Forex is the backbone of all international capital transactions. Compared to the slim profit
margins rendered in other areas of commercial banking, huge profits are generally produced in a
matter of minutes form minor currency market movements. Some banks generate 60% of their
profits from trading currency aggressively.
Trading volume has been growing at a rate of 25% per year since the mid-1980s and therefore
it is not difficult to accept the notion that the currency market is one of the world fastest
growing industries. What used to require days to accomplish in Europe or Asia now only takes a
few minutes. Needless to say, technology has changed everything and millions of Dollars are
moved from one currency into another every second of every day. This is done by major banks,
through computers, and for the average investor with the touch of a computer key.
margins rendered in other areas of commercial banking, huge profits are generally produced in a
matter of minutes form minor currency market movements. Some banks generate 60% of their
profits from trading currency aggressively.
Trading volume has been growing at a rate of 25% per year since the mid-1980s and therefore
it is not difficult to accept the notion that the currency market is one of the world fastest
growing industries. What used to require days to accomplish in Europe or Asia now only takes a
few minutes. Needless to say, technology has changed everything and millions of Dollars are
moved from one currency into another every second of every day. This is done by major banks,
through computers, and for the average investor with the touch of a computer key.
Forex Education
Forex is the backbone of all international capital transactions. Compared to the slim profit margins rendered in other areas of commercial banking, huge
profits are generally produced in a matter of minutes form minor currency market movements. Some banks generate 60% of their profits from trading
currency aggressively.
Trading volume has been growing at a rate of 25% per year since the mid-1980s and therefore it is not difficult to accept the notion that the currency
market is one of the world fastest growing industries. What used to require days to accomplish in Europe or Asia now only takes a few minutes.
Needless to say, technology has changed everything and millions of Dollars are moved from one currency into another every second of every day. This
is done by major banks, through computers, and for the average investor with the touch of a computer key.
Transactions in foreign currencies take place when one countries currency is purchased (exchanged) with another countries currency. The price agreed
upon or negotiated for the currency purchased is referred to as the foreign exchange rate. Major commercial banks in the money market centers
throughout the world are responsible for the majority of foreign currencies bought and sold.
Unlike trading on the stock market, the Forex market is not conducted by a central exchange, but on the interbank market, which is thought of as an
OTC (over the counter) market. Trading takes place directly between the two counterparts necessary to make a trade, whether over the telephone or on
electronic networks all over the world. The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution
of trading centres means that the Forex market is a 24-hour market.
Currencies are quoted in pairs, such as EUR/USD or USD/CAD. The first listed currency is known as the base currency, while the second is called the
counter or quote currency. The base currency is the basis for the buy or the sell. For example, if you BUY EUR/USD you have bought Euros
(simultaneously selling US dollars). You would do so in expectation that the Euro will appreciate, strengthen, relative to the US dollar.
When trading the trader should determine if he is going to buy or sell. If the trader wants to enter a "short order", where they will profit if the exchange
rate falls they will click on the sell rate. Opposite holds true for someone who wants to purchase "long" currency, they will click the buy rate and look
for the currency to appreciate or exchange rate to go up.
Trading the currency market works similar to all markets, there are two prices for every currency pair. The difference between these two prices is the
spread, or the cost of the trade. In this example, the spread is three pips. On a mini account, a pip on the EUR/USD currency pair is worth $1.
MARGIN
profits are generally produced in a matter of minutes form minor currency market movements. Some banks generate 60% of their profits from trading
currency aggressively.
Trading volume has been growing at a rate of 25% per year since the mid-1980s and therefore it is not difficult to accept the notion that the currency
market is one of the world fastest growing industries. What used to require days to accomplish in Europe or Asia now only takes a few minutes.
Needless to say, technology has changed everything and millions of Dollars are moved from one currency into another every second of every day. This
is done by major banks, through computers, and for the average investor with the touch of a computer key.
Transactions in foreign currencies take place when one countries currency is purchased (exchanged) with another countries currency. The price agreed
upon or negotiated for the currency purchased is referred to as the foreign exchange rate. Major commercial banks in the money market centers
throughout the world are responsible for the majority of foreign currencies bought and sold.
Unlike trading on the stock market, the Forex market is not conducted by a central exchange, but on the interbank market, which is thought of as an
OTC (over the counter) market. Trading takes place directly between the two counterparts necessary to make a trade, whether over the telephone or on
electronic networks all over the world. The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution
of trading centres means that the Forex market is a 24-hour market.
Currencies are quoted in pairs, such as EUR/USD or USD/CAD. The first listed currency is known as the base currency, while the second is called the
counter or quote currency. The base currency is the basis for the buy or the sell. For example, if you BUY EUR/USD you have bought Euros
(simultaneously selling US dollars). You would do so in expectation that the Euro will appreciate, strengthen, relative to the US dollar.
When trading the trader should determine if he is going to buy or sell. If the trader wants to enter a "short order", where they will profit if the exchange
rate falls they will click on the sell rate. Opposite holds true for someone who wants to purchase "long" currency, they will click the buy rate and look
for the currency to appreciate or exchange rate to go up.
Trading the currency market works similar to all markets, there are two prices for every currency pair. The difference between these two prices is the
spread, or the cost of the trade. In this example, the spread is three pips. On a mini account, a pip on the EUR/USD currency pair is worth $1.
MARGIN
For positions open at 5pm EST, there is a daily rollover interest rate that a trader either pays or earns, depending on your established margin and position
in the market. If you do not want to earn or pay interest on your positions, simply make sure it is closed at 5pm EST, the established end of the market
day. Since every currency trade involves borrowing one currency to buy another, interest rollover charges are an inherent part of FX trading. Interest is
paid on the currency that is borrowed, and earned on the one that is purchased. If a client is buying a currency with a higher interest rate than the one
he/she is borrowing, the net differential will be positive and the client will earn funds as a result.
Open an Account and Get Started
With no commitment or cost, you can open a Virtual Trading Account. The account has the full capabilities of a "real" account including live market
rates, access to real-time market analysis, and the ability to execute trades off streaming prices. The virtual account (or Demo Account) gives you the
ability to learn about the forex markets and test your trading skills without any risk.
How to Trade Your Demo:
Use this time to make a plan...
1. Choose the right currency pair. Find out based on your risk parameters, which currency is best suited for your trading style. Some may be too
volatile and some to slow so decide which currency pair is most appropriate for your strategy and time frame.
2. Decide on how long you plan to stay in a trade. If you are an inter day trader, what is the average time of your trade, few minutes, couple of hours a
full day, swing trade (couple of days to a week).
3. Before you enter a trade you should also have clear exit plan. Place your stops and limits accordingly.
4. Know how much you are willing to risk and how much you are looking to gain.
5. Keep track of important news and technical levels, which may be tested within your time frame.
OPEN AN ACCOUNT
Now lets discuss Margin. The margin deposit is not a down payment on a purchase
of equity, as many perceive margins to be in the stock markets. Rather, the margin is a
performance bond, or good faith deposit, to ensure against trading losses. The margin
requirement allows traders to hold a position much larger than the account value. In the
event that funds in the account fall below margin requirements, the dealing desk's will
close some or all open positions. This prevents clients' accounts from falling into a
negative balance, even in a highly volatile, fast moving market. An example of how this
works is as follows. Lets say the trader opened 1 lot of the EUR/USD, his margin
requirement or Used Margin is $1000. Usable Margin is the funds available to open new
positions or sustain trading losses. If the equity (the value of his account) falls below
his Used Margin due to trading losses, his position will automatically be closed. As a
result, the trader can never lose more than he/she deposits.
Rollover
of equity, as many perceive margins to be in the stock markets. Rather, the margin is a
performance bond, or good faith deposit, to ensure against trading losses. The margin
requirement allows traders to hold a position much larger than the account value. In the
event that funds in the account fall below margin requirements, the dealing desk's will
close some or all open positions. This prevents clients' accounts from falling into a
negative balance, even in a highly volatile, fast moving market. An example of how this
works is as follows. Lets say the trader opened 1 lot of the EUR/USD, his margin
requirement or Used Margin is $1000. Usable Margin is the funds available to open new
positions or sustain trading losses. If the equity (the value of his account) falls below
his Used Margin due to trading losses, his position will automatically be closed. As a
result, the trader can never lose more than he/she deposits.
Rollover
| Copyright © 2010 Nor'East Forex, Inc. All rights reserved. Risk Disclosure |
Free $50,000 Practice Account
Fixed spreads from 1 PIP
Chosen by Forex Professional
No Obligation
Leverage up to 500:1
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Hedging, Scalping, EA Trading
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