Forex Trading

How Do Forex quotes work?





Reading a FOREX quote may seem a bit confusing at first. However, it's really quite simple if you remember two things: 1) The first currency listed first is the base currency and 2) the value of the base currency is always 1.


The US dollar is the centerpiece of the FOREX market and is normally considered the 'base' currency for quotes. In the "Majors", this includes USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. For example, a quote of USD/JPY 110.01 means that one U.S. dollar is equal to 110.01 Japanese yen.


When the U.S. dollar is the base unit and a currency quote goes up, it means the dollar has appreciated in value and the other currency has weakened. If the USD/JPY quote we previously mentioned increases to 113.01, the dollar is stronger because it will now buy more yen than before.


The three exceptions to this rule are the British pound (GBP), the Australian dollar (AUD) and the Euro (EUR). In these cases, you might see a quote such as GBP/USD 1.7366, meaning that one British pound equals 1.7366 U.S. dollars.


In these three currency pairs, where the U.S. dollar is not the base rate, a rising quote means a weakening dollar, as it now takes more U.S. dollars to equal one pound, euro or Australian dollar.


In other words, if a currency quote goes higher, that increases the value of the base currency. A lower quote means the base currency is weakening.


Currency pairs that do not involve the U.S. dollar are called cross currencies, but the premise is the same. For example, a quote of EUR/JPY 127.95 signifies that one Euro is equal to 127.95 Japanese yen.


When trading FOREX you will often see a two-sided quote, consisting of a 'bid' and 'offer'. The 'bid' is the price at which you can sell the base currency (at the same time buying the counter currency). The 'ask' is the price at which you can buy the base currency (at the same time selling the counter currency).




What is Forex?





The Foreign Exchange market, also referred to as the "FOREX" is the biggest and largest financial market in the world. It has a daily average turnover of US$1.9 trillion- just imagine that amount of money! Don't you want to join this trillion-dollar industry?


FOREX is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY). So basically, FOREX is trading.


There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency.


The other 95% is trading for profit, or what you call speculation. Investors frequently trade on information they believe to be superior and relevant, when in fact it is not and is fully discounted by the market.


On one side of each speculative stock trade is a participant who believes he has superior information and on the other side is another participant who believes his information is superior.


For speculators, the best trading opportunities are with the most commonly traded (and therefore most liquid- meaning its in cash or convertible to cash) currencies, called "the Majors." Today, more than 85% of all daily transactions involve trading of the Majors.


A true 24-hour market, FOREX trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - real time- day or night.


The FOREX market is considered an Over The Counter (OTC) or 'interbank' market. This is because the transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange compared to stocks and futures markets.
Boosting trading returns

Online currency trading is the fastest growing market. The FOREX Market never sleeps. A currency trader may take advantage of all profitable market conditions at any time. There is no waiting for an opening bell as in the case of trading stocks. It is a 24-hour, continuous currency exchange that never closes (normal hours of operation are Sunday 1pm through Friday 2pm Pacific standard time). This is very desirable for those who want to trade on a part-time basis, because you can choose when you want to trade: morning, noon or night. e world. Traditionally the foreign exchange market was only available to larger entities trading currencies for commercial and investment purposes through banks. Now online currency trading platforms allow smaller financial institutions and retail investors access a similar level of liquidity as the major foreign exchange banks, by offering a gateway to the primary (Interbank) market.
Forex in depth

An in-depth how-to look at Forex trading using the methods, analysis, and insights of a renowned trader, Raghee Horner As the fate of the dollar against foreign currency generates both anxiety and opportunities, currency trading has been drawing much interest and a growing following among traders in the United States. The Forex market is particularly attractive for investors because it trades with no gaps and has unlimited guaranteed stop-losses. The liquidity of the Forex market and worldwide participation makes for more reliable and longer lasting trends as well. Raghee Horner has become legendary not only as a top Forex trader but as a master teacher of trading systems and techniques. Drawing on her winning tools and methods, including classic charting techniques, this book enables a trader or investor of any skill level to understand how the Forex operates and lays out a blueprint for getting starting in this little-understood but high-potential trading vehicle. Raghee Horner (Pompano Beach, FL) is an accomplished trader with more than fifteen years in the markets. She is the cofounder and lead trader of the EZ2 Trade Institute and an educator teaching her style of technical analysis and charting strategies to students all over the world. Raghee has written more than 100 articles on investing, has been a regular on the MoneyWatch Radio Network, is featured at eSignal's "Trading with the Masters," and is a regular contributor to Trader's magazine. Her chart analysis and commentary have appeared on TradingMarkets, JAGNotes, StockCharts.com, and FXStreet. She is also a sought-after speaker who has conducted seminars throughout the U.S., Canada, Caribbean, and Asia. Customer Review: I was looking for a trading approach and found it hereI googled forex and found plenty of generic information on the market, history, major players, chart patterns but nothing specific. I needed to know when to trade because I was told that even though this market trades 24 hours there are better times to trade. Also needed a trading approach. I am not new to trading. I have traded stock successfully for years. I tried applying what I had been doing in stocks and it didn't quite translate the way I had hoped it would. A friend recommend this book to me and I bought it second hand for a good price. The tools the author uses are not diffcult to learn and the Wave that she uses are now on all my charts. Traders that are looking for a fundamentalist's approach to trading economic data nad news will be disspointed. I like the way the author used Fibonacci Levels and psychological numbers to manage the trade. This book made forex approachable and gives me a place to start. If you need generic info on the market, google "forex" and you will have plenty of information. When you are ready to trade, give this book a read.Customer Review: Simple vs. simplisticDifferent traders have different styles. Some want a zillion confirming indicators before placing a trade, some prefer playing with indicators to trading, and some indulge in the fantasy of finding the "holy grail" system. Personally, I've never found anything that beats good ole support and resistance, trendlines, and entering the "zone" by watching candlesticks form and candlestick formations. I pay my bills with Forex, and I trade against the indicators only slightly less often than I trade with them. I often forget to look at them at all because I'm focused on what is happening with the ... PRICE!The problem with indicators is they tell you what has happened but they make you believe they can tell you what WILL happen. There is a world of difference between looking at a historical chart and watching one develop in real time. If you don't believe me, just place a default slow stochastic on a chart and watch the crosses develop. You'll lose a heap of money in no time at all. Then knock yourself out tweaking it according to any number of holy grail systems. You'll lose another heap of money.Raghee's system is no different. It looks great on historical charts, but often fails to predict the future in real time.Actually, it is fairly easy to predict where prices will go in general - assuming no strong support or resistance and no big news, they will usually continue merrily on in the direction they are going. Consequently, it's easy to get into a trade.
forex history

The origin of Forex trading traces its history to centuries ago. Different currencies and the need to exchange them had existed since the Babylonians. They are credited with the first use of paper notes and receipts. Speculation hardly ever happened, and certainly the enormous speculative activity in the market today would have been frowned upon. In those days, the value of goods were expressed in terms of other goods(also called as the Barter System). The obvious limitations of such a system encouraged establishing more generally accepted mediums of exchange. It was important that a common base of value could be established. In some economies, items such as teeth, feathers even stones served this purpose, but soon various metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value. Trade was carried among people of Africa, Asia etc through this system. Coins were initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the Middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of today's modern currencies. Before the First World war, most Central banks supported their currencies with convertibility to gold. However, the gold exchange standard had its weaknesses of boom-bust patterns. As an economy strengthened, it would import a great deal from out of the country until it ran down its gold reserves required to support its money; as a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession. Ultimately, prices of commodities had hit bottom, appearing attractive to other nations, who would sprint into buying fury that injected the economy with gold until it increased its money supply, drive down interest rates and restore wealth into the economy.. However, for this type of gold exchange, there was not necessarily a Centrals bank need for full coverage of the government's currency reserves. This did not occur very often, however when a group mindset fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called "Run on banks " The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability. The Great Depression and the removal of the gold standard in 1931 created a serious lull in Forex market activity. From 1931 until 1973, the Forex market went through a series of changes. These changes greatly affected the global economies at the time and speculation in the Forex markets during these times was little. In order to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility. Near the end of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US Dollar. International institutions such as the IMF, The World Bank and GATT were created in the same period as the emerging victors of WWII searched for a way to avoid the destabilizing monetary crises leading to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that reinstated The Gold Standard partly, fixing the USD at $35.00 per ounce of Gold and fixing the other main currencies to the dollar, initially intended to be on a permanent basis. The Bretton Woods system came under increasing pressure as national economies moved in different directions during the 1960's. A number of realignments held the system alive for a long time but eventually Bretton Woods collapsed in the early 1970's following president Nixon's suspension of the gold convertibility in August 1971. The dollar was not any longer suited as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits. The last few decades have seen foreign exchange trading develop into the world's largest global market. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values. The European Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. The quest continued in Europe for currency stability with the 1991 signing of The Maastricht treaty. This was to not only fix exchange rates but also actually replace many of them with the Euro in 2002. London was, and remains the principal offshore market. In the 1980s, it became the key center in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance. In Asia, the lack of sustainability of fixed foreign exchange rates has gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates in particular in South America also looking very vulnerable. While commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The Forex exchange market initially worked under the central banks and the governmental institutions but later on it accommodated the various institutions, at present it also includes the dot com booms and the world wide web. The size of the Forex market now dwarfs any other investment market. The foreign exchange market is the largest financial market in the world. Approximately 1.9 trillion dollars are traded daily in the foreign exchange market. It is estimated that more than USD 1,200 Billion are traded every day. It can be said easily that Forex market is a lucrative opportunity for the modern day savvy investor.

forex

Trading the Online Forex market has many advantages over other fiscal markets, among the most significant are: better liquidity, 24hrs online market, superior execution, and many others. Traders and investor see the Forex market as a fresh speculation or expanding chances because of above mentioned benefits. Does this mean that it is quite simple to earn money trading the Forex Market? Not at all…!The précising the forex market incoming/quitting time all based on technological an analysis that is specific for very short-term life of such forex analyses. It is resolute by days, hours, and some times even by minutes, but not by weeks or months. In all the above cases, the same technological tools are used. Having successful forex trading system carries the following tactics.Tactics for Price BreaksThere are three different trader’s actions at price breaks:To take a place in advance, predicting the break;To open a place when the break is actually in progress;To wait for the predictable rollback after breakWhen you work with several lots, you as a trader could open one position at every of the three stages. One could open a small place before the predicted break, and then purchase some more straight away after the break, and then lastly open extra place at an unimportant price fall during correction, which follows the break. If one trades with small place, two questions would have force on one's decisions first of all.Gaps - Price gaps that are created on bar charts could also be used to select a proper flash to open or close forex trading positions. For example, gaps created during price development frequently become support levels. That is why, at a forex up-trend, it is sensible to open extended positions when prices actually fall to the upper border of the gap or even sometimes a bit below it. A stop order could even be placed below the gap. At a down-trend, an open place needs to be opened when prices arrive at the lower border of the gap or even at bit above it. The defensive stop order is placed above the gap, in this above case.Averaging - Averaging is a forex trading strategy used when one has made an error or simply made a trade (the first thing that comes to one's mind) and the price has moved beside, and one makes a fresh forex operation of the same kind but at a more money-making price. The most significant drawback of averaging is that one cannot know to what price the market would go beside the trader.The averaging looks for investing a double amount of money when compared to that invested before. Trading productively is no simple task; it is a procedure and could take years to attain the preferred results. There are a few things though every forex trader needs to take in thought that could go faster the process: having a trading system, using money management, education, being conscious of psychological things, discipline to follow your forex trading system and your forex trading plan, and others.
What is Forex???FOREX or The Foreign exchange rate market is an international market where various currency exchange transactions take place; this is in the shape of simultaneously buying one currency and selling another. The most commonly traded currencies are referred to as “Majors”; over 85% of daily transactions on Forex trading involve the Majors. These seven currencies are the US Currency (Dollar, USD), Japanese Yen (JPY), Euro (EUR), British Pound (GBP), Swiss Franc (CHF), Canadian Dollar (CAD) and Australian Dollar (AUD). The Forex system in operation today was established in the 1970s when free currency exchange rates were introduced, this period also saw the US Dollar overtake the British Pound as the benchmark currency. Prior to this and in particular during World War II, exchange rate remained more stable.Forex trading in simplest terms is the buying of one currency and the selling of another. Forex trading, also referred to, as “FX” is open to corporations, small businesses, commercial banks, investment funds and private individuals, it is the largest financial market in the world averaging a daily turnover of over $1 trillion dollars, making it a diverse and exciting market. It is a 24-hour market enabling it to accommodate constant changing world currency exchange rates . According to New York time, trading begins at 2.15pm on Sunday in Sydney and Singapore and progresses through to Tokyo at 7pm
Benefits of ForexThe (FOREX) currency market is the most liquid market in the world having various participants: banks and the investment organizations, corporations and the private speculators using the market not only for realization of speculative operations, but also for insurance upon fluctuation of exchange rates at export-import transactions.
High Profitableness It occurs by means of the mechanism of Margin Trade which consists that there is no necessity to have all sum of the contract to make a transaction; it is enough to bring only in a pledge which makes the certain percent from the sum of the contract. That means, you are financed with the missing sum of money for the transaction execution on currency purchase or sale. For example, it is necessary to bring only in 1000 dollars of a pledge for realization of the deal on 100 000 dollars at a pledge in 1 %. So the trader may operate with the market sums of hundred thousand dollars, having small means in stock. For instance, you are a client of Northfinance Ltd and you have a 1000 USD on your account that allows you to strike a bargain on market Lot in 100 000 USD. Assume, that having analyzed change of rate USDJPY by the means of a convergence method - divergence of sliding average MACD (the fast line has crossed slow from top to down), You have made the decision to sell 100 000 USD against the Japanese yen at the price of 124.80. In a few hours when the rate of USDJPY has fallen down to 100 points and became 123.80, You have decided to close a position and have bought dollars much cheaper, than have sold those, so You have received profit.Profit = [(Open Price - Close Price)*Volume of Lot ]/Close Price Profit = [(124.80-123.80)*100000]/123.80=807.75 USDFlexible schedule of work at the marketForex Market works round the clock from Monday till Friday. You can choose any time convenient for you to work.
Participants of Forex- commercial banks- currency stock exchanges- the firms which are carrying out the foreign trade operations- investment funds- the broker companies, private personsParticipants of this market are: large commercial banks, which the basic operations under the instruction of exporters and importers are carried out through, investment institutes, insurance and pension funds and private investors. Also these banks carry out operations and in the interests due to own means, thus volumes of daily operations at large banks reach for billions of dollars. Some banks make the basic part of the profit formed only due to speculative currency operations.Except for banks, the broker houses are the active participants of the market, which are carrying out a role of the intermediary between a plenty of banks, funds, commission houses, the dealing centers, etc. act.Commercial banks and broker houses not only make operations on sale and purchase of currency under the prices which are established by the other active participants, but also offer own prices. Thus, they actively influence a process of pricing and a life of all market, therefore they are named market - makers. As against active participants, passive participants of the market cannot offer own quotations and make purchase-sale of currency under the prices which are offered by active participants of the market.Passive participants of the market pursue usually following targets: payment of export-import contracts, foreign industrial investments, opening of branches abroad or creation of joint ventures, tourism, gamble on a difference of rates, hedging of currency risks, etc.The Central banks of the different countries come on FOREX, not with the purpose of extraction of the profit, as a rule. They usually do it with the purpose of stability check up, or correction of an existing rate of national currency, The correction of an existing rate of national currency influences on a condition of national economy.The central banks also come out on the currency market through commercial banks. The profit is not the basic purpose of these banks, unprofitable operations do not involve them aswell. Therefore interventions of the central banks are masked usually and carried out through several commercial banks at once.The central banks of different countries can carry out also the joint coordinated interventions. If active participants make operations with the big sums of a few millions dollars passive participants can use margin trade, They have an opportunity to temporarily operate the capital, in one hundred times exceeding this deposit. Such way of trade allows to take a part in work of the currency market to fine investors with the small capital and thus to receive significant profit.The structure of the basic participants of the market testifies that this market is actively used by "serious business" and for the serious purposes. That means not all the participants of the market use FOREX in speculative purposes. As we already said, the change of the exchange rates can lead to huge losses at the export-import transactions. Attempts to be protected from currency risks force exporters and importers to apply for hedging various instruments of the currency market: forward transactions, options, futures, etc.Moreover, the business not even associated to export-import transactions, can have loss at change of Currency rates. That's why studying FOREX is an obligatory component of any successful business.
tips for forex

The best forex trading advice starts with treating it like a business, keeping in mind that you are going against highly trained professionals who trade in the forex market for a living.In that regard, you must follow a tested and proven forex trading system. Now, you may start out with a forex day trading method that generates profitable trades right away, or you may not.Quite frankly, it doesn't matter much to your long term success, as losing trades are a normal and expected cost of doing business. With that stated, your objective should simply be to have far more winning trades than losing trades consistently.The forex trading advice you ultimately decide to implement to execute trades should put the odds of a winning trade in your favor using a trading system designed to capture 20-50 pips per trade during the first 1-3 hours following specific key economic announcements.Forex markets provide multiple opportunities to trade and profit within a 24 hour period. This can be a two edged sword at times because it can mean very late night or early morning trades.Let's face it no one really wants to monitor trade positions 24 hours a day, five days per week. The stress and fatigue factor is far too great to effectively trade at a profitable level over time

Trade rights

The Forex Trader’s Bill of Rights (2005) is a non-fiction book about the foreign currency trading market, published by OANDA_Corporation. It is primarily a call to arms for currency traders to call for greater transparency and accountability within the market. The overleaf provided with the printed version of the book states: “Big banks and confederated brokerages have overcomplicated forex: trading costs are inflated, unnecessary risk abounds, and the system is grossly unfair.” Essentially, the book elaborates on this premise, detailing ways in which traders are being unfairly treated and encouraging them to take action.
OANDA is a company that provides currency trading tools for investors, travelers, and businesses. As such, there is an unavoidable marketing aspect to this publication. However, OANDA is not mentioned throughout the book. There has been a clear effort to maintain a relatively neutral point of view. The back cover does state “OANDA is a leading provider of online currency trading…FXTrade…enables all currency investors to change the way forex trading is done”.
The authors believe currency investors have 10 basic rights which are being violated: each short chapter deals with one of these rights. They are:1. The right to immediate, uncensored access to the marketplace2. The right to trade real spot3. The right to know4. The right to trade whenever you want5. The right to equal treatment6. The right to choose and manage risk7. The right to understand cost8. The right to learn – on your own, or through free exchange with other traders9. The right to full disclosure10. The right to pay and receive interest
1) The right to immediate, uncensored access to the marketplace Chapter one argues that when trading traditionally (with banks etc.,) execution and price are affected by who you are (size of your order/ relationship with your market maker etc.), the amount of greed on the part of the market maker, and manual intervention which can delay the trade. The chapter calls for transparency, fairness, and efficiency for traders from market makers.
2) The right to trade real spotChapter two addresses unnecessary delays in settlement of trades, which according to the authors increase risk for investors.
3) The right to knowThe third chapter states that market makers share information based on who you are: in some cases they share information that should not be shared; in other cases they do not share information that should be publicly available. This leads to an unfair advantage.
4) The right to trade whenever you wantThe chapter asserts that market makers may advertise 24 hour trading but they close the books on Friday. However, world events which affect currency price occur on weekends. The argument continues that since the technology for 24/7 trading is available, it should be offered by all market makers.
5) The right to equal treatmentChapter five argues that every trader should be given the same price and spread, and that market makers should not discriminate between traders.
6) The right to choose and manage riskTraders are encouraged to use a market maker who does not require high minimums, lets them trade any amount, and provides immediate settlement as a way of minimizing risk.
7) The right to understand costIt is reasoned that traders have the right to understand spreads, as well as who gets a “cut” and why. This chapter also includes a profitability calculator.
8) The right to learn – on your own, or through free exchange with other tradersThis chapter covers multiple ways to learn about trading, and test new strategies, including trading games offered by online market makers and other sources of Internet information.
9) The right to full disclosureThe book claims that a lack of transparency in pricing, execution, and after the trade needs to addressed. Market makers should publish statistics regarding real spreads and prices and traders should demand that they do this.10) The right to pay and receive interestIt is argued that continuous interest should be introduced, which would make for price flows that are less volatile.