In the forex markets, it is important to understand the nature of the currencies you are trading. It is worth knowing the characteristics of the currency pairs, since each of them exhibit distinct identities. There is a fact that most of the currencies might exhibit similar movement patterns, which can help a trader confirm price movements. Trader can look at two pairs of currencies that have almost similar or completely opposite price movement patterns to get better predictions. Let take an example of the close relation between the EUR/USD & USD/CHF.
The price movements of these two currency pairs are absolute mirror images. In short, they have an inverse relationship. If EUR/USD is rallying, then USD/CHF should have downward movement, and vice-versa.
How can traders take advantage of this? The most obvious fact is that one must not trade both the currencies at the same time. If one is long the EUR/USD, logically one should not be long the USD/CHF at the same time, since the USD/CHF would have a downward movement.
Neither is it wise to take opposing trades on these two pairs, because if the trade goes wrong, then the trader would incur losses in both the trades (although the trader also might have double profit if the trade goes right, but anyway, in forex trading, we focus on how to not get loss first).
Ideally, one should trade either of the two pairs. The best way to take advantage of this fact is to cross-check a trade by looking for confirmation factors on the other pair. If a trader is planning to take a long position in the EUR/USD, he can look for a similar short setup on the USD/CHF. If such an opposite setup is present in the USD/CHF, it only adds further credence to his long EUR/USD trade. It is just a check.
There are other currency pairs also which exhibit a close relation. This fact serves as a good rule of thumb to estimate the movement of the particular currency. Thus it is worth studying these relationships to gain a higher edge in the market. As you know, sometimes a basic knowledge can also serve as a turning point between failure and success.
Friday, March 7, 2008
Understand Your Currencies
Forecasting in the Forex Trading Market
Forex, also known as the foreign exchange market is the busiest financial market that boasts of over $1.5 trillion worth dealings in a day. Although this market has no physical location, it operates efficiently through an extensive network of banks and corporations. The Forex market is far more volatile than the traditional market and relies heavily on speculation. Forex currency trading can be very lucrative for those who understand the importance of "timing a trade" and are willing to stake long hours in research and market study. As a Forex trader, you should be able to forecast Forex trends for successful trading. Forecasting is one of the most crucial aspects of Forex trading and if you are able to predict market trends well, you can save yourself from financial disasters. For forecasting Forex trends successfully, you need to look into various details such as historical trends, past performances, and market movements.
Financial experts depend on technical and fundamental analysis to study current trends and predict future trends. Existing data and facts can be used to forecast the movement of the economy and the stock market and how this would impact individual securities. Financial analysts apply several methods to forecast the foreign currency market that include the most popular methods namely, technical analysis and fundamental analysis. These methods are commonly used to understand how the foreign currency exchange market operates and how even the slightest fluctuations influence currency rates and subsequently the whole currency trade. Both these methods are entirely different from one another but serve one common purpose – Forecasting Forex trade. As you understand how technical and fundamental analysis can help in forecasting, you will be able to combine the two for better forecast and more lucrative trade.
Technical analysis relies on past performances that are indicated through charts and graphs compiled on the basis of past Forex market movements. These movements are nothing but major events that occurred in the past and how they affected the currency rates. Experienced Forex traders and brokers greatly depend on technical analysis, as it is drawn from actual figures and trends in the Forex market. For effective technical analysis, you need to understand how past performances, current events, and changing currency prices influence the market action and therefore need to take into account the supply and demand as well. Financial experts believe that the price movements generally repeat in a particular pattern over a period of time. As a Forex trader, you need to study and understand these patterns well in order to forecast successfully. When looking at the past performances for technical analysis, you must divide your study into five main categories namely; number theory, indicators, gaps, waves, and trends.
Fundamental analysis is another important method for forecasting in the Forex market and forecast is based on events that have not yet occurred. You can forecast price movements by taking into account number of factors that include environmental factors, political changes and natural disasters. These factors greatly affect supply and demand in the market and eventually influence price of currency. Although the fundamental approach is quite effective, it cannot rely on it alone to predict in the Forex market. Experts combine this analysis with technical analysis to predict accurately and expect changes in the currency exchange trade.
If you are keen on investing your money in the Forex market, a basic understanding of how the Forex currency trading system functions is crucial. This will help you to predict which direction the currency trends will move and how you can use this information to maximize profits. If you are not familiar with the way the Forex market operates, you may consult with an expert Forex broker who can take off the burden and advise you about Forex trading and planning entries and exits effectively.
Thursday, February 28, 2008
The Best Forex Trading Platforms
Forex trading platforms are software through which online brokers and investors can perform daily forex trading from anywhere around the world.
New age forex trading platforms offer you advanced, unique features that can actually change the way one used to perceive online trading. The best forex trading platform presents the blend of functional usage combined with ease of use.
The best forex trading platform will be designed to help the investor in executing the trading most effectively by employing strategies to maximize the return. Most of the forex trading platforms are powered with unique analysis and strategy-testing features to test all buy and sell rules.
With a click of your mouse you can access strategy performance reports with simulated results like profit versus loss, annual rate of return, etc. Based on them you can modify your trading strategies without incurring losses.
The best forex trading platform always comes with fully automated real-time online streaming data from the market to take the advantage of the liquidity of the market. The best forex trading platform connects your monitor to the markets.
This also ensures that you get the execution prices on every order type available without any slippage. The best forex trading platform should provide the robust backbone to handle transaction of heavy data and information traffic.
The best forex trading platform must offer more than one type of account like standard, institutional or mini. The platform should come with different operating packages like Flash, Java, or WAP. These software provide firewall protection to maintain the security and integrity of your trading.
You can perform your trading from home, office, laptop on the go or even from an internet café with equal ease. The best forex trading platform will facilitate you to use the system without downloading any program, which presents perfect mobility to the traders or investors.
The best forex trading platform should offer:
- Tight spread on all major currency pairs with cutting-edge trading technology
- Quick execution with unlimited transaction amount
- No slippages and no requites
- Constant margin requirements in all volatile market condition
- Multiple real-time charts and other technical analysis based predictions with maximum visual representation
- Flexibility of placing complex orders including contingency orders
- Real time margin and position monitoring.
- Technical analysis for all demo and live accounts
- Authentic market news and economic calendar
- Performance, Security, Simplicity and Transparency
- Trading history and print out any reports
These platforms come with easy to use interface, where you can easily move from one screen to the next. You can place market and contingent orders with simple steps and can have full reports including execution and open order.
