To many people, it all seems like a tangled bowl of spaghetti; how can one currency trading chart reads that the index for the US dollar is 1.68, the Euro is 1.90, and the Canadian dollar is .73? Understanding the exchange rates for foreign currency trading isn't difficult but it can be a little confusing. By understanding the language of the Forex markets it is easier to understand these rates and untangle the spaghetti.
Basic Foreign Currency Trading Rates
The exchange rates for foreign currency trading are really born out of a simple formula. That formula reads like this: Y-to-X exchange rate = 1 / X-to-Y exchange rate. Because of this inversion, comparing US dollars to Euros is a different number than comparing Euros to US dollars. For example, one Euro is worth 1.34 US dollars but 1 US dollar is worth .75 Euros. Since a Forex trade is bi-directional, so are the ratios.
If it still doesn't seem to make sense, think of foreign currency trading the same way you would if you were converting from metric to English measurement and visa versa. One mile is equal to 1.6 kilometers , yet 1 kilometer is only equal to 0.6 miles .
How to Read Foreign Currency Trading Charts
Forex markets use charts that have a basic structure for foreign currency trading; the first column is the country code, which is a three letter code that designates the currency. For example, the United States dollar is represented by USD, while the Canadian dollar has a code of CAD. The second column in a foreign currency trading chart is the name of the country and its currency. The remaining columns each reflects comparisons between the base currency desired and other currencies. This type of foreign currency trading chart allows for fundamental analysis of the rates for a particular currency against the other currencies of the world.
Sample Foreign Currency Trading Chart
Sometimes using a visual can help make an explanation clearer; note the sample chart below:
Code Country Units/USD USD/Unit Units/CAD CAD/Unit
ARP Argentina (Peso) 2.9450 0.3396 2.1561 0.4638
AUD Australia (Dollar) 1.5205 0.6577 1.1132 0.8983
BSD Bahamas (Dollar) 1.0000 1.0000 0.7321 1.3659
BRL Brazil (Real) 2.9149 0.3431 2.1340 0.4686
CAD Canada (Dollar) 1.3659 0.7321 1.0000 1.0000
This example helps to show the workings of the chart and the relationship between the various currencies. For instance, looking at the row for the Canadian dollar, the foreign currency trading chart shows that the US dollar is worth about 1.37 Canadian dollars, one CAD is worth about .73 USD, and just for assurance 1 CAD is equal to 1 CAD. (That seemed like an investment basic, but aren't you glad it worked out right?)
Looking for Arbitrage in Foreign Currency Trading
Arbitrage is the investment strategy of trading multiple currencies with the intention of profiting from any differences in the exchange rates. For example, we will trade USD, CAD and ARP. We will sell 5 USD and in return get 6.8295 CAD. After this we will sell our 6.8295 and get 14.725 Argentinean pesos. Finally when we sell our pesos and buy US dollars we get 5.00 again. While this example did not yield an arbitrage for us, it is easy to see how it works. If your investment timing is right and you catch volatility between the various pairs, arbitrage has the potential to be very profitable
Conclusion
Foreign currency trading can have its confusing moments, tangled up like a bowl of spaghetti. Once you learn Forex trading, concepts like foreign currency trading charts crystal clear!
Tuesday, April 29, 2008
Foreign Exchange Swaps
One of the beauties of Forex trading lies in the ability to trade using leverage, which is often as high as 1,000 times your capital. In other words, you can effectively borrow up to 1,000 times your capital in order to trade. But borrowing money to trade is no different to borrowing money for any other purpose and you will be charged interest.
However, because every transaction involves both buying and selling currency, interest payments payable on money borrowed to fund a transaction can be offset by interest earned on the currency held. If this seems a little confusing we'll look at an example in a moment, but first it is worth just taking a moment to examine the subject of interest rates in general to see the wider picture as it affects the Forex market.
Interest rates are established by central banks and are used to regulate a currency in order to meet a country's monetary policy. Interest rates directly affect the cost of a currency with high interest rates making it expensive to buy a currency and low interest rates making a currency more affordable.
As a tool of monetary policy the government of a country facing high inflation, with the price of goods and services rising rapidly, might choose to raise interest rates. This would have the effect of raising the cost of currency so that borrowing becomes more expensive and both demand and consumption fall. Following the normal laws of supply and demand, as demand falls, so the rate at which prices rise will also fall and inflation will come down.
By the same token, a country facing recession might well choose to lower interest rates in an effort to stimulate the economy into growth. As the cost of the currency falls, so too will the cost of borrowing and investors, companies and individuals will be encouraged to borrow and thus spend more, so increasing demand and stimulating supply to meet that demand.
Interest rates established by central banks determine the rate at which commercial banks can borrow from the government and thus the rate at which they will lend to their customers, including Forex traders.
So just how do interest rates impact individual Forex trades?
Suppose a trader buys GBP/USD at 1.9430. In this case he is borrowing US Dollars to buy UK Pounds and is thus paying interest on the US Dollars he has borrowed and is earning interest on the UK Pounds which he holds.
If the Bank of England has set a higher rate of interest for the UK Pound than the Federal Reserve has set for the US Dollar then the trader has the opportunity to earn more in interest on the UK Pounds that he is holding than on the US Dollars he had borrowed.
However, unless interest rates are particularly high on one currency and the differential between the two interest rates is significant, any net gain or loss is likely to be small. It should also be borne in mind that interest rates are set at an annual rate and that most currency trades are conducted over short, or extremely short, timeframes. This again will reduce any interest gained or paid considerably.
However, because every transaction involves both buying and selling currency, interest payments payable on money borrowed to fund a transaction can be offset by interest earned on the currency held. If this seems a little confusing we'll look at an example in a moment, but first it is worth just taking a moment to examine the subject of interest rates in general to see the wider picture as it affects the Forex market.
Interest rates are established by central banks and are used to regulate a currency in order to meet a country's monetary policy. Interest rates directly affect the cost of a currency with high interest rates making it expensive to buy a currency and low interest rates making a currency more affordable.
As a tool of monetary policy the government of a country facing high inflation, with the price of goods and services rising rapidly, might choose to raise interest rates. This would have the effect of raising the cost of currency so that borrowing becomes more expensive and both demand and consumption fall. Following the normal laws of supply and demand, as demand falls, so the rate at which prices rise will also fall and inflation will come down.
By the same token, a country facing recession might well choose to lower interest rates in an effort to stimulate the economy into growth. As the cost of the currency falls, so too will the cost of borrowing and investors, companies and individuals will be encouraged to borrow and thus spend more, so increasing demand and stimulating supply to meet that demand.
Interest rates established by central banks determine the rate at which commercial banks can borrow from the government and thus the rate at which they will lend to their customers, including Forex traders.
So just how do interest rates impact individual Forex trades?
Suppose a trader buys GBP/USD at 1.9430. In this case he is borrowing US Dollars to buy UK Pounds and is thus paying interest on the US Dollars he has borrowed and is earning interest on the UK Pounds which he holds.
If the Bank of England has set a higher rate of interest for the UK Pound than the Federal Reserve has set for the US Dollar then the trader has the opportunity to earn more in interest on the UK Pounds that he is holding than on the US Dollars he had borrowed.
However, unless interest rates are particularly high on one currency and the differential between the two interest rates is significant, any net gain or loss is likely to be small. It should also be borne in mind that interest rates are set at an annual rate and that most currency trades are conducted over short, or extremely short, timeframes. This again will reduce any interest gained or paid considerably.
Tuesday, March 25, 2008
Forex Trading
You've heard about other people making a full time income from investing in the Forex but you're just not sure if it is for you. If you're in this position, we'll take you on a quick tour of the concept of Forex foreign exchange rates, the benefits and the risk involved.
The Forex market revolves around the buying and selling of money - specifically the various currencies around the globe. The market is huge. To give you an idea of its size, the volume traded is 3 times that of the stock market and futures market combined.
When you start trading the Forex you simultaneously buy one currency and sell another currency. A Forex quote will look something like USD/EUR = 1.2. This can sometimes be a bit daunting to the beginner, but it essentially means that one US dollar can be sold for 1.2 Euros. The 2 currencies listed are known as currency pairs, and there are various pairs that are commonly quoted including USD/GBP (US dollar and British Pound), USD/CAD (US dollar and Canadian dollar), and USD/JAY (US dollar and Japanese Yen).
Trading the Forex has a number of benefits over the stock market. The first of these is the ability to trade 24 hours. Unlike the stock market, there is no physical location that the Forex is traded from. It is a global trading network that runs continuously. This means that you can trade at a time to suit you even if you have other commitments in your life.
Another benefit is the ability to be able to use leverage. This allows you to control large sums of money using only limited funds. If you have a broker that allows you 200:1 leverage, you can control $20,000 with only $100 of your own money. This means that you can increase your profits many-fold. But the downside is that if you do not correctly predict the market, your subsequent losses will also be much higher. Using leverage wisely is something that comes with experience.
A way of building up your experience with Forex is to trade a demo account first. This is a facility that is provided by many of the online Forex brokers. You get an account with 'virtual money' in it. You can then start trading without fear of losing any real money. You'll get to feel comfortable using the trading software and you can even test out trading systems to see if they actually work.
There is a wealth of information available on the Internet about Forex trading. Much of it is free. It is advisable that you start out by getting an understanding of the basics such as Forex foreign Exchange rates, pips, trading signals and trading software. Then if you want to take things further, you can look into buying a trading course.
The Forex market revolves around the buying and selling of money - specifically the various currencies around the globe. The market is huge. To give you an idea of its size, the volume traded is 3 times that of the stock market and futures market combined.
When you start trading the Forex you simultaneously buy one currency and sell another currency. A Forex quote will look something like USD/EUR = 1.2. This can sometimes be a bit daunting to the beginner, but it essentially means that one US dollar can be sold for 1.2 Euros. The 2 currencies listed are known as currency pairs, and there are various pairs that are commonly quoted including USD/GBP (US dollar and British Pound), USD/CAD (US dollar and Canadian dollar), and USD/JAY (US dollar and Japanese Yen).
Trading the Forex has a number of benefits over the stock market. The first of these is the ability to trade 24 hours. Unlike the stock market, there is no physical location that the Forex is traded from. It is a global trading network that runs continuously. This means that you can trade at a time to suit you even if you have other commitments in your life.
Another benefit is the ability to be able to use leverage. This allows you to control large sums of money using only limited funds. If you have a broker that allows you 200:1 leverage, you can control $20,000 with only $100 of your own money. This means that you can increase your profits many-fold. But the downside is that if you do not correctly predict the market, your subsequent losses will also be much higher. Using leverage wisely is something that comes with experience.
A way of building up your experience with Forex is to trade a demo account first. This is a facility that is provided by many of the online Forex brokers. You get an account with 'virtual money' in it. You can then start trading without fear of losing any real money. You'll get to feel comfortable using the trading software and you can even test out trading systems to see if they actually work.
There is a wealth of information available on the Internet about Forex trading. Much of it is free. It is advisable that you start out by getting an understanding of the basics such as Forex foreign Exchange rates, pips, trading signals and trading software. Then if you want to take things further, you can look into buying a trading course.
Forex Exchange Rates - Brief Look
One of the primary methods of making a profit on the foreign exchange or the Forex market is to be able to purchase and sell currencies in such a way that whatever fluctuations there may be in the prices will end up helping you to earn a tidy profit. Therefore, understanding the meaning and nature of foreign exchange rates is crucial to your success in Forex trading and though it might, on the surface, appear to be a simple matter that anybody can learn, in reality it isn't all that straightforward a subject and therefore requires some in-depth knowledge prior to a person being able to succeed in Forex trading.
A Rich History
Actually, there is a rich history behind the foreign exchange rates so you need to understand the importance of understanding why things happen the way that they do on the Forex market and also educate yourself in making the right decisions so that you can capitalize on your knowledge.
So, to actually comprehend foreign exchange rates, you must be certain of what they in fact really are A definition of foreign exchange rates would be that they are the value of one currency as it relates to a second currency.
Therefore, when the exchange rate between two different currencies is listed as being a first currency fetching 1.20 of the second currency, then the foreign exchange rate is 1:1.2. Additionally, you will also need to comprehend why currencies have values that are different and this can be best explained by the fact that after the valuation of currencies throughout the world moved away from 'gold standards', the prices of currencies started to be pegged against the US dollar, and other currencies fluctuated upwards or downwards as they related to this currency in a range of not more than a single percentage.
Hence, this was the start of foreign exchange rates and it was commonly referred to as fixed exchange rate. Since these changes in the method that the trade is carried out in recent times, both the fixed exchange rates and the gold standard have been abandoned so the forex exchange rates are now typically known as fluctuating exchange rates.
In reality it means that presently forex exchange rates are influenced by the forces of the market and when demand for a specific currency exceeds its supply then the Forex exchange rates will end up going higher for the currency being demanded, and the opposite would occur should the demand decrease.
Now that the US dollar is the base currency in Forex trading, the US government merely prints additional dollars and then sells these new dollars to various countries in the form of debts, though due to rising oil prices as well as stronger world economies, currently the US dollar is losing its vice like grip as the predominant currency of the world which is eroding the exchange rates of the dollar and the United States closest trading allies are affected as well.
A Rich History
Actually, there is a rich history behind the foreign exchange rates so you need to understand the importance of understanding why things happen the way that they do on the Forex market and also educate yourself in making the right decisions so that you can capitalize on your knowledge.
So, to actually comprehend foreign exchange rates, you must be certain of what they in fact really are A definition of foreign exchange rates would be that they are the value of one currency as it relates to a second currency.
Therefore, when the exchange rate between two different currencies is listed as being a first currency fetching 1.20 of the second currency, then the foreign exchange rate is 1:1.2. Additionally, you will also need to comprehend why currencies have values that are different and this can be best explained by the fact that after the valuation of currencies throughout the world moved away from 'gold standards', the prices of currencies started to be pegged against the US dollar, and other currencies fluctuated upwards or downwards as they related to this currency in a range of not more than a single percentage.
Hence, this was the start of foreign exchange rates and it was commonly referred to as fixed exchange rate. Since these changes in the method that the trade is carried out in recent times, both the fixed exchange rates and the gold standard have been abandoned so the forex exchange rates are now typically known as fluctuating exchange rates.
In reality it means that presently forex exchange rates are influenced by the forces of the market and when demand for a specific currency exceeds its supply then the Forex exchange rates will end up going higher for the currency being demanded, and the opposite would occur should the demand decrease.
Now that the US dollar is the base currency in Forex trading, the US government merely prints additional dollars and then sells these new dollars to various countries in the form of debts, though due to rising oil prices as well as stronger world economies, currently the US dollar is losing its vice like grip as the predominant currency of the world which is eroding the exchange rates of the dollar and the United States closest trading allies are affected as well.
Monday, March 10, 2008
Monitoring The Foreign Currency Exchange Rate
Monitoring the currency exchange rate is very important if you’re planning to go on a vacation and would like to stay within your set budget and save money. Let us understand what exactly currency exchange rate means. In general, depending on the US dollar, most of the other currencies are calculated in value and are either more or less than the value of the US dollar. For example, a Canadian dollar would be worth around 85 percent of the US dollar. Similarly, the British Pound is worth two US dollars. However, owing to the fluctuating market conditions, one day the British Pound could be worth two dollars while on the next, it could be worth more than two dollars.
There are two types of currencies – free floating and pegged. A currency that is determined by the government of the country in relation to the another currency is called a pegged currency. Inthe 1980’s, the Hong Kong dollar was fixed with respect to the US dollar. On the other hand, a free-floating currency is permitted to change in value with respect to all other currencies in the foreign exchange market. When referring to currency, people often discuss issues like the real exchange rate and the nominal exchange rate. The actual exchange rate is the rate for which products of a country can be traded for the products and services of another country. The nominal exchange rate on the other hand, is the value at which the currency of a certain country can be traded with that of another.
Practically speaking, currency exchange rates generally change from one country to another and make travel and tourism easier and more attractive. So, if you’re planning on going on a vacation and there are several countries that you plan to visit, it is advisable to keep an eye on the current exchange rates. This could help you save money. For example, New York City is always full of tourists from France, Japan, the UK and Germany at different times of the year. This is only because at certain times the exchange rates favor the Europeans or the Japanese, making it cheaper for them to visit America than at other times. In recent years, the currency exchange rate is seen to have worked in favor of all the European nations.
Before the Euro came into existence, Austrian currency was the Schilling, Germany the Deutsche Mark, Italian Lira, Switzerland had the Swiss Franc and France the Franc. In the early 80’s the currency exchange rate was two and a half Schillings for a dollar while five French Francs made one US dollar. On the other hand, the Deutsche Mark fluctuated anywhere from 1.7 Marks to 2.5 Marks to the dollar. So, when the US dollar was at 2.5 Marks, the Americans would trade in their dollars for German Marks to stay ahead.
Watching out for the fall or rise in exchange rates is always beneficial for tourists who would like to travel and at the same time save money. Even if you are only thinking of hopping across the border to visit family or are planning on flying to Mexico or Canada, knowing and understanding the nominal exchange value of another country is very important. So, remember to plan your vacation at a time when the fluctuation in exchange rates is most likely to help you.
There are two types of currencies – free floating and pegged. A currency that is determined by the government of the country in relation to the another currency is called a pegged currency. Inthe 1980’s, the Hong Kong dollar was fixed with respect to the US dollar. On the other hand, a free-floating currency is permitted to change in value with respect to all other currencies in the foreign exchange market. When referring to currency, people often discuss issues like the real exchange rate and the nominal exchange rate. The actual exchange rate is the rate for which products of a country can be traded for the products and services of another country. The nominal exchange rate on the other hand, is the value at which the currency of a certain country can be traded with that of another.
Practically speaking, currency exchange rates generally change from one country to another and make travel and tourism easier and more attractive. So, if you’re planning on going on a vacation and there are several countries that you plan to visit, it is advisable to keep an eye on the current exchange rates. This could help you save money. For example, New York City is always full of tourists from France, Japan, the UK and Germany at different times of the year. This is only because at certain times the exchange rates favor the Europeans or the Japanese, making it cheaper for them to visit America than at other times. In recent years, the currency exchange rate is seen to have worked in favor of all the European nations.
Before the Euro came into existence, Austrian currency was the Schilling, Germany the Deutsche Mark, Italian Lira, Switzerland had the Swiss Franc and France the Franc. In the early 80’s the currency exchange rate was two and a half Schillings for a dollar while five French Francs made one US dollar. On the other hand, the Deutsche Mark fluctuated anywhere from 1.7 Marks to 2.5 Marks to the dollar. So, when the US dollar was at 2.5 Marks, the Americans would trade in their dollars for German Marks to stay ahead.
Watching out for the fall or rise in exchange rates is always beneficial for tourists who would like to travel and at the same time save money. Even if you are only thinking of hopping across the border to visit family or are planning on flying to Mexico or Canada, knowing and understanding the nominal exchange value of another country is very important. So, remember to plan your vacation at a time when the fluctuation in exchange rates is most likely to help you.
Benefits And Risks In Forex Foreign Exchange Rates
You've heard about other people making a full time income from investing in the Forex but you're just not sure if it is for you. If you're in this position, we'll take you on a quick tour of the concept of Forex foreign exchange rates, the benefits and the risk involved.
The Forex market revolves around the buying and selling of money - specifically the various currencies around the globe. The market is huge. To give you an idea of its size, the volume traded is 3 times that of the stock market and futures market combined.
When you start trading the Forex you simultaneously buy one currency and sell another currency. A Forex quote will look something like USD/EUR = 1.2. This can sometimes be a bit daunting to the beginner, but it essentially means that one US dollar can be sold for 1.2 Euros. The 2 currencies listed are known as currency pairs, and there are various pairs that are commonly quoted including USD/GBP (US dollar and British Pound), USD/CAD (US dollar and Canadian dollar), and USD/JAY (US dollar and Japanese Yen).
Trading the Forex has a number of benefits over the stock market. The first of these is the ability to trade 24 hours. Unlike the stock market, there is no physical location that the Forex is traded from. It is a global trading network that runs continuously. This means that you can trade at a time to suit you even if you have other commitments in your life.
Another benefit is the ability to be able to use leverage. This allows you to control large sums of money using only limited funds. If you have a broker that allows you 200:1 leverage, you can control $20,000 with only $100 of your own money. This means that you can increase your profits many-fold. But the downside is that if you do not correctly predict the market, your subsequent losses will also be much higher. Using leverage wisely is something that comes with experience.
A way of building up your experience with Forex is to trade a demo account first. This is a facility that is provided by many of the online Forex brokers. You get an account with 'virtual money' in it. You can then start trading without fear of losing any real money. You'll get to feel comfortable using the trading software and you can even test out trading systems to see if they actually work.
There is a wealth of information available on the Internet about Forex trading. Much of it is free. It is advisable that you start out by getting an understanding of the basics such as Forex foreign Exchange rates, pips, trading signals and trading software. Then if you want to take things further, you can look into buying a trading course.
The Forex market revolves around the buying and selling of money - specifically the various currencies around the globe. The market is huge. To give you an idea of its size, the volume traded is 3 times that of the stock market and futures market combined.
When you start trading the Forex you simultaneously buy one currency and sell another currency. A Forex quote will look something like USD/EUR = 1.2. This can sometimes be a bit daunting to the beginner, but it essentially means that one US dollar can be sold for 1.2 Euros. The 2 currencies listed are known as currency pairs, and there are various pairs that are commonly quoted including USD/GBP (US dollar and British Pound), USD/CAD (US dollar and Canadian dollar), and USD/JAY (US dollar and Japanese Yen).
Trading the Forex has a number of benefits over the stock market. The first of these is the ability to trade 24 hours. Unlike the stock market, there is no physical location that the Forex is traded from. It is a global trading network that runs continuously. This means that you can trade at a time to suit you even if you have other commitments in your life.
Another benefit is the ability to be able to use leverage. This allows you to control large sums of money using only limited funds. If you have a broker that allows you 200:1 leverage, you can control $20,000 with only $100 of your own money. This means that you can increase your profits many-fold. But the downside is that if you do not correctly predict the market, your subsequent losses will also be much higher. Using leverage wisely is something that comes with experience.
A way of building up your experience with Forex is to trade a demo account first. This is a facility that is provided by many of the online Forex brokers. You get an account with 'virtual money' in it. You can then start trading without fear of losing any real money. You'll get to feel comfortable using the trading software and you can even test out trading systems to see if they actually work.
There is a wealth of information available on the Internet about Forex trading. Much of it is free. It is advisable that you start out by getting an understanding of the basics such as Forex foreign Exchange rates, pips, trading signals and trading software. Then if you want to take things further, you can look into buying a trading course.
Wednesday, February 20, 2008
Foreign Exchange And Financial Markets
The Foreign exchange market deals with the trading of different foreign currencies. One currency is traded for another in the foreign exchange market only. Presently the market is by far the largest financial market in the world.
The trade in a foreign exchange market includes trading of different currencies between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. Individuals constitute a very small fraction of this market and they participate only through brokers or banks and most of the times they are subject to forex scams.
The foreign exchange market is unique because of many factors such as its trading volumes, its geographical dispersion and the extreme liquidity of the market. Beside that the large number and variety of traders in the market and its long trading hours that is round the clock operation throughout the week except on weekends make it unique.
The average daily turnover in traditional markets is estimated to be over $3 trillion. This is more than ten times the size of the combined daily turnover on all the world's equity markets. Foreign exchange trade has more than doubled since 2001; this is largely due to the growing importance of foreign exchange as an asset. The internet trading platform has also made it easier for retail traders to trade in the market.
Essentially the foreign exchange market is an over the counter market where the dealers negotiate directly with each another. The biggest foreign exchange trading centre is the UK. Majority of the trade is handled by the institutions like Deutsche Bank, UBS AG, Citigroup incorporated, Royal Bank of Scotland, Barclays Capital, Bank of America, HSBC, Goldman Sachs, JP Morgan, Morgan Stanley.
These large international banks frequently provide the market with buy and sell prices of the different currencies. Minimum trading size for most of the deals is usually kept at 100,000 units of that particular currency; this is a known popularly as a standard lot. Unlike a stock market, the foreign exchange market is divided into levels of access. This is due to volume of transactions. Central banks of various countries also participate in the market to align currencies to their economic needs.
The bank may trade on behalf of customers, but much of the trading is done by the banks for their own account. A major fraction of this market comes from the financial activities of various companies seeking foreign exchange to pay for goods or services, their trades often have small/ big short term impact on market rates. There are two types of retail brokers who participate in the market such as the brokers offering speculative trading and brokers offering physical delivery of the bought currency.
The foreign exchange rate fluctuations are generally caused by actual currency flows as well as by expectations of changes in currency flows caused by changes in GDP growth, inflation, interest rates, budget and trade deficits or surpluses and other economic conditions of that particular country. The foreign currencies are traded against one another; each pair of currencies thus constitutes an individual product. Although exchange rates are affected by many factors, in the end, currency prices are a result of supply and demand forces, thus its value, are not influenced by any single element, but rather by several.
There are few specific terms that are used frequently in the foreign currency trade like spot. A spot transaction is a two-day delivery transaction, this trade represents a direct exchange between two currencies, it involves the shortest time frame. Next is the Forward, in this type of transaction, money does not actually change hands until some agreed upon future date. Another is the swap, in a swap; two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date. Speculation also plays a major part in the foreign exchange market and it may cause some currencies to fall or gain for a short time period.
Foreign Exchange - Perfect Investment
f you have tried searching the Internet for a Forex foreign exchange broker you will be overwhelmed by the choice. The advent of the Internet has seen an explosion in the number of brokers who are offering their services. But if you are looking to find your ideal investment partner, a little due diligence and research will help you find the perfect broker.
A Forex broker is a person or company that will carry out Forex trades on your behalf. They are an essential part of your Forex strategy. They charge for this service, but not in the normal way. Whereas stockbrokers will usually charge you a commission, a Forex broker makes his money by the difference in the bid and ask price. Ideally you should be looking for a broker that charges a 2-3 pip spread. Anything over 5 pips is expensive and should be avoided.
The reputation of a company is a good indicator of what level of service you may expect from them. This information is sometimes quite difficult to obtain because many of the online Forex brokers are quite young companies. However you can visit the search engines and online discussion forums to see what other people's experience is with different brokers. The types of things to look out for are comments about how the company reacted to problems. Did they take ages to answer queries or were the customer support team able to deal with them quickly? Another common area of complaint is the ease of use of the platform. Are people finding that they can quickly execute their trades? This little bit of research shouldn't take you too long but it could save a lot of problems in the future.
One of the important practical things that will help you choose a broker is the trading platform that they provide. This is the software from which you make your trades. You should be looking for a platform that is user-friendly and easy to use. You may want to try out several on demo accounts so that you can get a feel for them. Most brokers will offer you an option to have a downloadable application or one that is web-based. The web-based option has the advantage that you can access it from any computer, whereas the downloaded version is often quicker.
Another important factor when selecting a Forex foreign exchange broker is whether they are regulated. You should check to see whether they are registered with Commodity Futures Trading Commission (CFTC). This should be the case for all US based Forex brokers. They should also be members of the National Futures Association (NFA).
Subscribe to:
Posts (Atom)