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The FOREX Market Is A Goldmine

The amount of dollars traded on the Forex market on a daily basis is in the trillions. The Foreign Exchange market (Forex) is truly the largest exchange in the world. The amount of dollars traded on the Forex market on a daily basis is in the trillions. Most of this currency trading takes place between between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. However, individual traders are starting to get in the mix, using internet discount brokers such as Etrade to participate in the currency exchange market.

There is no central exchange or meeting place for the Forex. All trading is done over computer networks between traders in different parts of the world. Also, unlike the stock market, the foreign exchange market is open 24 hours per day, because it is a global market. A trader in Hong Kong may be exchanging currency with a trader in Australia while an American trader is sleeping.

There are several different markets within the Forex exchange system. First, there is the spot market. The spot market deals with trades that are based on the current values of currencies. One person trades a certain amount of currency with another trader in exchange for an equivalent amount of a different foreign currency. Spot trades take two days for settlement.

The other two types of foreign exchange markets are the forward and futures markets. In the forward market, the buyer and seller agree on an exchange rate and a transaction date is set for a specific time in the future, at which point the trade is executed regardless of what the rates are at that time. On the futures market, futures contracts are bought and sold based upon a standard contract size and maturity date. Futures trades take place on public commodities markets.

A currency quote is listed differently from a stock quote. Stocks are quoted in terms of price per share. Currency exchange prices are listed as either a direct quote or an indirect quote. A direct quote uses the domestic currency as the base and the foreign currency as the quote. An indirect quote works the exact opposite way.

So, if you were to view a quote in an American newspaper that said USD/JPY = 75, that would be a direct quote and would mean that $1 of U.S. currency is equal to 75 Japanese yen. If that same quote appeared in that same American newspaper and was listed as JPY/USD = 0.013, that would be an example of an indirect quote.

As with stock prices, currency exchange prices have a bid and ask spread. The current bid is the amount of foreign currency that someone is willing to spend in order to buy $1 U.S. base currency. The ask is the amount of foreign currency that someone is demanding in order to be willing to sell $1 U.S. base currency.

The Forex markets are generally considered to be less volatile than then stock market because within the course of a trading day, it is highly unlikely for the value of a single currency to move all that much. With equities, it is not uncommon for a trader to buy a stock, and then a negative press release causes the stock to lose considerable value within a day or even a couple of hours. Sometimes, however, the Forex can be volatile. If there is a significant economic or political development with a certain country, the currency of that country can lose value quickly.

There is a higher degree of liquidity on the currency exchange then there is on the stock exchange because the currency exchange is open 24 hours per day and because the very nature of currency exchange is to bet on when certain currencies will go up or down; so, it is easy to sell your position in a certain currency even when the value of that money is going down. A plummeting stock is more difficult to unload, but not impossible.

If you want to begin currency tranding, try to set aside some money and open an account with an online broker. Start slowly, then as you get the hang of it, work your way up to larger trades and higher volume. However, do not gamble your nest egg on currency trading because inexperienced traders can lose everything they have rather quickly in spite of the relative safety of the Forex market.

Jim Pretin is the owner of www.forms4free.com, a service that helps programmers make a free HTML form and download formmail

Quick Forex Ideas



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Although the role of the Forex broker is relatively redundant as a result of technological advancement and increased awareness, we cannot completely underestimate his role. The new paradigm shift has had something of a democratizing effect on the financial markets, and in the years that have followed a plethora of banks and brokerages have extended the range of their services to a new market by packaging up their online trading systems for the retail market, enabling the more modest investor to trade from their own computer screen - even on the previously out-of-reach currency markets. This is where the real role of Forex broker starts.





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Intro to Forex Fundamental Analysis

The best course of action to take sometimes isn�t clear until you�ve listed and considered your alternatives. The following paragraphs should help clue you in to what the experts think is significant.

FOREX traders almost always rely on analysis to make plan their trading strategies. There are two basic types of FOREX analysis � technical and fundamental. This article will look at fundamental analysis and how it used in FOREX trading.

Fundamental analysis refers to political and economic conditions that may affect currency prices. FOREX traders using fundamental analysis rely on news reports to gather information about unemployment rates, economic policies, inflation, and growth rates.

Fundamental analysis is often used to get an overview of currency movements and to provide a broad picture of economic conditions affecting a specific currency. Most traders rely on technical analysis for plotting entry and exit points into the market and supplement their findings with fundamental analysis.

Currency prices on the FOREX are affected by the forces of supply and demand, which in turn are affected by economic conditions. The two most important economic factors affecting supply and demand are interest rates and the strength of the economy. The strength of the economy is affected by the Gross Domestic Product (GDP), foreign investment and trade balance.

Indicators

Various indicators are released by government and academic sources. They are reliable measures of economic health and are followed by all sectors of the investment market. Indicators are usually released on a monthly basis but some are released weekly.

Most of this information comes straight from the Forex Fundamental Analysis pros. Careful reading to the end virtually guarantees that you�ll know what they know.

Two of the most important fundamental indicators are interest rates and international trade. Other indicators include the Consumer Price Index (CPI), Durable Goods Orders, Producer Price Index (PPI), Purchasing Manager�s Index (PMI), and retail sales.

Interest Rates - can have either a strengthening or weakening effect on a particular currency. On the one hand, high interest rates attract foreign investment which will strengthen the local currency. On the other hand, stock market investors often react to interest rate increases by selling off their holdings in the belief that higher borrowing costs will adversely affect many companies. Stock investors may sell off their holdings causing a downturn in the stock market and the national economy.

Determining which of these two effects will predominate depends on many complex factors, but there is usually a consensus amongst economic observers of how particular interest rate changes will affect the economy and the price of a currency.

International Trade � Trade balance which shows a deficit (more imports than exports) is usually an unfavourable indicator. Deficit trade balances means that money is flowing out of the country to purchase foreign-made goods and this may have a devaluing effect on the currency. Usually, however, market expectations dictate whether a deficit trade balance is unfavourable or not. If a county habitually operates with a deficit trade balance this has already been factored into the price of its currency. Trade deficits will only affect currency prices when they are more than market expectations.

Other indicators include the CPI � a measurement of the cost of living, and the PPI � a measurement of the cost of producing goods. The GDP measures the value of all goods and services within a country, while the M2 Money Supply measures the total amount of all currency.

There are 28 major indicators used in the United States. Indicators have strong effects on financial markets so FOREX traders should be aware of them when preparing strategies. Up-to-date information is available on many websites and many FOREX brokers supply this information as part of their trading service.

Take time to consider the points presented above. What you learn may help you overcome your hesitation to take action.

By Matthew at http://forex-resource-pro.com/

Forex Snippets

foreign exchange calculator



Forex, FX and the Forex market are some common abbreviations for the Foreign Exchange market. Actually it is the largest financial market in the world, where money is sold and bought freely. In its present condition the Forex market was launched in the seventies, when free exchange rates were introduced, and only the participants of the market determine the price of one currency against the other proceeding from demand and supply. As far as the freedom from any external control and free competition are concerned, the Forex market is a perfect market.
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foreign exchange risk



Yes, but as a position trader I never use tight stops. Same goes for trailing stops. All very far away from the market not to be taken out by meaningless market noises. Initial stop is always 1% of my total equity, and never commit the whole position at a go but always scale in and scale out.
You can avoid your problem in most cases by leaving the market always by trailing stops, i.e., do not set the profit target. So, any winning trade must be held as long as market does not tell you to leave by hitting your trailing stops. When you enter the market by market signals and leave by stops or trailing stops, it solves the most difficult part of decision making process rather easier for traders.

USD/JPY HINTS
One of the silly rules of thumb in USD/JPY trading is it rarely moves 700-800 pips in a row without 200 pips or more correction in the middle and it almost always retraces back to 350 pips advance point from the start of its 700-800 pips move. All because of liquidity problem in Yen market.
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foreign exchange student



The Commodity Futures Modernization Act of 2000 (CFMA) made clear that the CFTC has jurisdiction and authority to investigate and take legal action to close down a wide assortment of unregulated firms offering or selling foreign currency futures and options contracts to the general public. The CFTC also has jurisdiction to investigate and prosecute foreign currency fraud occuring in its registered firms and their affiliates. The CFTC issued an advisory in 2001 that discussed these CFMA amendments to the Commodity Exchange Act (CEA), 7 USC 1, et seq.
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Forex Trading News From Around The World

European Mid Morning Update 31st March 2008

Mon, 31 Mar 2008 03:21:02 -0500
Incubation conditions are perfect…

Releases from Europe:
Prior Revised
Swiss SECO 2008 GDP Forecasts +1.7% +1.5%

February Forecast Actual
French Producer Prices (MoM) +0.5% +0.4%
French Producer Prices (YoY) +4.9% +4.9%
Italian PPI (MoM) +0.5% +0.7%
Italian PPI (YoY) +5.2% +5.7%
Euro-zone M3 (YoY) 11.5% 11.3%

No surprises from the European data releases so far this morning but there’s plenty to come albeit that nothing is likely to spring much of a surprise. Italian PPI was a touch firmer than forecasts which will keep Trichet vigilant but more emphasis will be placed on this week’s CPI numbers.

The Dollar consequently has remained within Friday’s ranges with the market beginning to give up hope that something will push the boundaries today.

The following economic releases are due today:

March
Euro-zone CPI (Est) (YoY) +3.3%
Italian CPI (P) (MoM) +0.3%
Italian CPI (P) (YoY) +3.1%
Euro-zone Business Climate Indicator 0.70
Euro-zone Consumer Confidence -12.0
Euro-zone Economic Confidence 100.0
Euro-zone Industrial Confidence 1.0
Euro-zone Services Confidence 10.0
U.S. Chicago PMI 46.5

The week has begun relatively quietly with subdued numbers from both Australia and Japan. The latter faces a stronger test tomorrow when the BOJ’s Tankan report is expected to show a substantial decline in corporate outlook as the combination of a stronger Yen and weaker demand threatens to force a hemorrhaging of the country’s export strength.

There are even one or two suggestions of softening in Europe also as the retail PMI’s provided a soggy outlook caused by consumer’s reactions to the threat of higher food and energy prices eating into their wealth.

Recessions are commonly a result of consumers protecting their wealth as they react to destabilizing factors around them. Right now we are seeing how higher credit spreads, tighter credit requirements and ballooning prices provide a spreading dis-ease. Indeed the symptoms are infectious.

The Fed and the U.S. administration have already reacted to this by cutting rates and forcing through fiscal and mortgage plans. The rest of the world has looked on and declared that they are not in the same boat.

Indeed, right now they are right. However, just 10 months ago the U.S. would have said the same. The onset of the symptoms has been more rapid than expected in the States.

While the ECB appears to remain aloof it is quite aware of the risks. It continues to inject liquidity when required and has pulled back sharply from a tightening in monetary policy. It may emit an air of confidence but its actions belay more caution.

If the rest of the world is going to catch the same dis-ease from the States it will come through the consumer. Oil prices and inflation provide the incubation conditions. Combined with persistent tight credit conditions, any lack of confidence in the consumer is going to stem the blood flow from industry.

We can’t say with any confidence that a collapse will occur. However, Japan is already very vulnerable with the strong Yen and reduced export demand. Any LBO failures in Europe and the result could be more devastating that SARS, bird flu and AIDS.

Note important support and resistance areas:

USDJPY EURUSD USDCHF GBPUSD
Res: 100.37-64 1.5901-07 1.0064-08 2.0028-48
Res: 99.80-15 1.5815-37 1.0005-23 1.9910-40

Spt: 98.81-30 1.5725-40 0.9910-15 1.9816-48
Spt: 98.37-54 1.5655-82 0.9846-79 1.9733-56

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