“A Future trading is a financial exchange where people can trade future contracts”. Simply, it is buying or selling a specified quantity and quality of a financial instrument at a specified time in the future at a price determined at the time of purchase and sale. Many people take it as a complicated, high stakes, risky business. This misconception is due to the lack of the proper financial knowledge and a clear understanding of its purpose. Because of high gain and financial security in future market, many professional traders don’t trade the stock market any longer.
The best way to start the trade is to get educated. Many seminars are offered by reputable broking houses to learn future trading from experienced traders. A specialized mentor can save a lot of time and money. Most traders are now relying on technical analysis to predict price fluctuation, to predict entry or exit price levels and timing. There is no magic formula exists to analyze the market. Fundamental analysis is one way to evaluate whether a market is likely to go higher or lower.
Future contracts can be purchased on margin, meaning that an investor can buy a contract with a partial loan from his or her broker. Maintenance Margin is the amount of money that a trader must maintain in his account in order to keep a future position running. If cash balance falls below this level, he/she would receive “Margin Call”, a notification from broker to top up his/her margin balance with cash back up to its initial margin level. It is done so that trader’s entire equity can’t be wiped out. Future trading is a zero-sum game; means if somebody makes a million dollars, somebody else loses a million dollars. Future traders have an incredible amount of leverage on them. Despite of all these problems, future trading is one of the best ways to make some quick profit.
Showing posts with label articles of forex. Show all posts
Showing posts with label articles of forex. Show all posts
Friday, 16 December 2011
Tuesday, 6 December 2011
Monday, 28 November 2011
Forex Trading
he forex market is quickly becoming one of the most popular markets for trading.
Not only are the experienced traders looking to this market to maximize their trading returns, but many new, individual investors are now able to trade the Forex market — just as they do stocks and futures.
More and more individuals are seeing Forex not only as a new way to diversify their portfolio, but are also finding that it is becoming the most profitable component of their investments.
And that's because of the many advantages Forex offers over other markets like stocks or commodities. Here's what you will typically see advertized about Forex:
— Unparallelled liquidity. It is the largest financial market in the world by far. Almost $2 trillion being traded daily!
— Excellent leverage potential. Individual investors have access to leverage of 100:1 and even 200:1
— No Commissions (more on this later on)
— Low trading costs.
And yes, the Forex market really does offer all these advantages.
But the last two points above talk about costs, and that's what we'd like to focus on in this article.
Like any trading, there are costs involved, and, while these may be much lower than they used to be, it is important to understand what those are.
Let's start by looking at stock trading, something that most of us investors are pretty familiar with.
When trading stocks, most investors will have a trading account with a broker somewhere and will have investment funds deposited in that account.
The broker will then execute the trades on behalf of the account holder, and of course, in return for providing that service, the broker will want to be compensated.
With stocks, typically, the broker will earn a commission for executing the trade. They will charge either a fixed dollar amount per trade, or a dollar amount per share, or (most commonly) a scaled commission based on how big your trade is.
And, they will charge it on both sides of the transaction. That is to say, when you buy the stock you get charged commission, AND then when you sell that same stock you get charged another commission.
With Forex trading, the brokers constantly advertise "no commission". And, of course that's true — except for a few brokers, who do charge a commission similar to stocks.
But also, of course, the brokers aren't performing their trading services for free. They too make money.
The way they do that is by charging the investor a "spread". Simply put, the spread is the difference between the bid price and the ask price for the currency being traded.
The broker will add this spread onto the price of the trade and keep it as their fee for trading.
So, while it isn't a commission per se, it behaves in practically the same way. It is just a little more hidden.
The good news though is that typically this spread is only charged on one side of the transaction. In other words, you don't pay the spread when you buy AND then again when you sell. It is usually only charged on the "buy" side of the trades.
So the spread really is your primary cost of trading the Forex and you should pay attention to the details of what the different brokers offer.
The spreads offered can vary pretty dramatically from broker to broker. And while it may not seem like much of a difference to be trading with a 5 pip spread vs a 4 pip spread, it actually can add up very quickly when you multiply it out by how many trades you make and how much money you're trading. Think about it, 4 pips vs 5 pips is a difference of 25% on your trading costs.
The other thing to recognize is that spreads can vary based on what currencies you're trading and what type of account you open.
Most brokers will give you different spreads for different currencies. The most popular currency pairs like the EURUSD or GBPUSD will typically have the lowest spreads, while currencies that have less demand will likely be traded with higher spreads.
Be sure to think about what currencies you are most likely to be trading and find out what your spreads will be for those currencies.
Also, some brokers will offer different spreads for different types of accounts. A mini account, for example may be subject to higher spreads than a full contract account.
And finally, because the spreads really are the difference between bid prices and ask prices as determined by the free market, it is important to recognize that they are not "guaranteed". Most brokers will tell you that there may be times during periods of low demand, or very active trading when the spreads widen and you will be charged that wider spread.
These do tend to be rarer situations because the Forex market really is so large and demand and supply are generally quite predictable, but they do occur, especially with some of the lesser traded currencies. So it's important to be aware of that.
In summary then, when trading Forex, understand that the "spread" is truly your most important consideration for trading costs.
Spreads can vary significantly between brokers, account types and currencies traded. And small differences in the spread can really add up to thousands of dollars in trading costs over even just a few months.
So be sure to understand what currencies you are going to be trading, how frequently, and in what type of account and use those factors to help decide which broker can offer you the best trading costs.
Not only are the experienced traders looking to this market to maximize their trading returns, but many new, individual investors are now able to trade the Forex market — just as they do stocks and futures.
More and more individuals are seeing Forex not only as a new way to diversify their portfolio, but are also finding that it is becoming the most profitable component of their investments.
And that's because of the many advantages Forex offers over other markets like stocks or commodities. Here's what you will typically see advertized about Forex:
— Unparallelled liquidity. It is the largest financial market in the world by far. Almost $2 trillion being traded daily!
— Excellent leverage potential. Individual investors have access to leverage of 100:1 and even 200:1
— No Commissions (more on this later on)
— Low trading costs.
And yes, the Forex market really does offer all these advantages.
But the last two points above talk about costs, and that's what we'd like to focus on in this article.
Like any trading, there are costs involved, and, while these may be much lower than they used to be, it is important to understand what those are.
Let's start by looking at stock trading, something that most of us investors are pretty familiar with.
When trading stocks, most investors will have a trading account with a broker somewhere and will have investment funds deposited in that account.
The broker will then execute the trades on behalf of the account holder, and of course, in return for providing that service, the broker will want to be compensated.
With stocks, typically, the broker will earn a commission for executing the trade. They will charge either a fixed dollar amount per trade, or a dollar amount per share, or (most commonly) a scaled commission based on how big your trade is.
And, they will charge it on both sides of the transaction. That is to say, when you buy the stock you get charged commission, AND then when you sell that same stock you get charged another commission.
With Forex trading, the brokers constantly advertise "no commission". And, of course that's true — except for a few brokers, who do charge a commission similar to stocks.
But also, of course, the brokers aren't performing their trading services for free. They too make money.
The way they do that is by charging the investor a "spread". Simply put, the spread is the difference between the bid price and the ask price for the currency being traded.
The broker will add this spread onto the price of the trade and keep it as their fee for trading.
So, while it isn't a commission per se, it behaves in practically the same way. It is just a little more hidden.
The good news though is that typically this spread is only charged on one side of the transaction. In other words, you don't pay the spread when you buy AND then again when you sell. It is usually only charged on the "buy" side of the trades.
So the spread really is your primary cost of trading the Forex and you should pay attention to the details of what the different brokers offer.
The spreads offered can vary pretty dramatically from broker to broker. And while it may not seem like much of a difference to be trading with a 5 pip spread vs a 4 pip spread, it actually can add up very quickly when you multiply it out by how many trades you make and how much money you're trading. Think about it, 4 pips vs 5 pips is a difference of 25% on your trading costs.
The other thing to recognize is that spreads can vary based on what currencies you're trading and what type of account you open.
Most brokers will give you different spreads for different currencies. The most popular currency pairs like the EURUSD or GBPUSD will typically have the lowest spreads, while currencies that have less demand will likely be traded with higher spreads.
Be sure to think about what currencies you are most likely to be trading and find out what your spreads will be for those currencies.
Also, some brokers will offer different spreads for different types of accounts. A mini account, for example may be subject to higher spreads than a full contract account.
And finally, because the spreads really are the difference between bid prices and ask prices as determined by the free market, it is important to recognize that they are not "guaranteed". Most brokers will tell you that there may be times during periods of low demand, or very active trading when the spreads widen and you will be charged that wider spread.
These do tend to be rarer situations because the Forex market really is so large and demand and supply are generally quite predictable, but they do occur, especially with some of the lesser traded currencies. So it's important to be aware of that.
In summary then, when trading Forex, understand that the "spread" is truly your most important consideration for trading costs.
Spreads can vary significantly between brokers, account types and currencies traded. And small differences in the spread can really add up to thousands of dollars in trading costs over even just a few months.
So be sure to understand what currencies you are going to be trading, how frequently, and in what type of account and use those factors to help decide which broker can offer you the best trading costs.
Advance Your Financial Position
Everyday, currencies are traded in an international foreign exchange market, otherwise known as the forex market, with the main marketplaces (otherwise known as bourses) existing in the world's financial centes New York, London, Tokyo, Frankfurt and Zurich. Historically, the only way to participate was from the trading floor of one of these bourses, but today, people can trade forex from anywhere through a secure internet connection and a PC.
Today's traders operate in a global network, taking positions in the market and making investment decisions based on either relative value between two currencies, or a particular currency's actual price. Currency value fluctuations are constantly renegotiated through trading activity, and this activity, and the corresponding currency values are also indicators of the levels of currency supply.
An example of market behaviour greater demand for the Euro might indicate a weakening supply. Low supply and increased demand will drive the price of the Euro up against other currencies like the dollar, until the price better reflects what traders are prepared to pay when short supply exists. Another way to look at this situation is this higher demand means it will cost more dollars to buy the Euro, which equates to a weakening of the dollar in comparison. Analysis of situations such as in this example forms the basis for a trader's investment decisions, and they will purchase or sell currency accordingly.
This should be remembered, as while many see the foreign exchange market as the vehicle for converting their home currency while travelling abroad, many others choose to use the market to advance their financial position and secure their future.
by Jay Moncliff
Today's traders operate in a global network, taking positions in the market and making investment decisions based on either relative value between two currencies, or a particular currency's actual price. Currency value fluctuations are constantly renegotiated through trading activity, and this activity, and the corresponding currency values are also indicators of the levels of currency supply.
An example of market behaviour greater demand for the Euro might indicate a weakening supply. Low supply and increased demand will drive the price of the Euro up against other currencies like the dollar, until the price better reflects what traders are prepared to pay when short supply exists. Another way to look at this situation is this higher demand means it will cost more dollars to buy the Euro, which equates to a weakening of the dollar in comparison. Analysis of situations such as in this example forms the basis for a trader's investment decisions, and they will purchase or sell currency accordingly.
This should be remembered, as while many see the foreign exchange market as the vehicle for converting their home currency while travelling abroad, many others choose to use the market to advance their financial position and secure their future.
by Jay Moncliff
Thursday, 13 October 2011
Automated Forex System
How do Forex Automated Systems Work?
If you are going to trade Forex, sooner or later you will hear about automated Forex systems. They are also called “robots”, “expert advisors”, and “auto traders”. No matter what you call them, they all operate in a similar manner. While the exact technical set ups will vary from system to system, the operation of them will essentially be the same.You will download and install the system to your Forex trading platform, and set up should only be a couple of steps. The basic premise of these things is that they are essentially an “add on” to your trading platform. This allows for easy installation, and uninstalling is just as simple. Because of this, many traders will actually have several different systems that they use in a variety of market environments.
The systems will fall into two basic categories: automatic and semi-automatic. The automatic ones will place trades for you, without any input from you at all. The semi-automatic ones will simply give you a signal or suggestion as to which way to trade a particular currency pair.
The automatic one will simply buy or sell based upon a sometimes complex mathematical formula that tells the computer when it is time to enter or exit the trade. The automated system simply does all of the work for you. It is very common for these systems to have a hidden proprietary algorithm that you never see in order to make these decisions. The one thing they will all have in common is that they are all mathematically based. Hiding the algorithm is just a simple way of protecting their intellectual property.
The semi-automatic system offered by forex automated traders will simply let you know when it gets a signal to buy or sell. The system will still have that hidden algorithm that you won’t see, but instead of placing the trade you will often see some kind of pop up alert when it is time to trade. You can then choose as to whether or not you want to trade the signal, allowing greater flexibility for the trader.
The majority of these systems are made for the MetaTrader 4 platform as it is by far the most popular one out there. There are systems made for other platforms such as GFTSDealBook 360, NinjaTrader, TradeStation, and many others. However, you will find an almost unending supply of them for the MT4 platform as even the brokers that use other platforms will often offer MT4 as well.
The better Forex automated systems will come with a money back guarantee, normally through some kind of ClickBank vendor account. Because of this you should be able to feel somewhat comfortable with the software as your money can be refunded. However, it is recommended that you try a new system out on a demo account just to make sure it performs up to your standards. Like anything else, there will be some that are better than others and your mileage may vary so to speak.
Friday, 7 October 2011
HISTORY OF FOREX
A History of Trading the Forex Market
Forex currency trading has made massive advancements over recent years and is becoming on the Internets most searched for trading opportunities.Technological advancements have made Forex an opportunity to make money for everyone from small individual speculators to large multi-national companies.
In reality the principles of Forex trade have existed for centuries but it wasn't until 1967 when the idea of a global system of currency exchange first began to be put together.
A college professor named Milton Friedman famously wanted to take a bank loan in Pounds Sterling (feeling that the currency was overpriced against the dollar) and then sell it before buying it back once the price against the dollar had fallen.
This would allow him to repay the bank and pocket a nice profit for himself. His loan application was declined due to the bretton woods agreement that was in place at the time but this set the wheels in motion for worldwide Forex trading.
The Birth of the Foreign Currency Exchange
In 1971 when floating exchange rates began to materialize and the bretton woods agreement was abandoned, the foreign currency exchange market was born.This advancement was welcomed with open arms by the International companies who had often noticed big profit changes both positive and negative simply based on the value of their native currency against the value of the currencies in the markets in which they traded their day to business activities.
These companies would see fluctuating exchange rates effect their profit and loss accounts, often with millions being made or lost simply on the value of one currency against another.
It was also these companies that were first to spot the huge money making opportunity currency fluctuations offered and these same companies were the first to leap on to the Forex trading bandwagon and attempt to increase their profit margins through brave yet profitable currency exchange decisions.
Online Forex Trading Advances
Of course when Forex first began the Internet was a distant dream and therefore trading was carried out exclusively by the cash rich worldwide organizations.These were companies who could afford to throw a few million in to the mix in an attempt to make some big money trading currencies.
Trading was carried out over the telephone via several exchange centers all over the world. A trader would monitor global activity and then ring their broker in order to commence or complete a trade order.
The transfer of funds to complete trades was done through bank transfers which often took a few days to go through. This meant that whilst the Forex market offered a fantastic earning opportunity, trading was both time consuming and a hassle.
With the advent and then increasing popularity of the Internet, Forex trading online opened up the doors to millions of people who had never previously had the resources to take part.
Gone are the days of having to phone through your intended trade, Credit and Debit cards are even accepted with some online brokers for depositing funds. Even more recently the Forex market has opened up to individual traders even with very small amounts to invest.
Thursday, 6 October 2011
Forex trading and business
Credit Crisis in Europe: How the Stability of an Entire Region is Teetering on the Edge of a Major Collapse
By EWI's European Financial Forecast editor Brian Whitmer (excerpt)
Panic Now and Avoid the Rush -- July 30, 2010
The market's collective sigh of relief is also reflected in authorities' stress testing of 91 European banks. In case you missed last Friday's results, their message is clear: relax.
The Committee of European Banking Supervisors (CEBS) gave passing grades to nearly every bank on its list. all five Italian banks, and five out of six Greek banks that it analyzed.
Even with share prices that sit 29%-66% beneath their 2009 countertrend highs, the CEBS says that the Bank of Ireland, Piraeus Bank, Banco Popolare, and Banco Santander are all in good shape. In fact, just seven of the 91 banks failed to make the grade. The group, for example, passed both Irish banks and all four UK banks that it evaluated. The CEBS gave clean bills of health to all four Portuguese banks, by the German government anyway. Everyone else -- 84 institutions in all -- are supposed to be strong enough to withstand another economic shock.
It's not so much the stellar results that expose the optimism of a Primary degree rally, but rather the Banking Committee's stress Five were in Spain, one in Greece, and one, Germany's Hypo Real Estate, is entirely owned tests themselves. They are notable primarily because they failed to test for any real stress in the first place. As the chart shows, the Committee's "adverse scenario" regarding economic performance assumed a mere 3% deviation from the European Commission's GDP forecast.
