Learn About Sigma Forex Trading Headline Animator
Thursday, January 21, 2010
Forex trading is built on variations in basis points, where the basis point is one tenth of a cent (or one tenth of the smallest unit of currency being traded). For example, if Euros are $1.60 each, every $32 you put into Euros will net 20 of them. If Euros rise to $1.80 each, your 20 Euros will be worth $36.00.
The chief strategy for foreign trading is watching the closing times of the major trading venues, which are London, the Asian markets and New York. A lot of banks will try to close out their positions at those times, which will cause the market to fluctuate.
Forex, like day trading in stocks, can result in an adrenaline rush mentality, and there's a lot of money to be made in small to change in exchange rates. However, to make foreign exchange trading work for you as a day trader, you need to live the life and adjust your sleep schedule to be awake when the markets are open to capitalize on shifts.
You can also take a long term strategy on forex trading. This is where you're looking for long term trends rather than trying to run the races each day on daily shifts.
Key factors to keep in mind in terms of foreign trading are the international news. In particular, any moves the Federal Reserve makes will change the exchange rates.
To become a foreign participant, you should at least read a book, if not take a course. Because real money is involved here, you must proceed with utmost caution.
Many foreign exchange investors sign up with forex websites to receive newsletters, advice, and to keep up with currency trends. Some investors even sign up to receive trends on their phones and PDA's to stay in the game.
Monday, January 18, 2010
There are many markets: markets for stocks, futures, options and currencies. These are probably the most accessible markets for everyday traders like you and I. People easily understand the basics of trading shares.
I began trading shares first and then I moved on to trading currencies; therefore, most of the examples I will be using in this book are derived from trading currencies.
If you do not know a lot about currency trading, allow me to introduce it to you. It is what I trade and I believe that it is one of the best markets to trade because of its efficiency. The transaction costs to execute a trade are minimal and most brokers provide you with the tools and data you need to make your trading decisions, they usually provide them for free. The market is open 24 hours a day which allows you to design your trading hours around your daily commitments.
The forex market is the market in which currencies are bought and sold against one another.
1. Rollover of Positions
When futures contracts expire, you have to plan ahead if you are going to rollover your trades. Forex positions expire every two days and you need to rollover each trade just so that you can stay in your position.
2. 24-Hour Marketplace
With futures, you are generally limited to trading only during the few hours that each market is open in any one day. If a major news story breaks out when the markets are closed, you will not have a way of getting out of it until the market reopens, which could be many hours away. Forex, on the other hand, is a 24/5 market. The day begins in New York, and follows the sun around the globe through Europe, Asia, Australia and back to the US again.
3. Free market place
Forex is perhaps the largest market in the world with an average daily volume of US$1.4 trillion. That is 46 times as large as all the futures markets put together! With the huge number of people trading forex around the globe, it is very hard for even governments to control the price of their own currency.
1. Lower Margin
Just like futures and stock speculation, a foreign trader has the ability to control a large amount of the currency basically by putting up a small amount of margin. However, the margin requirements that are needed for trading futures are usually around 5% of the full value of the holding, or 50% of the total value of the stocks, the margin requirements for foreign is about 1%. When you are trading on margin, this can be a very profitable way to create an investment strategy, but it's important that you take the time to understand the risks that are involved as well. You should make sure that you fully understand how your margin account is going to work. You will want to be sure that you read the margin agreement between you and your clearing firm. You will also want to talk to your account representative if you have any questions.
2. No Commission and No Exchange Fees
When you trade in futures, you have to pay exchange and brokerage fees. Trading forex has the benefit of being commission free. This is far better for you. Currency trading is a worldwide inter-bank market that lets buyers to be matched with sellers in an instant.