Forex Trading Money » currency pairs

Some Ways to Trade Foreign Exchange Online

randi — Sat, 07 May 2011 02:35:42 +0000

Learning Foreign Exchange (Forex) trading is important for you who like making money from home or from office in online. It is a profitable way. However, it is not that simple for them who have no experience there. It is because there are two possibilities when you start trading forex, you can get big gains or big losses. Only the experienced investors can trade forex. Then, for the inexperienced ones, you should be careful, because it is possible that your lack of knowledge may lead you into losing everything. So, to deny the loss or to reduce its possibility, these are some ways suggested for you.

First, you have to observe the best ways of investing forex. For you information, forex market in the world is bigger than United States stock market. You also have to make sure that the retail investors and traders will not going to move the market. Second, you need an experienced and trusted broker. Some cases happened when the brokers disclaim the agreement before. For example, they take the other side of your trade. It is because of the wider market makers. So, to make sure whether your brokers are qualified or not, you can visit the U.S. Government’s website, www.nfa.futures.org/basicnet/. Then, enter your brokers’ name and it will give you their detailed information on business and practices. It is better to deal with someone you have known before. Third, you also should be aware of world currency and fluctuations. Currencies are always traded in pairs. For example is people often trade pair in EUR and USD. Fourth, you also have to make sure that your broker will give you free charting package to allow you seeing the current price. Fifth, you decide the forex trading platform that you will use. The platform is software to find everything about the current buy and sell prices of the various currency pairs. Sixth, you have to learn the system which you can indicate when to enter and leave the trades. Seventh, you can try to make a demo account and use unreal money.

If you can manage unreal money, you can reduce the losing money possibility. The last way, you should take a finance course. You can learn how to trade forex from many affordable brokers. You also can find much information about trading in internet. However, you have to be careful because not all information is accurate and trusted. It is better for you to learn money management too. This skill can save you from losing money.

There are many tips to manage your trading well. If you are the beginners, you have to be aware with oil, gold, and stock market prices. From the previous cases, there are some problems with currency fluctuation there. You also have to avoid trading with real capital, unless you have experienced with that or you are a professional. Choosing a trusted broker is important. Besides, to consult and keep us out of bad trades, you must choose a competent and trusted money manager too.

There are some ways and tips that you can follow to start your forex trade. One thing that you have to remember is be careful with the amount of money to start with. The more money can lead you into losing.

Incoming Forex terms:

Understanding Forex Charts for Any Forex Trader

randi — Mon, 11 Apr 2011 00:52:04 +0000

The charts are important and will work to your advantage only if you learn how to interpret technical analysis. Before you can actually begin to engage in the real Forex trade, there is one tool that you should have besides the software and those are the Forex charts, which constitutes an important part of your trading system.

Forex charts are the most basic apparatus in a Forex trader’s tool belt. It is a graph of a currency pair’s performance over a specified range of time. Reading them is essential to a Forex trader’s business, so it’s important to know how to read them and understand what they mean. In this article, we take a look at a number of factors including Currency pairs and Where to access Forex charts.

All charts are labeled with a currency pair: EUR/USD, USD/GBP, etc. All Forex trading deals with different countries’ currency in relation to each other. The EUR/USD chart, for example, tells you how the euro and the U.S. dollar compare against each other. The Forex chart tells you how much of one currency can be bought with another.

The variables of currency exchange can be tracked by using charts such as currency pairs but take your time to learn as the data can be overwhelming at first. Among the three most popular Forex charts, the simplest is the line chart form. This type of chart allows you to see overviews about the trend in the market but is not a good chart if you are into long term trading because it does not support technical analysis capability.

In order to take advantage of trading charts in the most favorable way, you should purchase some type of Forex trading software. This software does all of the analysis for you and provides you with insight on whether you should trade a given currency pair or not. Forex trading software is often automated so you can leave your computer on and the software will “think” for you.

There are way too many Forex currency pairs for one to keep track of. Forex charts show you what currency pairs are up to. One should definitely keep an eye on the currency pair(s) they are trading and may want to keep an eye on new prospects. Forex trading software often gives one the ability to leave this process on autopilot.

Forex Glossary, Special Code Abbreviations

admin — Fri, 14 Aug 2009 19:03:50 +0000

In banking practice there are special code abbreviations: for example, the exchange rate for dollar against yen refers to USD/JPY, British pound against US Dollar to GBP/USD. The first currency is referred to as the base currency and the second as quote currency:
USD / JPY = 120.25

Base currency Quote currency Rate
This abbreviation specifies how much you have to pay in quote currency to obtain one unit of the base currency (in this example, 120.25 Japanese Yen for one US Dollar). The minimum rate fluctuation is called points or pips.

Most currencies except USD/JPY, EUR/JPY and GBP/JPY where pip is 0.01 has 4th decimal system as 0.0001.

The currency pairs on Forex are quoted as bid and ask (or offer) prices:
Bid Ask
USD / JPY = 120.25 / 120.30

Bid is the rate at which you can sell the base currency, in our case it’s dollar, and buy the quote currency, i.e. Japanese Yen.

Ask (or offer) is the rate at which you can buy the base currency, in our case dollars, and sell the quote currency, i.e. Japanese Yen.

Spread is the difference between the bid and the ask price.

Margin trading assumes that Forex dealing is based on the margin, the collateral, and the provided leverage.

This means that a client places minimal cash deposit, much smaller than the underlying value of the contract, but can operate with larger amounts sufficient to enter the real market. Such credits are provided by the brokerage companies besides their informational services and make it possible for a trader to enter into positions larger than his/her account balance. This collateral is typically referred to as margin.

Leverage is the term used to describe margin requirements: the ratio between the collateral and borrowed funds 1:20, 1:40, 1:50, 1:100. Leverage 1:100 means then when you wish to open a new position, then you must have 100 times less then the contract size.

Currency Rate is the ratio of one currency valued against another value of a currency of one country. It whether depends on the demand and supply on free market or restricted by a government or by central bank.

Lot is a fixed standard currency amount for trading provided on the collateral — margin. Sometimes it is called the contract size. The 1.0 lot contract size for each currency pair is listed in Contract Specification.

Storage is the charge to rollover the position overnight. It can be both positive (credited to your account balance!) or negative (debited from you account balance) depending on the interests rate in the countries which currencies you trade.

Incoming Forex terms:

Forex Currency Pairs

admin — Mon, 20 Jul 2009 18:07:50 +0000

Foreign Exchange Market (Forex) is the arena where a nation’s currency is exchanged for that of another at a mutually agreed rate. It was created in the 70′s when international trade transitioned from fixed to floating exchange rates, and nowadays is considered to be the largest financial market in the world because of its tremendous turnover.

Probability of earning on Forex is based on the fact that every national currency is a good, as well as wheat or sugar, and a medium of exchange, as gold or silver. As the world is changing so fast, economic conditions of every country (production, inflation, unemployment etc) are getting more and more dependant on each other, as a result, the rate of a currency changes against other currencies. This is the main reason of the process of rate fluctuations.

All currencies are traded in pairs and each is assigned with an abbreviation.
Table 1. Currency Abbreviations
Abbreviation Interpretation
EUR Euro
USD US Dollar
GBP British Pound
JPY Japanese Yen
CHF Swiss Franc
AUD Australian Dollar
CAD Canadian Dollar
NZD New Zealand Dollar
SEK Swedish Krona
DKK Danish Krone
NOK Norwegian Krone
SGD Singapore Dollar
ZAR South African Rand

Currency exchange rate is the rate at which currencies are exchanged one for another. For example, «EUR/USD exchange rate is 1.2505» means that one Euro is exchanged for 1.2505 US Dollars.

The exchange rate of any currency is usually given as the Bid price (left) and the Ask price (right). The Bid price represents what will be obtained in the quote currency (US Dollar in our example) when selling one unit of the base currency (Euro in our example). The Ask price represents what has to be paid in the quote currency (US Dollar in our example) to obtain one unit of the base currency (Euro in our example). The difference between the Bid and the Ask price is referred to as the spread.
Table 2. 1.0 lot size for different currency pairs
Currency pair↓ 1.0 lot size Necessary margin for 1 lot 1 pip size

EURUSD EUR 100,000 1000 EUR 0.0001
USDCHF USD 100,000 1000 USD 0.0001
GBPUSD GBP 100,000 1000 GBP 0.0001
USDJPY USD 100,000 1000 USD 0.01
AUDUSD AUD 100,000 1000 AUD 0.0001
USDCAD USD 100,000 1000 USD 0.0001
EURCHF EUR 100,000 1000 EUR 0.0001
EURJPY EUR 100,000 1000 EUR 0.01
EURGBP EUR 100,000 1000 EUR 0.0001
GBPJPY GBP 100,000 1000 GBP 0.01
GBPCHF GBP 100,000 1000 GBP 0.0001
EURCAD EUR 100,000 1000 EUR 0.0001
NZDUSD NZD 100,000 1000 NZD 0.0001
USDSEK USD 100,000 1000 USD 0.0001
USDDKK USD 100,000 1000 USD 0.0001
USDNOK USD 100,000 1000 USD 0.0001
USDSGD USD 100,000 1000 USD 0.0001
USDZAR USD 100,000 1000 USD 0.0001
CHFJPY CHF 100,000 1000 CHF 0.01

Let’s assume that exchange rate for EUR/USD is 1.2505/1.2509. You may have made market analysis and decide the EUR/USD rate is moving higher (at least to 1.2600). You buy 0.1 lot (minimum contract size) of EUR/USD at the 1.2509 (ask price). Table 1 will help you to define what the contract size is: i.e. 1.0 lot for EUR/USD is 100 000 EUR, then 0.1 lot (our contract size) is 10 000 EUR.

This means that you bought 10 000 EUR and sold 10 000×1.2509=12,509 USD. So, in order to make a deal you don’t have to sell total amount of 12.509 USD but 100 times less just $125.09. The rest sum of the money (in our example $12,383.91) is leveraged to you by a broker (a company you entered the contract with to enter the market).

Leverage is the term used to describe margin requirements: the ratio between the collateral and borrowed funds: 1:20, 1:40, 1:50, 1:100. Leverage 1:100 means then when you wish to open a new position, then you must have deposit 100 times less then the contract size.

So, you forecast that EUR/USD is moving higher and you buy 10.000 EUR and sell 12.509 USD. Assume you are right and EUR/USD reaches 1.2599/1.2603. You close the open position by the opposite one, in our example, you close short position (sell position) by long position (buy position), i.e. you sell 10.000 EUR (0.1 lot* 1.0 lot size for EUR/USD) and buy 12.599 USD:
Transaction EUR USD
Open a position — buy EUR and sell USD + 10,000 – 12,509
Close a position — sell EUR and buy USD – 10,000 + 12,599
Total: 0 + 90

You get a profit of 90 dollars. And you didn’t operate with 10.000 EUR ($12,509), but only $125. So, the profit is 90 pips. Pips or point is a minimal rate fluctuation. For EUR/USD 1 pips is 0.0001 of the price (see table 2). Our profit is 1.2599-1.2509=0.0090, i.e. 90 pips.

So, you invested $125 and take a profit of $90. The time period for this can take from 10 minutes to several days. But anyway to make profit of $90 for several hours isn’t a bad return at all. But be aware, that all this can work against you and magnify your losses. Only money management will help you to minimize the risks, moreover to reduce them to zero, and increase the return of your funds from 10% to 20-30% and higher per month.

One question is left: what is broker’s charge for the leverage he provides? If you open and close a position till 2:00 Moscow time, a broker provides the leverage for free. If you leave your position after 2:00 Moscow Time, he credits to your account or debits from you account a storage — charge for the overnight position. It can be both positive (credited to your account!) and negative (debited from your account). It depends on the interest rates in those counties which currencies you trade.

For example, ECB interest rate is 4.25%, FED interest rate is 3.5%. Assume, you have a short position on EUR/USD per 1.0 lot. You sell 100.000 EUR. This means you borrow them at 4,25% per annum. You sell euro and buy dollars, which can be deposited at 3.5% per annum. As a result, the costs are (4.25-3.5)% per annum or 937.5 dollars per year (if EUR/USD rate is 1.2500), or $2.57 per day. This means that your account will be debited on $2.57 everyday per one lot if you have a short position (selling position) on EUR/USD. And your account will be credited $2.57 everyday per one lot if you have a long position (buying position) on EUR/USD.

In practice the debited amount is a bit higher than 2.57%, and the credited amount is a bit lower than 2.57%. The difference goes to a broker as a payment for the rollover (see Contract Specification).

Forex Trading Money » currency pairs

Some Ways to Trade Foreign Exchange Online

Incoming Forex terms:

Related Forex

Understanding Forex Charts for Any Forex Trader

Related Forex

Forex Glossary, Special Code Abbreviations

Incoming Forex terms:

Related Forex

Forex Currency Pairs

Incoming Forex terms:

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