prices, the forex market is divided into levels of access. At the top is the inter-bank market, which is made up of the largest investment banking firms. Within the inter-bank market, spreads, which are the difference between the bid and ask prices, are razor sharp and usually unavailable, and not known to players outside the inner circle. As you descend the levels of access, the difference between the bid and ask prices widens (from 0-1 pip to 1-2 pips for some currencies such as the EUR). This is due to volume.
Banks
The interbank market caters for both the majority of commercial turnover and large amounts of speculative trading every day. A large bank may trade billions of dollars daily. Some of this trading is undertaken on behalf of customers, but much is conducted by proprietary desks, trading for the bank's own account.
Until recently, foreign exchange brokers did large amounts of business, facilitating interbank trading and matching anonymous counterparts for small fees. Today, however, much of this business has moved on to more efficient electronic systems. The broker squawk box lets traders listen in on ongoing interbank trading and is heard in most trading rooms, but turnover is noticeably smaller than just a few years ago.
Commercial companies
An important part of this market comes from the financial activities of companies seeking foreign exchange to pay for goods or services. Commercial companies often trade fairly small amounts compared to those of banks or speculators, and their trades often have little short term impact on market rates. Nevertheless, trade flows are an important factor in the long-term direction of a currency's exchange rate. Some multinational companies can have an unpredictable impact when very large positions are covered due to exposures that are not widely known by other market participants.
Central banks
National central banks play an important role in the foreign exchange markets. They try to control the money supply, inflation, and/or interest rates and often have official or unofficial target rates for their currencies. They can use their often substantial foreign exchange reserves to stabilize the market. Milton Friedman argued that the best stabilization strategy would be for central banks to buy when the exchange rate is too low, and to sell when the rate is too high — that is, to trade for a profit based on their more precise information. Nevertheless, the effectiveness of central bank "stabilizing speculation" is doubtful because central banks do not go bankrupt if they make large losses, like other traders would, and there is no convincing evidence that they do make a profit trading.
The mere expectation or rumor of central bank intervention might be enough to stabilize a currency, but aggressive intervention might be used several times each year in countries with a dirty float currency regime. Central banks do not always achieve their objectives. The combined resources of the market can easily overwhelm any central bank.[3] Several scenarios of this nature were seen in the 1992–93 ERM collapse, and in more recent times in Southeast Asia.
Hedge funds
Hedge funds have gained a reputation for aggressive currency speculation since 1996. They control billions of dollars of equity and may borrow billions more, and thus may overwhelm intervention by central banks to support almost any currency, if the economic fundamentals are in the hedge funds' favor.
Investment management firms
Investment management firms (who typically manage large accounts on behalf of customers such as pension funds and endowments) use the foreign exchange market to facilitate transactions in foreign securities. For example, an investment manager with an international equity portfolio will need to buy and sell foreign currencies in the spot market in order to pay for purchases of foreign equities. Since the forex transactions are secondary to the actual investment decision, they are not seen as speculative or aimed at profit-maximization.
Some investment management firms also have more speculative specialist currency overlay operations, which manage clients' currency exposures with the aim of generating profits as well as limiting risk. Whilst the number of this type of specialist firms is quite small, many have a large value of assets under management (AUM), and hence can generate large trades.
Retail forex brokers
There are two types of retail broker: brokers offering speculative trading. Retail forex brokers or market maker handle a minute fraction of the total volume of the foreign exchange market. According to CNN, one retail broker estimates retail volume at $25–50 billion daily, which is about 2% of the whole market. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks, and might be subject to forex scam
Other
Non-bank foreign exchange companies offer currency exchange and international payments to private individuals and companies. These are also known as Foreign Exchange Brokers but are distinct from Forex Brokers as they do not offer speculative trading but currency exchange with payments. i.e. there is usually a physical delivery of currency to a bank account.
It is estimated that in the UK, 14% of currency transfers/payments are made via Foreign Exchange Companies. These companies' selling point is usually that they will offer better exchange rates or cheaper payments than the customer's bank. These companies differ from Money Transfer/Remittance Companies in that they generally offer higher-value services.
Money Transfer/Remittance Companies perform high-volume low-value transfers generally by economic migrants back to their home country. In 2007, the Aite Group estimated that there were $7.69 billion of remittances (an increase of 8% on the previous year). The four largest markets (India, China, Mexico and the Philippines) receive $95 billion. The largest and best known provider is Western Union with 345,000 agents globally.
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