What is the secret to successful forex trading?
Saturday, November 30, 2013
, Posted by Ryanita at 1:59 PM
Jimmy
Can anyone tell me Secret to success in currency trading
Answer
A complete newbie to forex trading, I am having difficulties figuring out where to look for information, but also what exactly to look for. Commodities? Bank quarterly results?
So, you want to learn how to trade currencies in the forex market? The process of trading currencies appears very straight-forward on the surface, but there's more to it than meets the eye.
Currency trading tutorial is about to receive here will give you a basic idea of ââhow things work. However, it should be noted that this tutorial is only scratching the surface. The Forex market is complex, fast and requires more seriously if you want to trade successfully.
Now that we have that the waiver form, let's start by examining the fundamental unity of all those involved in trade: the "currency pair.
What are currency pairs?
Currency pairs are units of two currencies involved in forex trading. For example, if you want to sell U.S. $ to buy euros, which would be in the exchange rate quoted for the EUR / USD. Or, if you wanted to sell Euros to buy U.S. dollars, which would be in the exchange rate quoted for the USD / EUR currency.
You may think, "Are not they the same thing?" Well, most are, but we must look to the right partner, in the correct order, based on the currency you are buying.
There are two reasons for this:
First, it is easier to calculate the results of their exchange in terms of how much of the base currency can be bought with the currency of your 'date'. Your base currency is the currency you intend to buy, and the quote currency is the currency you intend to sell for the base.
When quoting an exchange rate, your broker will list the base currency for the first time the couple and the second currency quoted.
This means that when you see a pair like EUR / USD, which is seeing the cost of 1 euro in U.S. dollars. A listing of the exchange rate of EUR / USD = 1. 4436 means that 1 euro costs U.S. $ 1.4436 Dollars.
Similarly, the USD / EUR pair indicates the cost of U.S. $ 1 in euro terms. An exchange rate of USD / EUR = 0.6834 means that one U.S. dollar costs 0.6834 euros.
The second reason to observe the correct buy / sell ordered pair is that you want to know the difference between the "bid price" the (exchange rate) and the selling price (what the market makers want to currency).
The difference between bid price and the price they ask what is known as "diffusion." Forex traders are subject to spreads when opening or closing operations in the buying. In other words, they are always subject to a margin when they buy, whether to open or close the trade.
Open buy - Dissemination>
Near sell -> no spread
Open sell -> no spread
Close to shopping - broadcast>
Say you want to buy the EUR / USD. The bid price is 1.4436. The price may be something like 1.4440. You must pay the spread of 0. 0004 to make the trade.
Those are the basics of currency trading, but there are other factors to consider. In order to make a profit in the foreign exchange you should also know how to calculate the cash value of exchange rate fluctuations in terms of "points" - or, in the jargon of the currency - 'pips value.
This currency trading tutorial does not cover the values ââof pips, but it is a concept that should be investigated further if you want to master the basics of trading in the forex market.
A complete newbie to forex trading, I am having difficulties figuring out where to look for information, but also what exactly to look for. Commodities? Bank quarterly results?
So, you want to learn how to trade currencies in the forex market? The process of trading currencies appears very straight-forward on the surface, but there's more to it than meets the eye.
Currency trading tutorial is about to receive here will give you a basic idea of ââhow things work. However, it should be noted that this tutorial is only scratching the surface. The Forex market is complex, fast and requires more seriously if you want to trade successfully.
Now that we have that the waiver form, let's start by examining the fundamental unity of all those involved in trade: the "currency pair.
What are currency pairs?
Currency pairs are units of two currencies involved in forex trading. For example, if you want to sell U.S. $ to buy euros, which would be in the exchange rate quoted for the EUR / USD. Or, if you wanted to sell Euros to buy U.S. dollars, which would be in the exchange rate quoted for the USD / EUR currency.
You may think, "Are not they the same thing?" Well, most are, but we must look to the right partner, in the correct order, based on the currency you are buying.
There are two reasons for this:
First, it is easier to calculate the results of their exchange in terms of how much of the base currency can be bought with the currency of your 'date'. Your base currency is the currency you intend to buy, and the quote currency is the currency you intend to sell for the base.
When quoting an exchange rate, your broker will list the base currency for the first time the couple and the second currency quoted.
This means that when you see a pair like EUR / USD, which is seeing the cost of 1 euro in U.S. dollars. A listing of the exchange rate of EUR / USD = 1. 4436 means that 1 euro costs U.S. $ 1.4436 Dollars.
Similarly, the USD / EUR pair indicates the cost of U.S. $ 1 in euro terms. An exchange rate of USD / EUR = 0.6834 means that one U.S. dollar costs 0.6834 euros.
The second reason to observe the correct buy / sell ordered pair is that you want to know the difference between the "bid price" the (exchange rate) and the selling price (what the market makers want to currency).
The difference between bid price and the price they ask what is known as "diffusion." Forex traders are subject to spreads when opening or closing operations in the buying. In other words, they are always subject to a margin when they buy, whether to open or close the trade.
Open buy - Dissemination>
Near sell -> no spread
Open sell -> no spread
Close to shopping - broadcast>
Say you want to buy the EUR / USD. The bid price is 1.4436. The price may be something like 1.4440. You must pay the spread of 0. 0004 to make the trade.
Those are the basics of currency trading, but there are other factors to consider. In order to make a profit in the foreign exchange you should also know how to calculate the cash value of exchange rate fluctuations in terms of "points" - or, in the jargon of the currency - 'pips value.
This currency trading tutorial does not cover the values ââof pips, but it is a concept that should be investigated further if you want to master the basics of trading in the forex market.
what determines exchange rates in forex market?
mm
Answer
What Determines Foreign Exchange (Currency) Rates
There are number of factors that contribute to changes in Forex rates. Below are some of them.
1. Interest rate movements
A rational investor will often look for the best place, in terms of returns, to park their money. If interest rates were high and outlook for the stock market is grim for example, then currency might be the better option (more attractive). Then, currency becomes more expensive due to the high demand..
Also, if you look at two countries. For example, the United States of America and Australia. Australia, at the present moment, has a higher interest rate than the US of A. Thus it makes more sense to park money here in Australia than in the US, thus earning a higher interest. Again, this will drive US Dollars down and push the Aussie Dollars up. This is what you call as⦠CARRY TRADE.
2. Central Banks Manipulation
A Central Bank can be a major player in the Forex market. It can buy and sell large sums of currencies to manipulate the market. There are many reasons to why central banks do this, but they will not be discussed here.
Bank Negara Malaysia was an influential player in the Forex market, to the point of getting a warning from Alan Greenspan, the then chairman of US Federal Reserve.
Also, referring to the 1st factor of interest rate movements, the central bank is the setter of interest rates.
3. Speculators/Traders
Pretty similar with above, the big players in the market like institutions or just people with heaps of money, they can influence Forex market movements by buying or selling large sums of currencies.
4. Unexpected News Announcements
Any unexpected political and economical news announcements can also cause movements in the Forex market.
5. Balance of Payments
Okay, this involves a few jargons like balance of payments, export, import, current accounts, deficits, and surpluses. Iâll just put them in an example.
Suppose a country is exporting goods & services more than it is importing, resulting in more money coming into the country. In this instance, the state of current account surplus is to be expected (letâs just assume that is in surplus). Large current account surplus will make the currency to appreciate.
Contrast this with a country that imports more than it exports (i.e. more money going out than coming in), in which current account deficits will exist (letâs just assume that it is in deficit). In this instance, the currency will depreciate.
All in all, we can conclude that at the end of the day, Forex rates are determined by supply and demand. If there is a high demand for a particular currency, it will appreciate. If there is a low demand for a particular currency, it will depreciate.
What Determines Foreign Exchange (Currency) Rates
There are number of factors that contribute to changes in Forex rates. Below are some of them.
1. Interest rate movements
A rational investor will often look for the best place, in terms of returns, to park their money. If interest rates were high and outlook for the stock market is grim for example, then currency might be the better option (more attractive). Then, currency becomes more expensive due to the high demand..
Also, if you look at two countries. For example, the United States of America and Australia. Australia, at the present moment, has a higher interest rate than the US of A. Thus it makes more sense to park money here in Australia than in the US, thus earning a higher interest. Again, this will drive US Dollars down and push the Aussie Dollars up. This is what you call as⦠CARRY TRADE.
2. Central Banks Manipulation
A Central Bank can be a major player in the Forex market. It can buy and sell large sums of currencies to manipulate the market. There are many reasons to why central banks do this, but they will not be discussed here.
Bank Negara Malaysia was an influential player in the Forex market, to the point of getting a warning from Alan Greenspan, the then chairman of US Federal Reserve.
Also, referring to the 1st factor of interest rate movements, the central bank is the setter of interest rates.
3. Speculators/Traders
Pretty similar with above, the big players in the market like institutions or just people with heaps of money, they can influence Forex market movements by buying or selling large sums of currencies.
4. Unexpected News Announcements
Any unexpected political and economical news announcements can also cause movements in the Forex market.
5. Balance of Payments
Okay, this involves a few jargons like balance of payments, export, import, current accounts, deficits, and surpluses. Iâll just put them in an example.
Suppose a country is exporting goods & services more than it is importing, resulting in more money coming into the country. In this instance, the state of current account surplus is to be expected (letâs just assume that is in surplus). Large current account surplus will make the currency to appreciate.
Contrast this with a country that imports more than it exports (i.e. more money going out than coming in), in which current account deficits will exist (letâs just assume that it is in deficit). In this instance, the currency will depreciate.
All in all, we can conclude that at the end of the day, Forex rates are determined by supply and demand. If there is a high demand for a particular currency, it will appreciate. If there is a low demand for a particular currency, it will depreciate.
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