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    What FOREX Leverage Is

    General 01.02.2012 No Comments

    Leverage is one of the major reasons why the foreign exchange market is appealing to a lot of traders. With the foreign exchange market, it is almost common for traders to get leverage that is much higher, as compared to trading in the stock market.

    Although the term leverage is frequently mentioned when talking about FOREX, there are still a lot of traders who do not really understand what the term means. A trader who does not have complete understanding of the term will not be able to use it to his full advantage.

    Leverage refers to borrowing a specific amount of money that will then be used for investment in something. In the foreign exchange market, the broker usually lends the money to the trader. It is said that leverage in the currency market is higher because a trader can start with – and control – large amounts of money. For instance, a trader is required to deposit one percent of the value of the whole transaction. If he plans to trade a hundred thousand US dollars, then his required deposit would be a thousand dollars.

    When trading in the foreign exchange market, a trader is given freedom, as well as flexibility, to choose his leverage amount. The trader can base his leverage on his personality, his trading style or his preferences in money management. Every trader should keep in mind that too much leverage can also kill his investment or trade. An investment that has high leverage can cause his trading account to be depleted quickly, if the trade goes against him. Thus, when planning on how much leverage to have, it would be wise to not have too little of it nor too much.

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  • Part-Time FOREX Trader Strategies

    General 25.01.2012 No Comments

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    Not all traders who are involved in the foreign exchange market trade full-time. There are those who trade only at a part-time capacity. Often, they do it on their spare time, like during lunch or at night.

    The problem with part-time FOREX trading is that there are a lot of missed opportunities for the trader, simply because the foreign exchange market is very fluid and changes or moves frequently in a short period of time. A part-time trader will not be able to enter his positions successfully because he is unable to monitor the movement of the market most of the time. Thus, in order to have more success in the foreign exchange market, despite being a part-time trader, one should have an effective trading strategy implemented.

    One strategy implemented by part-time FOREX traders is the strategy of knowing their markets. How this works is by identifying those active markets at those specific times that the trader can participate in the market. A part-time trader should be more than familiar with the currency pairs actively traded at those specific times when he is able to make his positions. Also, the trader should know what time currency markets, at least the major ones, open as these will help in choosing what major currency pairs to place a position on.

    Another strategy part-timers in the currency market are implementing is the Stop-Loss Orders strategy. If a part-time trader only has an hour or two to trade in a day, he can use his computer to function as a “trading partner”. Meaning, a trader can make use of a trading program that allows him to be aided by information technology in his dealings in the currency market.

     

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  • What Traders Can Do to Not Lose Money

    General 17.01.2012 No Comments

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    The FOREX market attracts all kinds of traders from all over the world. Much of the market’s appeal is the ease with which one can trade FOREX. However, with its leverage, relative low costs and round-the-clock sessions, one may also soon discover that it is also easy to lose money from trading in the currency market.

    FOREX traders must constantly be aware of the movements in the market in order to ascertain if they will end up taking a loss or profit from their trade. There are also some ways in which one can avoid losing money in the currency market.

    If you are new to the FOREX market, one good strategy to implement would be to use a practice account. This is also called a demo account. With a demo account, you can place theoretical trades that will not need to have funds. Basically, a demo account will allow you, the trader, to become skilled at techniques in order entry and learn how the markets work.

    Another strategy to avoid losing money in the currency market is to keep your charts clean. Once you already have an account, you might be tempted to make use of all the technical tools for analysis that are offered by the platform. However, keep in mind that it is always better to keep tools for analysis at a minimum in order for it to give you good results.

    Another strategy that can help when you are just starting is to trade with small amounts of money at first. Because you are still in your first few trading transactions, there is a very high possibility that you will lose money. Thus, it is better to lose small amounts of money than lose large amounts, especially when you are still a beginner trader at the currency market.

     

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  • The US Dollar in the Foreign Exchange Market

    General 23.12.2011 No Comments

    The U.S. dollar is one of the most important currencies in the foreign exchange market. Its position in the currency market is one that cannot be ignored. Because the U.S. dollar represents about half of the volume of currencies being traded, it is a reserve currency that is dominant worldwide. It is even the currency used for almost all international transactions.

    This is not a surprising event, as it is well known that the United States is considered to be the biggest single-economy worldwide, with China coming in at second. Thus, it would only be fitting that the U.S. dollar is in the position that it is in right now.
    Thus, it would only be fitting that the U.S. dollar is in the position that it is in right now. If you are interested in investing in the U.S. dollar consider using a forex trader like New York based FXCM.

    However, it was not always this way in previous years. Before World War II happened, it was the British Pound that was the most dominant reserve currency in the world. After the war however, the United States dominated the economic landscape, which is why the value of the U.S. dollar increased.

    The United States’ central bank is known as the Federal Reserve. Like a central bank, the Federal Reserve implements a balance to control inflation and encourage the growth of the economy. Because the U.S. economy is very large, as well as its bond market, whatever actions the Federal Reserve makes can have an unequal effect on the different interest rates worldwide.

    Currently, and it seemingly for many years to come, the U.S. dollar will still be maintaining its preeminent position as being a reserve currency. This is largely because it is very unlikely that another major economy will go back to using a currency system that is based on gold. This does not mean however that the valuation of the U.S. dollar will be fixed as well. The value of this currency will be determined by the United States’ economic health and the ability of the US government to address problems, as well as a national debt that is growing.

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  • The Martingale Trading Strategy

    General 06.11.2011 No Comments

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    In the world of foreign exchange trading, agents and brokers make use of different strategies in order to be successful in their trading. One such trading strategy is the Martingale Trading Way.

    This trading strategy was widely practiced in the city of Las Vegas, particularly in its gambling halls. According to FOREX experts who know of this strategy, the Martingale way of trading can be very profitable, yet can also very risky. With this trading strategy, the theory is that if a person’s pocket is deep enough, his success rate is almost a hundred percent.

    In fact, the Martingale way is the primary reason why there are betting maximums and minimums in casinos. It is also the strategy behind roulette wheels having two markers, the 0 marker and the 00 marker, as well as the odd-even bets.

    With the high possibility of success rate for this trading strategy however, comes a sense of impossibility, as no one ever has wealth that is infinite. It would be very difficult to achieve profitability at a hundred percent, as it would be very difficult to have limitless money. With the original Martingale strategy, a number of experts would say that the trading risks involved far outweigh its potential gains.

    This is not a hopeless case however, as there are ways to improve the chances of increasing the potential gains in a Martingale strategy. Especially when applied to currency trading, an important tip in applying the Martingale strategy is to “double down,” so that you necessarily lower down your average, or mean, entry price. The Martingale strategy can be used in the currency market primarily because although currency can be devalued, a country is very rarely zeroed out of money.

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  • Japan’s Failure to Stem Rise in Yen Value Pressurises the Dollar

    General 09.09.2011 No Comments

    This week the dollar hit almost rock bottom levels as it became increasingly apparent that Japan’s attempt to curtail the ballooning value of the Yen was turning out to be a dismal failure. The moves taken by the Japan to transfer funds to Japan Bank for International Cooperation had no effect whatsoever. This hardly came as a surprise to analysts and traders who anticipated as much.

    It is not surprising that investors are currently more risk averse that usual given the current sentiments over the global economy. To be or not to be seems to be the question when it comes to the possibility of additional quantitive easing by the Federal Reserve. However the braver will no doubt see that this is a great time to invest in the dollar as quantitive easing has probably been, at least to a large extent, discounted already.

    It is an ill wind that blows no good and the current focus on dollar woes is sending a breeze of abatement on the pressures on the Euro; however it is a gentle breeze and one that will soon blow over.

    Certainly the euro has been holding up well considering the dire state of the European economies. Often there is little rationality in long term positions as the possibilities of short terms gains dominate. Whilst many economic analysts are going as far as predicting the total collapse of the euro, the currency is surprisingly popular.

    Is the danger of a euro meltdown being overstates? We think not. It is becoming increasingly apparent that a single currency Europe is unsustainable whilst each individual state has its individual economy. The only way out of the current crisis is to form a United States of Europe where every state has a uniform economy. Should that happen the long term benefits on the euro would be substantial, but achieving such an outcome would be a very painful experience.

    In the interim we wait with baited breath on a further announcement by the US Federal Reserve on additional quantitive easing.

  • Tips for currency trading

    General, Starting Out 13.08.2011 No Comments

    Currency trading, otherwise known as foreign exchange, or in shorter terms, forex, is the exchange in currencies at determined prices. It is the largest financial market on the Earth, with lucrative profits to be made across the world in decentralised 24 hour markets. There are many methods to this trade, which is rife in speculation and leveraged deals, which has the potential to greatly magnify any deals, though of course this means the risk involved is greater in proportion.

    A key must to forex currency trading is a real understanding and analysis of the markets, which is many traders greatest pitfall. There is more speculation in this market than any other, and speculating without the understanding of the chosen currencies and the potential shift in their margins is extremely risky.

    Consider your plan and remember that differing currency pairs can be more or less volatile in their margins, so choose the right one and decide how long you want to run after purchasing a currency with targets in mind. Use everything at your disposal too, including any forex charts and current news, these are ever changing, so keep watching them. It is important also not to make the same mistakes, so make an accurate and reasoned diary of your decisions. Managing risk is critical too, and parameters can be set to give trading strategy discipline. To prevent great loss, stop/loss orders can be set, and limit orders can seal your closing position to prevent any emotional decision making.

    This should all be considered before even looking at the exchange rates, after this, technical and fundamental analysis should then come into consideration. Technical analysis is the researching of currency pricing, and in which direction the rates are moving. Fundamental analysis is the wider picture and considers socio-economic and political influences that drive supply and demand. This can involve indicators such as economic growth rates and interest rates which should be factored into overall planning. Overall, a clear, concise plan with reasoned decision making on the currencies with which a trader operates with will always provide a strong fundamental base for success.

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