Advantages of forex trading

Advantages of forex trading

Leverage. Huge leverage is available in Forex trading, often up to 100:1 meaning that large profits can be generated from small margin deposits.

Liquidity. The enormous size and global trading of the forex markets means that the markets in the major currency pairs are very liquid making trade executions almost instant with little slippage.

Ability to go short. Since currency trading always involves buying one currency and selling another, there is no structural bias to the market. This means a trader has equal potential to profit in a rising or falling market.

Trends. Fundamentally, the value of a country's currency is determined by interest rates and the strength of the economy in relation to other countries. Currencies, therefore, have a greater tendency to trend until the fundamentals change.

Disadvantages of forex trading

Disadvantages of forex trading

Leverage. With huge leverage available to forex traders the danger is that positions which carry too much risk for the account size can be taken on, leading to margin calls. Effective money management rules must be adhered to.

Brokers. Retail traders must use a broker rather than dealing directly in the interbank market. The broker will be the counterparty in all transactions and is, effectively, making the market. They can, therefore, widen spreads or even refuse to trade during volatile trading conditions. To avoid dealing with brokers an alternative to forex is to use futures. See online futures trading for more details.

Spreads. As the retail trader must use a broker to trade, they cannot deal at the interbank rates. A broker will generally quote a fixed spread of 3-20 pips depending on the currency pair. The underlying interbank rate might be as little as 1 pip.

Forex is a very large market but for most retail traders dealing with brokers the odds are shifted against them. Online futures trading provides a much more level playing field for most traders who want to take part in forex trading.

No Commissions or fees AND Free resource for Forex trading

No Commissions or fees
Trading Forex has much lower transaction costs than other investment products, a very important point for active traders.

Free Resource for Forex Trading
There are lot's of online FOREX BROKERS offer free Demo accounts for potential Forex traders to practice trading. Just register and start demo trading to get feel on Forex trading. Besides that, there's also tonnes of FREE FOREX NEWS made available online, along with Forex charts and other resources. Just make sure you have browse thought all other pages in this site to learn on the essential Forex websites you have to visit for Forex trading.

HIGH LEVERAGE

High Leverage
In Forex trading, a small margin deposit can control a much larger total contract value. 200 to 1 leverage enable Forex traders to buy or sell $100,000 worth of currencies with $500 margin deposit. It gives Forex traders the ability to make extraordinary profit

Profit on Bulls and Bears

Profit on Bulls and Bears
"Buy low sell high", this is what every investor knows and practising in whatever market. One of the most exciting advantages of Forex trading is the ability to generate profits whether in the bull or bear condition. In the Forex market, apart form buy low sell high, Forex traders can always sell high and then buy back at lower price to generate profit.

24 Hour Trading

24 Hour Trading

The Forex market is open 24 hours daily. When Asia market is close, the European market start follows by the USA market and continue by Asia market again the next day. Thus, this allows Forex traders to take positions regardless of the hour and locations.

FOREX GIVES HIGHEST LIQUIDITY

Highest Liquidity

There is always buyer and seller in Forex market. The Forex market absorbs trading volumes and per trade size which dwarfs the capacity of any other market. On the simplest level, liquidity is a powerful attraction to any investor as it suggest the freedom to enter or exit the market at any time. Forex traders benefit from the ability to respond to breaking news immediately. There is no other market or investments that you can ever make an exit exactly at the time you wish to.

STOCK MARKET

A stock market is a public market for the trading of company stock and derivaties at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.

The size of the world stock market was estimated at about $36.6 trillion US at the beginning of October 2008. The total world derivatives market has been estimated at about $791 trillion face or nominal value, 11 times the size of the entire world economy. value of the derivatives market, because it is stated in terms of NOTIOANAL VALUES, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. , the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring.). Many such relatively illiquid securities are valued as marked to model, rather than an actual market price.

MUTUAL FUNDS

A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in STOCK, BONDS short-term money market, and/or other securities. The mutual fund will have a fund Manager that trades the pooled money on a regular basis. The net proceeds or losses are then typically distributed to the investors annually.

Net asset value

The net asset value, or NAV, is the current market value of a fund's holdings, less the fund's liabilities, usually expressed as a per-share amount. For most funds, the NAV is determined daily, after the close of trading on some specified financial exchange, but some funds update their NAV multiple times during the trading day. The public offering price, or POP, is the NAV plus a sales charge. Open-end funds sell shares at the POP and redeem shares at the NAV, and so process orders only after the NAV is determined. Closed-end funds (the shares of which are traded by investors) may trade at a higher or lower price than their NAV; this is known as a premium or discount, respectively. If a fund is divided into multiple classes of shares, each class will typically have its own NAV, reflecting differences in fees and expenses paid by the different classes.

Some mutual funds own securities which are not regularly traded on any formal exchange. These may be shares in very small or bankrupt companies; they may be derivaties; or they may be private investments in unregistered financial instruments (such as stock in a non-public company). In the absence of a public market for these securities, it is the responsibility of the fund manager to form an estimate of their value when computing the NAV. How much of a fund's assets may be invested in such securities is stated in the fund's prospectus.

BENEFITS OF FOREX TRADING

1. 24 HOUR MARKET

Since the forex market is worldwide, trading is continuous as long as there is a market open somewhere in the world. Trading starts when the markets open in Australia on Sunday evening, and ends after markets close in New York on Friday.

2. High Liquidity

Liquidity is the ability of an asset to be converted into cash quickly and without any price discount. In forex this means we can move large amounts of money into and out of foreign currency with minimal price movement.

3. Low Transaction Cost

In forex, typically the cost for a transaction is built into the price. It is called the spread. The spread is the difference between the buying and selling price.

4. Profit Potential from Rising and Falling Prices

The forex market has no restrictions for directional trading. This means, if you think a currency pair is going to increase in value; you can buy it, or go long. Similarly, if you think it could decrease in value you can sell it, or go short.

some forex tips

Some Forex Basics:

• The first currency listed in a currency pair is called the "base currency".
• The "base currency" is usually the U.S. Dollar. Traders will generally trade the U.S. Dollar against another currency, which is called the "counter currency".
• Currencies are quoted in pairs. For example: The pair U.S. Dollar and JPY will be quoted in the following way: USD/JPY equals to 2.5 (This means that 1 U.S. Dollar can buy 2.5 JPY).
• When a quote increases, it means that the "base currency" has risen in value and the "counter currency" has weakened in value. For example: If the USD/JPY quote used to be equal to 2.5 but is now equal to 2.6, then this means that the dollar has strengthened (because 1 U.S. Dollar can now buy 2.6 JPY as opposed to the mere 2.5 JPY it could buy beforehand.)

How to Trade Forex

STEP 1:

The step 1 defines certain concepts and terms of Forex Trading-

Quotes are a vital part of the foreign exchange trading, as Forex
trading is done in terms of quotes. Therefore, comprehending these
quotes is the first important step.

Firstly, in a Forex quote, the currency listed first is known as the
Base currency. For example, we have EUR/USD. Here, EUR is the Base
currency.
Secondly, the base currency has always the value 1. In other words,
the rate of other currency is calculated against 1 pt of the Base
currency. For example, we have EUR/USD where EUR is the Base currency.
Then 1 EUR = 1.2323 USD or the value of one currency against the other
in the pair.
Thirdly, when dealing in terms of quotes, prices are expressed in
terms of Pips. Pips can be defined as “percentage in points” and are
mostly the fourth decimal point i.e. 1/100th of 1%.

Also used while trading through quotes, are two significant terms
known as Bid and Ask. These two terms are responsible for making
trading quote, a two-sided quote.
Bid can be defined as ''The price at which the base currency is sold
concurrently buying the counter currency. Ask can be defined as “The
price at which the base currency can be bought concurrently selling
the counter currency''

STEP 2:

Step 2 illustrates the other key features of Forex trading which are
namely, the leverage and the Margin. These two are immensely important
in attracting the interest of the traders as they enhance the trading
power of the investors.

The leverage is the ratio of the deposited amount to the amount that
can be traded. Leverage enables the investors to deposit a small
amount of money but still trade for a much larger amount. This way,
investors can trade easily, utilizing less money to deal.

Margin, therefore, is the minimum amount required to be deposited
before an investor starts trading. This can also be known as the
initial amount with which the Forex trading account can be opened.

A detailed Example below illustrates exactly how Forex trading is done-
Supposing the current bid/ask price for EUR/USD is going by the rate
of 1.5027/30, giving you the option to buy 1 euro with 1.5030 US
dollars or sell 1 Euro for 1.5027 US dollars. Now, if you feel that
the Euro is underrated against the US dollar, you would opt on buying
Euros, selling your dollars at the same time. So you buy 100,000 euros
by paying 150,300 dollars. You can then start analyzing the market,
waiting for the exchange rates to rise.
As predicted, the rates begin to rise and then you decide a favorable
rate at which you plan to sell your Euros to get a hefty profit.
Supposing the Euro rises to 1.5090/93. Now, to realize your profits,
you sell 100,000 euros at the current rate of 1.5090, and receive
$150,900.
You bought 100k Euros at 1.5030, paying $150,300. You sold 100k Euros
at 1.5090, receiving $150900. That's a difference of $600 or in other
words, you successfully earned a profit of $600.
Return on Investment = $600

Always learn a lesson from the Forex Indicators, keep a watch, think
long term and then take a step.

STEP 3:

MarketForex does e-trading using high end MarketForex softwares.
Easily accessible and user friendly, they have a simple operating
process. For instance, the currency pair to be bought or sold can
simply be dealt with, by clicking on the sell or the buy key, placed
in front of that currency.
After the deal to be done is selected, a quote is then displayed by
the software, making it easier for the user to keep track of the
records. Also, MarketForex software provides some attractive powerful
features such as account details of the holder, like balance, leverage
and margins, along with stop/limit orders.
The trader also has the option of selecting various other currency
pairs for trading purposes. Before investing always analyse the forex
market with various types of forex analysis.

Information on Forex

What is Forex?

The largest financial market in the world, Foreign Exchange market,
Forex or FX market, all the terms are used to describe the business of
trading of the world's various currencies, with more than $2 trillion
changing hands every day. Being an international foreign exchange
market, Forex is a market where money is sold and bought freely. FOREX
was launched in the 1970s, to become the biggest liquid financial
market today, dealing in more than hundred times the daily trading on
the New York Stock Exchange.

FOREX is a perfect market to invest in, as it is free from any
external control and free competition. Mostly, all Forex trading are
tentative and unlike the stock market trading, the Forex market is not
conducted by a central exchange, but on the “interbank” market, which
is thought of as an OTC (over the counter) market. The trading takes
place between the two dealers, either over the telephone or through
Internet, all over the world. The major trading centers are the ones
at Sydney, London, Frankfurt, Tokyo and New York, making Forex a
24-hour market.

Forex Trading requires the employing fundamental as well as technical
analyses. These analysis help a trader to foresee and determine the
development in the price trends of currencies, based on which, he
attempts to predict market changes and make profits. Fundamental
analysis can be said to use techniques to analyze the value of a
state’s currency with the help of its economic indicators, quality
markets and political events and associations. Political stability
also influences the exchange rate at Forex. Its not just that Forex
Trading is intutive, rather its technical

While Technical analysis engages the study of patterns of price trends
and movements, making it easier for the trader to predict the path of
the future developments in the Forex market. The primary data for a
technical analysis are values, be it the highest or the lowest values,
the price of opening and closing in a definite period of time, and the
amount of transactions taking place. Any factor, be it economic,
political or psychological, having little or some influence on the
value or the price, has already been measured by the market to be
included in the price. We offer some very useful Tips for New Forex
Traders.