December 20, 2012
Before you decide to jump into foreign exchange market as a broker or as an investor, you must acquire a basic knowledge of how this market operates and the terms used in it. The foreign exchange market never shuts down and operates 24 hours a day on all working days. It is the largest liquid financial market. It’s not like a typical ‘market’ or stock exchange. There is no central trading location. All the transactions are conducted over the telephone or electronic foreign exchange trading networks. The ‘interbank market’ is the primary market for currencies. First of all, remember foreign exchange has been abbreviated to ‘forex’ and ‘FX’ by the people who are active participants in foreign exchange trading. Here is a list of the basic terms used in forex trading.
- Exchange Rate: The exchange rate expresses the value of one currency in terms of another. For example, AUD/JPY = 88.6348352. This means, 1 Australian dollar is equal to 88.6348352 Japanese yen.
- Currency Pair: The two currencies shown in an exchange rate are called a ‘currency pair’. The first currency is known as the ‘base’ currency, and the second one in the pair is called ‘counter’ or ‘terms’ or ‘quote’ currency.
- Currency Codes: There are eight major currencies which are traded in the forex market. There is a three character code that denotes the country. The major currencies are;
USD = US Dollar
EUR = Euro
JPY = Japanese Yen
GBP = British Pound
CHF = Swiss Franc
CAD = Canadian Dollar
AUD = Australian Dollar
NZD = New Zealand Dollar
- Lot: The standard unit size of a transaction. A 100,000 units of the base currency are called a standard lot. If its 10,000 units, traders refer to it as ‘mini’ and 1,000 units are called ‘micro’.
- Pip: This is the smallest unit in price quote for currency. Beginners will note that forex traders quote currencies with 4 decimals. For example if a price is quoted as 1.2345 the last digit ’5′ is known as ‘pip’. If it goes up by 3 pips it would be 1.2348.
- Bid and Ask Price: The bid price is the price at which the forex market will buy a particular currency from you. The ask price is the price they are ready to sell a currency to you. The market makes money when the ask price is higher than the bid price. The difference in the two prices is known as the bid/ask spread.
- Sell Quote / Bid Price: The sell quote is the currency on the left of the pair known as the base currency. For example, if AUD/USD = 1.0532/03, this means you can sell 1 Australian dollar at the bid price of US$ 1.0532.
- Buy Quote / Offer Price: The buy price is displayed on the right of the currency pair. This is the price at which you can purchase the base currency. It is also known as the market maker’s ask or offer price. For example AUD/USD = 1.0532/03 means that you can buy 1 Australian dollar for US$ 1.0532.
Once you are familiar with these basic terms of forex trading you can take the plunge and learn more advanced terminologies and how this unseen market operates.
So there you have it; some of the basic forex terms which will get you moving in learning the terms and the language that enshrouds the buzzing world of forex trading. For more information, log on to http://www.edutrade.com.au/tools/.
Tags: Cash Flow
, Currency Trading. Economy
, Foreign Exchange
, forex trading
April 4, 2012
In this post I’d like to address the question, ‘What is foreign exchange market sentiment?’ This might be useful if you’re thinking about changing currencies, but have heard that sentiment toward the UK pound or euro or whichever currency you’re trading is negative, and want to know what this means.
Foreign exchange sentiment is the general feeling toward a currency at a particular time, among investors on the foreign exchange market. It’s a summation of how the countless millions of investors in foreign exchange feel about one currency at present. Sentiment can become more upbeat or downbeat, depending on what’s influencing that currency on a certain day or month. It can also be used to describe the mood on the foreign exchange market as a whole.
For instance then, when looking at sentiment on the foreign exchange market as a whole, one very common way is to describe the market as either having risk appetite or being risk averse. This tells us whether foreign exchange investors are feeling brave (i.e. there is risk appetite) meaning they’re more likely to invest in small or riskier currencies, or whether they’re being cautious, and hence putting their funds in strong and stable economies believed to be safe (i.e. they’re risk averse.)
Depending on whether there is risk appetite or not, the entire outlook for the foreign exchange market can change. The US dollar for instance tends to strengthen when there is risk aversion (i.e. there’s a big political or economic threat in the world) because the US economy is the backbone of the global system. It’s hence a safe place to put money. The UK pound too tends to benefit in times of risk aversion, because it’s thought stable. On the other hand, currencies in smaller and less stable economies such as New Zealand and Canada (whose prospects are tied to the price of commodities) tend not to benefit when there is risk aversion.
In addition to looking at sentiment on the foreign exchange market as a whole, you can also look at sentiment concerning a specific currency. This tends to reflect not the global outlook, but the factors affecting that particular currency at a certain time. These factors tend to be political or economic. For instance then, if you’re looking at the euro right now, you might say that sentiment is cautious but optimistic, because Greece has just received its second EU bailout. This has cheered investors. On the other hand, cautious remains because Europe is in recession right now. This is reflected in euro weakness.
You should now have a better idea what foreign exchange market sentiment is. If you have any other questions about foreign currency exchange then visit foreign exchange specialists Pure FX.
, Foreigh Exchange
, forex trading
, world economy
April 1, 2012
Forex trading success is through knowing the insides of the financial and foreign exchange market, and through some amazing insight and strategy, successful currency trades can amass you a small fortune. Stanley Druckenmiller is one of the great currency traders and many brokers aspire to reach the levels of success that he has achieved throughout his 30 year career. His most famous, and most lucrative, currency trades both occurred through the successful trade of the German Mark, The first at the fall of the Berlin Wall, and the second in combination with one of his partners, George Soros, that ended up with both men making billions and creating huge gains for the company. All of these currency trades were used with futures stocks and the careful insight of the brokers to use the current political and international climate and predicting change, insight that forever changed the lives of these men and the climate of the forex market.
The Great Currency Trades
Both the trades focused on a currency crisis, and a smart broker can always take advantage of political turmoil. The initial crisis occurred when the Druckenmiller believed that the reunification of Germany after the fall of the Berlin wall would be a very rough transition and made a futures trade, increasing it to 2 billion worth of marks in the long haul and managed to reap benefits of 60% growth for the Quantum Fund. This currency trade cemented Druckenmiller’s position as one of the top traders in the industry and set up his firm as a leader in the industry, changing the thoughts on futures trading. The second multi million deal was done in collaboration with George Soros, and became known as the largest forex trading move in history. While Soros was working on breaking apart the British currency with his trades, Druckenmiller leveraged his working capital and bought up marks in the long haul and leveraging the assumption that investors would shift to the German currency after the English decline. Once again he reaped amazing success, with himself and Soros pulling off one of the largest coups in forex currency trades.
Life After the Mark
Druckenmiller retired in August 2010 stating that his days of great returns were over and that he could not provide returns to clients that he was satisfied with. He has been ranked by Forbes as of this year as the 149th Richest man in America and has holdings of assets of over 2.5 billion dollars. However, beyond all his wealth, he will be known as the forex broker who made the Mark earn him millions in currency trades.
Dave Tucker is a freelance author with a keen interest in Foreign Exchange. Through his writing his aims to educate readers on key people in the industry and great strategies. He has worked for short periods as a mt4 forex broker and can provide great information for anyone with a forex trading account and looking for assistance.
Tags: Best Forex Trade
, Forex Brokers
, forex trading
March 26, 2012
If you keep listening to your friends you will keep your day job, keep working for 30 years each and every day and not make serious money and you know why? Because your friends think trading stocks and Forex is nothing but luck and gambling and they can’t be more wrong.
In this article I will share with you a few important tips that will help you make money trading stocks and currencies, so take a pen and a paper and write this down because all the professional traders in the world started using these tips and you should too if you want to make money.
Trade with an amount of money that suits you
At first trading will be difficult and you may lose some money before you get the grasp of it and understand the market and that’s natural. That is why you should trade with an amount of money that suits you as a trader and that means trading with the amount you don’t afraid of losing. I know how it sounds but if you’re afraid of losing you will lose because you will make decisions according to your emotions and not your head and you will lose money, so at first trade with a small amount of money and slowly with time add more money to your trading bankroll.
Always come prepared to any trading day
You should always come prepared prior to any trading day and that means working for 2-3 hours each day searching for stocks and currencies, writing down the entry and exit points of each stock and never leave anything to chance. Only this way you’ll control your bankroll, know exactly how much you’ll profit from a trade and limit your losses to a minimum if the trade was not successful.
Trade with your head and not with your gut
Trading stocks and Forex has nothing to do with luck and we are not gambling here. You read charts, you analyze them, you read news and you know your entry and exit points and with this analytical work plan you make money. If you start trading according to your emotions and gut feelings you may make mistakes and lose money, so always trade smart and don’t let your feelings get involve in your trade but this will come with more trades and experience.
Be patient learn from mistakes and never stop reading charts
If I have one tip to give you in order to succeed in trading is to read as many charts as you can. The more charts you read the more you’ll understand how the market and how the stocks react, you’ll know to anticipate the next move of your stocks and currencies and you’ll have more experience in trading and here it means a lot. Even when you don’t trade keep reading charts, see if you’re right and with time you will master the market and in less than 3-4 years will be able to be a professional trader and believe me this is not a long time as professional traders usually are millionaires because there is a lot of money in the market and with time you will get your piece of it as well.
Author Bio : Nir is the co-founder of the Forex trading strategies site where you will be able to find prove and successful trading strategies, trading tips, information about trading software and more tools to help you trade better and earn more money each day you trade.
, forex trading
, Makre Monay
, stock trading
March 5, 2012
Up today, down tomorrow? The fortunes of the euro are swinging widely depending on the news from Greece.
It might seem like the international political equivalent of a soap opera. Updates from Greece emerge as regularly as episodes of Eastenders, in which there is a new twist on whether the heavily indebted nation is set to receive its latest EU loan, implement crucial reforms, or just plan give up the ghost and default, abandoning the euro and returning to the drachma. Furthermore these nightly episodes have a lot of viewers, as international investors incorporate events in Greece into their decisions whether to sell the euro. It is not exaggerating things to say the future of the currency hangs on Greece in this sense! Why then is it so important? And how can you use the situation to help you?
The Musketeers of Foreign Exchange
The situation in Greece matters because the members of the euro are a little like the three musketeers: they go ahead shouting “All for one and one for all!” In this sense, the euro lives or dies according to the health of its members. If Greece or Portugal look a bit green about the gills, that has a knock-on impact on larger economies like France and Germany. In fact, it is not exaggerating to say that, though Greece is only a small country, its defaulting could plunge both Europe and the world into crisis! Commentators describe that scenario as comparable to the collapse of Lehman Brothers in 2008.
Turning to the present, right now the Greek situation has hurt the euro against its rivals, because Greece and the EU are at blows regarding its second bailout. For Europe, it is no longer certain Greece can be trusted, following months in which it has promised reforms and failed to deliver. This has reached the point that German finance minister Wolfgang Schlaueble is calling for Greece to give up control of its own finances, and hand them to Brussels! For Greece meanwhile, this is of course a huge insult. Hence the impasse – and the Euro weakness.
How Might The Foreign Exchange Rate Change In Future?
Turning to the future, the state of the euro depends on awful lot on the solution that emerges. For me at least, there is no serious threat of Greece leaving the euro right now. The reports in the newspapers are spats between partners, but do not represent a permanent divide. In that sense, it seems certain to me that the euro will eventually gain as Greece makes progress. But I could be wrong! And before that agreement emerges, there could yet be more ups and downs prompting euro weakness.
To find out how the crisis in Greece might affect your currency transfers visit foreign exchange specialists Pure FX.
, financial planning
, Foreign Exchange
, forex trading