Currency trading or foreign exchange has grown to be the biggest financial market in existence today.
Currency markets never sleep and several trillions dollars are traded everyday, making currencies the world’s biggest and most exciting investment market.
In recent years, mechanical currency trading systems, using technical analysis to predict trend movements have become increasingly popular as a way of locking into, and profiting from the longer term currency trends.
Making Money from the Longer Term Trends
Currency trading systems are ideal for making profits from longer-term currency trends, and they occur in all currencies.
The longer-term trends in FOREX markets reflect the health of the economy.
Currencies that offer good trends and liquidity include:
- The US Dollar
- Swiss Franc
- Japanese Yen
- British Pound
Many traders like to follow currency research in the form of newsletters and currency trading systems from vendors and then act upon the signals they provide.
If you are doing this make sure you:
1. Have full confidence in the method they are using to generate the signals and know as much about the logic as you can.
2. You also should study trading history to see how successful trades have been and make sure you are happy with the risk reward.
3. Keep in mind if you are following signals or trades you need to follow them EXACTLY and this means having full confidence in the method used.
By contrast, the futures market is fragmented among hundreds of types of commodities listed at dozens of exchanges, and equities market volume is spread across some tens of thousands of listed stocks.
The deep liquidity of the forex market ensures that bid/ask spreads are typically very tight, and the market can absorb large trades quickly and easily. Learn More…
24-Hour Trading no matter where you are located
You get consistently tight bid/ask spreads, day or night, because the currency market offers around-the-clock liquidity. As a trader, this allows you to react to economic and political events immediately. This below some parameters :
The forex market’s size and nearly non-stop activity means that it tends to trade in a more orderly fashion than futures markets. Dangerous trading gaps and limit moves are all but eliminated. You’ll ordinarily be able to get in and out of positions with ease.
No Market Manipulation
Thin stock and futures markets can be pushed up or down by specialists, market makers, commercials, and locals. Given the sheer size and depth of the spot FX market, however, real buying/selling by banks and institutions is required to move prices. Any attempt to manipulate the forex market usually is futile.
Trade FX and Lower Your Transaction Costs
Every trader should know that transaction costs can reduce profits or exaggerate losses. Due to the decentralized, electronic nature of the FX market, transaction costs are far less than the costs associated with trading either stocks or futures.
No Exchange Fees
The absence of any centralized exchange, such as the NYSE or the CME, means that there are no exchange fees with FX. Whereas equity and futures markets take small pieces of each transaction, FX is an over-the-counter market, which means that participants deal directly with one another, typically via the Internet.
FX costs are further reduced by the efficiencies created by a purely electronic marketplace that allows clients to deal directly with other traders or a dealer, thereby eliminating middlemen, brokers, commissions, and ticket charges. There are no commissions charged when you trade FX.
Every financial market has a spread between the bid price and the offer price. In futures and option markets, current bids and offers often aren’t displayed, so the real cost of the trade is hidden. By contrast, in the FX market, you can always see current bids and offers, so you’ll always know the true cost of the trade.
Tight Bid/Ask Spreads
Because the FX market is global, continuous, and always liquid, traders benefit from tight, competitive pricing both day and night, making this an excellent market choice for aggressive short-term traders and longer-term position traders alike.
Free Streaming Quotes
Because FX is a decentralized marketplace, real-time, streaming prices are absolutely free. Real-time, streaming futures data, in particular, has always been exorbitantly priced, and as more futures exchanges convert from membership organizations to for-profit public enterprises, it is reasonable to assume that such costs may increase. This trend is likely to make the FX market’s cost advantage even more pronounced.
24-Hour Currency Trading
Major Financial Center Chicago Time GMT
Tokyo Open 6:00 PM 00:00
Tokyo Close 3:00 AM 09:00
London Open 2:00 AM 08:00
London Close 11:00 AM 17:00
New York Open 7:00 AM 13:00
New York Close 4:00 PM 22:00
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Forex Market Overview
Many active traders have come to love forex because of its strong advantages and exciting opportunities. Not sure how the forex market works? Here’s a quick overview to help you get started.
Factors Effecting the Market
Currency prices are affected by a variety of economic and political conditions, such as interest rates, inflation, and political stability. Moreover, the central banks of various governments occasionally intervene in the forex market to influence the value of their currencies, either by flooding the market with their domestic currency in an attempt to lower the price, or conversely, by buying in order to raise the price. Any of these factors, as well as large market orders, can cause high volatility in currency prices. However, the size and depth of the forex market makes it practically impossible for any single market participant to “drive” the market in one direction for any length of time.
Investors want to be sure that they are investing in a solid economy that is achieving steady growth. Currency traders looking to assess the economic growth of a country will look at unemployment, trade, and GDP data. We can analyzing strong support resistance level by reading value from leading and lagging economics indicators beside some forex candlesticks basics from at least one hour time frame. You can learn and practice about identifying supply demand zone in analyzing strength economic growth in your charts on your metatrader.
Money tends to follow interest rates. If interest rates go up, money will flow into the country from all over the world as investors seek to capitalize on higher returns. To determine whether interest rates will rise or fall, investors pay attention to economic inflation indicators, as well as speeches by influential figures. Generally, the timing of interest rate moves is known in advance. They take place after regularly scheduled meetings by the Bank of England, The U.S. Federal Reserve, European Central Bank, Bank of Japan, and other central banks.
Election turmoil, changes of government, high unemployment and international conflict all make investors cautious to put their money in a given country. Investors will watch for major news that comes out of a country.
Forex is a Decentralized, OTC Market
The forex market, unlike other financial markets, has no physical location or central exchange. Rather, it’s an over-the-counter (OTC) or “Interbank” market, due to the fact that participants deal directly with one another via the telephone or an electronic network. The forex market is unique in that there’s live, active, continuous trading 24 hours per day for most of the week. Somewhere around the world, there’s always a major financial center open where banks, hedge funds, international corporations, and individual speculators are trading currencies. Essentially, foreign exchange trading follows the sun around the world, allowing traders to buy and sell currencies whenever it’s convenient, or whenever the need arises. The world’s currencies are on a floating exchange rate and are always traded in pairs, such as Euro/Dollar or Dollar/Yen. Forex transactions always involve the simultaneous purchase of one currency and sale of another – in other words, in every open position, an investor is long one currency and short the other.
Forex traders express a market position in terms of the first currency in the pair. For example, a trader who has bought Dollars and sold Yen (USD/JPY) at 103.99 is considered to be “long” the USD/JPY (pronounced “Dollar/Yen”). Quoting convention is to display one unit of the first currency in the pair expressed in terms of the second currency in the pair. By way of example, if the USD/JPY pair is quoted as 1.6433, this means that $1 is the equivalent of 1.6433 Japanese Yen.
Regulation of the Forex Market
The Commodity Futures Modernization Act of 2000 (CFMA) placed responsibility for overseeing and regulating the foreign exchange market with the Commodity Futures Trading Commission (CFTC). Generally, if a brokerage company offers over-the-counter (OTC) foreign exchange trading to retail customers, it must be registered as a Futures Commission Merchant (FCM) is subject to strict capital requirements. You can join in demo account first before taking in real account with real money or even you can start with free $5 to start in our tested and top rated forex brokers that all have a good reputation and reviews.
Currency Trading Research – To help you with Entry and Exit Levels
If you don’t want to follow someone else and you wish to make your own trades then there is plenty of currency trading research services on the net.
There are services that you can pay for, but much of it is available free and in many instances, this information is the best.
Many of the larger brokers and banks have great research and cover both technical and fundamental factors affecting currency movements.
Do a search, and you will be able to find good daily, weekly and monthly currency research reports.
This means a good currency trading training program will help you make connections with people who can help you succeed in the currency trading game. So good luck and have fun and hopefully make some money.
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