Foreign Exchange Trading|

The modern approach to forex currency trading is different to the olden approach to the trade in a number of ways.

For one, the modern approach to forex currency trading sees the trade as a mass undertaking, a ‘free for all’ undertaking, as it were, which is in sharp contrast to the situation in the olden approach to forex currency trading when the trade was largely the preserve of the rich and the sophisticated. Many barriers that previously hindered the entry of smaller players into the forex trade have effectively been removed, examples of this being the knowledge barrier (which has been removed by easy availability of free or cheap forex education online), the legal barrier (which has been removed by the liberalization of foreign currency holding laws in many countries) – among others. The automation of the forex trade has also gone a long way in making the mechanics of forex trading easy enough for almost anyone to handle. Trading through on these automated forex trading platforms can get as easy as just clicking on a button here and typing in figure there – something anyone who knows how to use a computer can surely do. Now compare this with the situation in the classic approach to forex exchange where trading involved calling the people who might require forex currencies for their transactions, making friends with them, marketing yourself to them and then trying to sell (or buy) actual currencies – in the form of notes and coins – to them. The logistics of going to all these great lengths for the (seemingly) paltry margins that forex trade offers would have seemed like too much work for small scale traders, and in those days, only the big sharks who could leverage on huge volumes could somehow survive the trade.

Secondly, the modern approach to forex currency trading differs from the traditional approach to the trade in that it takes a global view of the trade, rather than a local view of the same as was previously the case. In the old days, a forex trader was largely limited to thinking in terms of buying forex currency and trading it vis a vis his country’s currency, but today’s trader might not even get to do anything with his country’s currency, unless of course that currency happens to be a lucrative one. The globalization of the forex currency trade has been achieved through the power of the Internet.

The Internet has actually opened up the global forex market to an extent that a forex trader operating from India can be trading in American and European currencies exclusively, to a level where such an Indian trader only gets to handle Indian rupees when reloading his account or when withdrawing profits from his account. This is a sharp contrast to what would have been the case a few years back, when such a forex trader would have been limited to just comparing the movements between the Indian rupee and the other currencies, as the forex trade was very much a ‘notes and coins’ and local affair then.

It is difficult to put into words the fast paced excitement that lies ahead for would be forex traders. Globally, the forex markets account for over $3 trillion in daily volume. While trading in forex was once the preserve of the super-wealthy and the banks, it is increasingly becoming popular with the average investor.

Advances in technology, and in particular, the internet, mean that individuals can trade on forex markets from the comfort of their homes. Technology aside, successful trading in forex still requires some knowledge on the part of the investors. The forex markets to the novice will appear different, totally alien and with a totally different language. Some people are too intimidated to even begin down the road to becoming successful forex traders and investors.

Despite these fears, the knowledge can be acquired readily, and easily for anyone willing to take the plunge. A few ways of going about it exist, and are suited to forex traders with different levels of experience.

Internet – The internet has an whole plethora of articles on forex trading. This is particularly so for total novices. Articles are available totally free of charge, on every forex trading topic imaginable. The diligent researcher can find information on everything from the history of the forex markets to the most complicated rocket-science-black-box forex trading models. Again, the price of most of this is FREE, so there really is no excuse for not doing a bit of research.

Books – In the past the books you found on forex markets seemed aimed at people with mathematics degrees. Full of theories and equations. There was actually little practical information to be found in these books. Because banks were the only institutions trading in forex, it was assumed that you learned the mechanics on the job, once you were working for one.

Now, the increase in the number of small investors in the forex markets has seen a similar increase in the number of books aimed at individuals. More than just wax lyrical about the theory, these books now provide valuable and practical tips on the forex markets. Everything from evaluating and choosing investment strategies, to more advanced material is covered. As the topic has become more popular, increasing numbers of libraries are stocking these books, so you do not even have to buy them.

Forex trading courses – Along with the articles and books, there are a lot of courses on forex markets and trading now available for the average investor. Prices range from FREE to six figures. There is something in there for everyone. The advent of sites such as youtube means that in some cases, even video material from other courses is available to anyone with a computer and an internet connection. Those who prefer structured learning, and having their hands held all the way should head for these.

Demo accounts – Last, but by no means least, is the increasing numbers of forex brokerage firms offering demo accounts. Forex demo accounts allow investors the ability to use real systems, trading on real forex market data in realtime, without risking any money. So, having familiarised oneself with the theory, this is the best way of actually getting some trading experience under your belt, risk free. Getting one of these accounts is as easy as applying online via a firm’s website, and in most cases, the accounts are free.

Clearly, as the above shows, there is a wide variety of sources for learning how to trade in forex markets, with a lot of it being available totally free of charge. Log on, explore and learn, and start trading forex profitably.

Sick of the credit crunch? Are you tired of poor returns from Wall Street? Interested in making better returns on your investments? Have you ever considered switching to foreign exchange (forex) from the stock exchange? If you answered “yes” to the first 3 questions, read on. Even if you have never previously considered investing in forex, we have the solution for you.

There are some differences between investing on the stock exchange and forex trading. The strategies are different, although no more complicated. A lot of people make the mistake of dismissing forex trading without first looking into it objectively. Do not be one of the many missing out on the great returns available.

Even if you are a total novice, we have a forex investment strategy that is easy to use, and that takes reduces the risks from the process. Our strategy does not involve long tedious courses on forex trading strategies and technical analysis. What we are offering instead, is a software package that uses proprietary techniques to pick buys and sells for you. All you need to do it set up a forex trading account at the brokerage firm of your choice.

Forex trading is the ideal vehicle for investors who want to earn high returns on their money, while safeguarding the capital and reducing risks. Our proprietary software platform achieves this happy medium. Key to this strategy is trading two different currency pairs that are inversely related, i.e. they move in different directions. A simple example would be coffee and ice-cream in a park. As it gets cold, sales of coffee will rise while those of ice-cream will fall, and vice versa. Owning both a coffee stand and an ice cream stand means you make money, whatever the weather.

A lot of technical analysis data exists that validates this strategy. A look at the historical charts for the two currency pairs shows the inverse relationship in their prices. As the price of one rises, the price of the other pair falls. Losses made on one side of that mirrored equation are offset by gains on the other.

Using this software is really effective, as it is both simple to learn and easy to use. The software is immediately useful without any need for a crash course training on everything to do with financial investing. The entire package can be picked up and understood in only a couple of hours. That is all you need in order to properly set up your accounts and your trades. After this initial setup, the only other time requirement on your part will be a few minutes each week to monitor your online accounts with your brokerage firms. Monthly returns surpassing even the annualised returns from mutual funds are possible with the system.

My initial enthusiasm at trading forex took a hammering when I realised that it would take weeks, if not months to master the various technical analysis tools and strategies. Learning how to read charts and the like was likely going to be difficult and cost a lot of money in books, materials and time. This was time I did not have as I had a full time job.

A friend tried to convince me that a forex trading strategy that did not require all this existed. One that was easy to learn, required no course attendance or training, and could be set up in a matter of hours. He claimed to be getting higher monthly returns on his investments than his other investments were earning annually.

As would be expected, while my interest was piqued, I remained sceptical of his claims. I therefore set out to do my own investigations and research on the software he talked about, and the company that produced it. I was convinced. I soon got the software and started trading with it on a demo forex account with a brokerage firm. The software worked, and the evidence from this backed up their claims, generating high returns. Having started trading with real money for two years now, I am happy with the performance of this great software and with the level service I receive from the company that supplies it.

Most investors are very familiar with the workings of the stock market. They are quite simple. You identify a share whose price you think will rise. You then buy a quantity of these shares. When the price rises as expected, you sell these shares, and pocket the difference as a profit.

Forex markets are very similar. You buy a currency whose price you expect to rise, and you sell when you expect it to fall. This is the simple part. The key thing to remember with forex investments, is that each trade requires both a sale and a purchase. Forex investors therefore trade in currency pairs. The examples below explain this further.

In the stock market, you can go to a broker, and buy shares, in say Microsoft. Assume the price is £1 and you buy 100 shares, the trade will cost you £100. You have therefore exchanged £100 and received 100 Microsoft shares in exchange. The key thing to remember here is that the prices are quoted in £ per share.

A similar trade can occur in forex markets. The chief distinction is that by trading currencies, you are trading money, in exchange for money. Assume that the US$ and the £ are trading at 2:1, i.e. it will cost you $2 for every £1. If you expect the dollar to strengthen against the pound (i.e.. less dollars for each pound), you buy dollars, and sell pounds. In simple terms, you would buy $100, and in exchange, give (or sell) £50. When the dollar appreciates against the pound, you would then sell the $100, for (say) £60 in exchange, making £10 profit.

The distinction between the two, is that in a given market, stocks and shares are quoted and traded in a single currency. Therefore, any prices quoted are absolute. An increase in price is an increase in price.

In a forex markets, the prices are quoted in terms of other currencies. It is therefore possible for one currency to be strengthening against a second, while simultaneously weakening against a third. Therefore, currencies to do not rise in value in the absolute. They rise and fall in price relative to a second currency. The dollar does not just rise in value. It rises in value against another currency.

Extending the example above. The $/£ price might be 2:1. At the same time, the dollar/Euro price might be 1.5:1. As the forex markets operate, you might see the $/£ move to 1.9:1. In this instance the dollar has strengthened against the pound. Simultaneously, the dollar/Euro price might move to 1.6:1. This means that the dollar has weakened against the Euro at the same time that it has strengthened against the pound. The movements will also have implications for the pound/Euro price, but that is beyond the scope of this article.

If you had bought dollars, and sold (exchanged) pounds, you would have made a profit. If instead you had bought dollars and sold (exchanged) Euros, you would have made a loss.

This trading of currencies in pairs on the forex markets is their chief difference from the traditional stock markets. Thus, you will always find currency price quotations in pairs, e.g. USD/GBP (dollar/pound), USD/EUR (dollar/Euro), USD/JPY (dollar/yen).