Saturday, October 04, 2008

Employ Flexibility with FOREX

Because of 24-hour trading those participating in foreign exchange
market would not wait to react on some events as happens on the stock markets. On other markets you wait to react but the FOREX market is a 24 hour market.

Unlike other financial markets the Forex market has no
physical location, like the stock exchanges.
An electronic network of banks, computer terminals or by phone are the operation modes of the currency exchange markets. The very lack of
physical exchanges lets the Forex market operate on a 24-hour basis.
It spans one zone to another across the major financial centers (Sydney,
Tokyo, Hong Kong, Frankfurt, London, New York etc). In every major financial
center there are dealers, who buy and sell currencies 24 hours a day
each business week. Trading session starts in Far East, in Wellington then Sydney, Tokyo, Hong Kong, Singapore, Moscow,
Frankfurt-on-Maine, London and ends in New York and Los Angeles.
Truly a 24 hour world market.

Labels: , ,

Friday, October 03, 2008

Types of Orders in the FOREX Market

Different terminology for order types in FOREX may be used by different brokers , but they all will be much the same in the way they work. Learn the various types of orders and become accustomed to them to enable you to make the right decisions on how to enter and exit the market thereby making your profit or loss.

Different Types of Orders

• Market Order
• Limit Order
• Stop-Loss Order
• Limit Entry Order
• Stop-Entry Order
• OCO Order
• GTC Order

Market Orders
A Market Order is the simplest type of order It is simply an order to buy or sell a currency at the current market price. A trader places a market order by stating the currency pair he wants to trade, as well as the number of lots he wishes to trade.
You may use the market order to enter a new position (buy or sell) or to exit an existing position (buy or sell).

This is an order where the second your order is processed you buy or sell a currency pair at the market price. The order is instant and this means that the current price quoted at the exact time of the click will be given to the customer. Using the phone is much the same but takes a few seconds longer.
This means you are buying one currency and at the same time selling a different currency. A market order is the most common order used in day trading.

Limit Orders
Limit Order – is an order to buy or sell at a certain limit or specific price. It turns into a market order when that specific price level is reached. They can be used to buy currency below the market price or sell currency above the market price. When buying, your order is executed when the market falls to your limit order price. The limit order is based on price and duration. When selling, your order is executed when the market rises to your limit order price.
As an example if a currency is worth at the current moment, $5, and you have a limit order in place for $4, the limit order will not come into effect until the currency drops to $4. This when the transaction will take place – at $4.

Stop Loss Orders
Stop Loss order - A stop loss order is an order where an open position is automatically liquidated at a specific price. If someone wants to learn forex, stop loss order is very important as this order protects you against sudden movements in the currency markets. Essentially this is a protection for the trading account against an adverse movement in the exchange rate. The stop loss order is in effect until the currency is sold or the stop loss order is cancelled by the client

The main difference between a limit order and a stop loss order is that stop loss orders are ordinarily used to limit a loss position on a transaction whilst limit orders are used to enter the market.

Limit Entry Orders

A Limit Entry Order means you state a certain value at which you wish to buy/sell, just as in regular limit orders. The difference is that the buying or selling is executed only when the exchange rate reaches, but does not break the specific level you decided upon.
As an example if a currency is $5, and you specify a limit entry order of $6, but the currency keeps rising in value to $7, this transaction will not be executed. If the same currency drops after reaching $6 the transaction will take place.

Stop Entry Order

For example, if you want to buy a particular currency, but not until the price drops to $5 you would place an entry-limit buy order at $5. If the price never drops to that level, then the order will remain unexecuted, but it will remain a pending order until you cancel it

OCO Order – one cancels other. It is an order that is a mixture of two limit and/or stop orders. Two orders with price and duration variables are placed above and below the current price. An order placed so as to take advantage of price movement, which comprises of both a stop and a limit price. When one level is attained, one half of the order will be executed (either the stop or limit) and the left order canceled (either stop or limit). Your position would be locked in if the market moved to either the stop rate or the limit rate, and as such would close your trade while at the same time, cancelling the other entry order. This order can be done without the need for monitoring the market.
This is also known as OCO – order cancels other.


Good 'Till Cancelled Order (GTC) - An order to buy or sell at a specified price.
An abbreviation of 'Good till Cancelled'. This is a no time limit order, which should keep working , unless the customer decides to cancel the order. This is an instruction to a broker that unlike normal practice the order does not expire at the end of the trading day, although normally terminates at the end of the trading month. A buy or sell order which remains open until it is filled or canceled.

GFD –Good for the Day
Entry Order
Buy Limit Order
If Done Order
Sell Limit Order
Stop Order
Buy Stop Order
Sell Stop Order
Protective Stop Order
Take Profit Orders
Trailing Stop or a Ratchet Stop
Position order
Take Profit Orders

Labels: , , ,

Wednesday, September 24, 2008

Best FX Traders

Robert Aguilar of Best FX Traders wrote an excellent article about how
to spot forex scams. You will find it at the bottom of his homepage
along with other articles that are worth reading.

Best FX Traders

As Robert is a well known source of investing and FOREX education it is worth getting on his list to have access to his knowledge. He is cautious and trades low risk and low leverage. He sends out emails that are worth getting. Robert tells is as he sees it.

Labels: , , , ,

Wednesday, August 27, 2008

Forex beginners - Learn with a free online practice account

The best way for forex beginners to learn about currency
trading is about is to open a practice account.

Most forex brokers offer a free practice account to those learning about forex.
This works online in a virtual capacity so you can trade with immunity not losing real money but virtual practice money. You gain experience in how margin trading works and the forex broker wins a prospective future client by providing the service.
Practice accounts give you the chance to get practical experience in the
forex market.

When the forex market reacts to new information due to world situations
you are able to see how it affects your trading.
You will be able to see how prices change at different
times of the day and how various currencies react to each other.
Because you are not losing or gaining real money fear does not affect you learning process. Having said this it is much preferred that you trade as though you really were trading with real money as emotion is a major factor of trading.

It becomes a simple process of trying all sorts of combinations and strategies to see how you cope and what works for you. It is a very helpful process to learn how your margin trading or leveraged trading works. Begin simply and then add the processes of learning how to analyze charts and read the indicators.

Experiment and have some fun but make it a serious learning process by imagining you are using real money. That way you will get the most out of your practical learning experience.

An excellent platform to practice and learn is at OANDA.

Labels: , ,

Tuesday, August 12, 2008

Beginners forex - what is a stop loss ?

• Stop Loss Order – When an order is put in position it can be automatically stopped at a specific price and is commonly known as a stop/loss order. Stops are used keep the exposure to losses at a minimum if the market moves against an investor's position. For example, if an investor is long (investors purchasing position at lowest cost) at USD132.45 you may put in a preset stop loss order just in case the dollar drops. It can be set for any amount you wish but for example lets use USD131.55 as what we will set to minimize losses, that is if the dollar drops below your purchasing position. What we are aiming for here is for the dollar value to rise, but just on the off chance it drops the stop/loss order is a safety net.

• The only thing you can control in Forex is when you buy and when you sell so having set a stop loss order gives you a very small chance of control over losses keeping them to a minimum. Naturally this is something you are not aiming for as selling below your cost brings a deficit……hence the name stop/loss.

Labels: , , ,

Wednesday, July 23, 2008

The Magic of Leverage

Currency rate changes are very very small and measured in pips. If you wish to make large profits in foreign exchange a large sum of money must be invested.
As most of the larger amounts invested are only available to banks and and large financial institutions and corporations, a private individual must use a FOREX broker.

These brokers are allied with the large financial institutions and lend to individuals as leverage and is also called the margin.
The difference between loaned capital and invested capital is known as leverage
(margin) and this is the key to smaller investors entering the markets.

If you have $100 to invest with then the ratio of leverage is 100:1. This means that your $100 will allow you to trade with $10000 through your broker. As discussed previously because of the minute movements ( PIPS ) larger funds are needed to make significant profits and leverage via the brokers allows this to happen.

This is where education and extreme caution should be placed as you can make good profits or lose all your money. Forex brokers have margin agreements to put stop orders on leveraged funds allowing both them and you protection from losing your shirt !

Study the margin agreement your broker sends you, thoroughly and understand all the details you have signed up for. This is for your protection.

Labels: , , ,

Thursday, July 17, 2008

Factors Influencing Forex Market Trends

Factors Influencing Forex Market Trends

The largest market today for stock trading is the FOREX market, and it grows continually as more and more people are investing in it. It can be very inconsistent even volatile however, as promising as this market may be when it comes to profit.

It is preferred that you be familiar with certain factors that influence trends in the Forex market if you are deciding to join this area of investing. Acquaint yourself with the many different scenarios that can cause currencies to go up or down. This will certainly help you a lot in making decisions for when to buy or sell in the market.

Three major factors affect the Foreign Exchange –a country’s economy, political conditions and market psychology.


Basic things that create changes in a country’s currency are economic factors. When a country has economic conditions such as a budget deficit or surplus, there will probably be reactions in the market and it will reflect on values of the currencies. Inflation trends, and the general economic growth of the country are also other conditions that will reflect in the FX market.

A prosperous economy in a country is a good sign that investors will be able to adhere to doing trade with a more positive attitude. Indicators such as growth in a nation’s gross domestic product (GDP),high employment levels and retail sales among others will basically attract more investors resulting in a nation’s currency value being likely to rise.

Political Conditions

Conditions of a country’s political sector are another very important factor that influence trends in Forex. Political instability or turmoil can sometimes create negative fluctuations in an economy. But if a country can rise above political obstacles, the opposite may occur and the economy may improve.

Events in a region causing instability can create negative or positive interest among investors for a nation’s currency. And as such, conditions will influence the trends for demands and prices of a that particular country's currency.

Market Psychology

The perception of traders and investors will greatly influence the Foreign Exchange market in many ways.The market is highly dependent on whether or not investors would want to gamble on a country’s economy in order to determine whether currency prices will go up or down.

For example, such conditions where unsettling international events happen, under the “flight of quality” rule, investors would look for a safe haven for their funds. Whenever there is a higher demand in a country’s economy, then a higher price will be given to buyers and the currency’s value will rise becoming stronger.

Other events that contribute to traders’ perceptions may be long-term trends and history of a currency where people invest based on what they have noted over a long period of time, and even where people may base their investments on economic numbers depending on what numbers show a greater value.

The market in Foreign Exchange is often volatile, unpredictable and fluctuating. So if you are interested in trading in this market, make sure that you take the time to be educated and knowledgeable about good strategies that can help you keep your funds safe and even gain profit. If you know what you are doing in this market it is indeed very profitable. In other words ....EDUCATE yourself before committing funds.

Labels: , , ,