Understanding Spot Forex Market (Part I)

By Ahmad Hassam

The spot forex market is an over the counter market. The spot forex market is a decentralized network of buyers and sellers. There is no physical central exchange that acts as a central clearing house.

Unlike the forex futures trading that is carried out through the exchange like CBOT, CME etc, over the counter in spot forex means that the buyers and sellers make a binding contract with each other after agreeing on the price and this is not carried through an exchange.

Forex traders in the spot forex market carry out their activities by dialing directly with one another or through brokers on telephone or internet. There are several advantages of a central exchange like the counterparty risk for the trades is reduced. There is trading anonymity something that big players want to hide their trails.

For all the practical purposes, the spot forex market is unregulated and free of distorting red tape. The sheer size of the daily trading volume something like $3 trillions means that the government and the central banks interventions have little long term effect on prices. Chicago Mercantile Exchange (CME) along with Reuters launched the worlds first centrally cleared global forex market place in 2007; FXMarketSpace. CME will act as the clearing house and guarantee the performance of all the contracts for both buyers and sellers in this centrally cleared system.

Only sophisticated investors with net worth of more than $20 Million can trade on the FXMarketSpace. Unfortunately FXMarketSpace is an institutional trading platform and is not open to retail forex traders.

There are many players involved in the spot forex market. Recently NFA (National Futures Association) had also passed certain new rules that make it more skewed against the small investor like you and me. The spot forex market is still skewed against the retail forex trader. Why is it so?

The spot forex market has always been an unfair playing field for the big boys. It became possible to introduce trading platforms for the retail investors with the advent of the internet. Previously spot forex trading was the playfield of the big banks, multinationals and the hedge funds.

The forex market differs from other traditional financial markets. Things deemed illegal in most of the other financial markets are simply considered part of the game in the forex market. Insider trading, front running, price shading etc are all regularly seen in forex trading and have no legal repercussions whatsoever. Retail spot forex is seeing a lot of growth in the recent years. A mushroom growth of online forex brokers took place. Many did not have even enough capital with them to start the brokerage business. Most of these forex brokers behave like bucket shops. But this is the way; the spot forex market has developed over the years.

It is essential for you that you understand the nature of the spot forex market and who are the main players. Why they trade forex? What type of advantages they have over the retail forex traders?

Over the counter (OTC) means that the spot forex market is spread all over the globe with no central location! Over the counter nature (OTC) of the spot forex market means that currency transactions do not take place at any single place. No government oversight and no central deal book to compare trades means that the banks can pretty much do whatever they want to their unsuspecting customers.

Players in the spot forex market range from those who trade billions of dollars daily to those who only trade just a few thousand dollars daily. A players access to the spot forex market depends on the quantity of transactions of large amounts of money. Now who are the main players in the forex market against whom you as a retail forex trader will be competing? - 23162

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try These 1500 Pips A Day Forex Signals From Heaven. Develop Your Own Forex Trading System!

Studying to Trade Foreign Exchange Like a Professional

By Marc Carson

Here's a secret that may possibly amaze you: There is not to much to study to learn forex trading. Better: Studying to trade FX like a pro can be done in your spare schedule...

Before Studying to trade FX, you must spend some time to familiarize yourself with what the forex market is. The forex market is 36 of the worlds currencies being traded against each other. In the region of 3 trillion US dollars is traded each day. Moreover this enormous international market is also the most accessible, because it's open 24/7.

One of the most exciting feature of the forex market is that it's not restricted like some markets. In fact it is one of the easiest markets on the planet where you can trade anytime, anywhere. It's very possible to achieve remarkable financial profits.

One of the advantages of FX trading is that you don't need a large amount of capital in order to trade Foreign Exchange. A small amount of capital can be sufficient if you use leverage, a procedure that can encourage your trade power and your return on investment (ROI).

Basically "leverage" means you have the capability to control a greater amount of capital using a small amount of real capital and borrowing the rest from your FX broker. The FX trading leverage can be very extreme, up to 400:1. This is a proven technique successfully implemented in their strategies by many traders.

One of the most compelling techniques for successful FX trading is to have your orders in place. And what are the most important orders? It's simple: The stop loss order and the limit order. This very necessary technique will protect you from large losses and will allow you to endure bad trading trends and become successful.

The best way to make sure you are learning to trade FX like a Professional is to obviously understand the nuts and bolts of buying and selling the currency pairs. Again, this is a uncomplicated yet often overlooked strategy: You cannot buy just for the sake of trading - you have to trade only with the expectation that the currency you intend to trade is going to go up in terms of profit to you. - 23162

About the Author:

Learn more about forex free trading. Stop by Marc Carson's site where you can find out all about forex free trading and what it can do for you.

Currency Trading Online-balance The Advantages And Disadvantages

By John Eather

Available online currencies: The list of online currencies available for trade on the foreign currency market is almost endless depending on the program, software or interface you use. The most commonly traded currencies in the world are US Dollar/Yen, Euro/UD Dollar, GBP/US Dollar, US Dollar/ Can Dollar, US Dollar/ Franc and Australian Dollar/ US Dollar.

Trading rates: The software will come standard with a trading rate calculator in real-time value. However it's important to also know the formula use to calculate the conversion rates. The formula is as follows Y-to-X exchange rate =1/ X-to-Y exchange rate.

Pro's to online: The biggest advantage to online trading is that the market is open for business twenty-four hours a day, seven days a week. The favourability of the markets' liquidity is even more attractive if accessible by a mere click of a mouse. Order limits and strategies to curb loss can be setup on the system. Gearing or leveraging allows for great profit opportunities while still keeping risk minimal. Bear markets can also be used turned into bull markets by use of short and long positions depending on pair values.

Disadvantages to online: To be successful in the foreign currency markets, you have to have a good knowledge and understanding of the market type. Do not be an impulsive buyer and seller, have a strategy or plan and follow it to a t. Do not transact with funds you do not have or are willing to possibly loose. Volatility is the greatest disadvantage. Your risk and reward must balance. Significant moves occur everyday in this market making prices extremely sensitive. Leverage can also work against you with margin calls taking place when risk is too high for your account size.

Be realistic: If you are realistic with your possible rewards and risks you will be an excellent trader. The fact that transactions are conducted spot, over-the-counter make them loose cannons. You work directly with possibly more experienced counter parties with no protection from clearing houses or brokers. Due to the skipping of clearing houses, no guarantees of delivery and payment are furnished. The purpose mainly for forex markets are to speculate, thus trader buy and sell at an extremely fast pace with only profits in mind. Possibility of total cash balance loss is very real, with the smallest of movement in the market. - 23162

About the Author:

Want to find out more about currency trading online, then visit John Eather's site on how to choose the best forex trading robot for your needs.

How To Select A Forex Broker?

By Kris Deaney

There are many Forex brokers out there in the industry that can allow people to trade almost straight away. However, the market is unregulated and meaning the operations of the brokers is unregulated.

Due to this issue it means that a lot of brokerages really have a business model that works in an opposite way to what the trader would like.

Due to of this, it is important to realize what to search out for when choosing a broker. The primary issue to be careful of is how trades are actually executed. Just brokers that can provide instant trade execution ought to be considered.

A lot of brokers use this 'slippage' to their own benefit, which is always at a disadvantage to a trader.

Also, people need to look at the spreads that brokers work on. Spreads will increase during extreme volatility within the market, but traders must just opt for brokerages that operate with low average spreads. The spread is how much it costs to place a trade, basically the difference in the purchase and the sell value at any instant.

Many traders do not really look at the spread. It's only if they really add up all of the trades they have executed and look at what it has cost| them to make each of the trades, do they understand the cost involved and subsequently the potential impact on their trading profits.

Traders ought to also look for organizations that may offer them with a professional trading surrounding and a full set of research tools and correct financial information and real time updates. This allows a trader to trade with the facilities of any bank trader.

Another issue that needs careful thought is when the trader truly starts to use actual money. If a trader rushes into it while not really knowing what they're doing, or while not giving themselves the right time to develop a strong trading strategy, then it can have significant ramifications.

Usually traders should take time to understand the market and educate themselves in how it works, before committing their own money. Brokers who provide their traders practice accounts enable traders an excellent surrounding to expand their experience while not risking losing their money.

A trader will trade in precisely the same method as actual trading, just that the wins and losses are virtual, rather then real.

Of course, whilst this is often a sensible beginning situation, the trader additionally has to comprehend that they are likely to act differently when the emotions of trading with proper cash come into play.

There also must be a learning curve where a trader trades with lesser amounts of actual cash, before making the decision to extend the capital, or leverage involved in their trading. - 23162

About the Author:

To read completely independent Reports On The Best Brokerages, just go to Easy forex Reviews.

Forex And Other Financial Markets (Part I)

By Ahmad Hassam

The New York time between 3:00 PM EST to 7:00 PM EST is best suited for scalping with the counter trend strategy. Off hours between 3:00 PM and 7:00 PM EST is when all the world banks are closed. The U.S. banks are closing their doors and the Asian banks have not yet opened. This is a great time to scalp the market using a counter-trend strategy, because no larger banks are moving money (i.e. the markets) at that time. Just as with the London close, there is no set way in which the New York afternoon market plays out. On more active days where prices have moved significantly, the lower liquidity can cause additional outsized price movements. So traders just need to be aware that lower liquidity conditions tend to prevail and adapt accordingly.

Why do investors need to exchange their domestic currencies for foreign currencies? Many want to invest in foreign assets. For that they need to convert their domestic currency into foreign currency. Companies involved in import and export business need foreign exchange to order new consignments or make payments. Multinationals need foreign exchange to repatriate profits. Big banks need foreign exchange and the list goes on. The forex market does no exist in a vacuum. You may have heard of other markets that exist like the gold, stocks, bonds, oil, futures and commodities.

There is a fair amount of noise and misinformation about the supposed relationship among these markets and the individual currency pairs. You can always find some correlation between two markets over time.

However, always keep this in kind that all the various financial markets are markets in their own right. All these individual financial markets function according to their own internal dynamics based on data, news, positioning and sentiment.

You should view each market in its own right perspective and trade accordingly. These markets will occasionally overlap and display varying degrees of correlation due to various underlying economic factors.

A good trade will always keep an eye on whats happening in the other markets as well. In fact there is a theory that in the 21st century, savvy traders will keep on shifting their investments from one market to another to maximize their returns. In other words, they will follow the money trail. Lets discuss some major financial markets and see what conclusions we can draw for currency trading. Its always important to be aware of whats going on in the other financial markets.

Gold: Gold is considered to be an alternative to the US Dollar and a hedge against inflation. Gold is commonly viewed as a store of value in times of economic and political instability and uncertainty.

Over the long term, the relationship between Gold and US Dollar is mostly inverse or negative. A weaker US Dollar is generally accompanied by higher gold prices and a stronger US Dollar is accompanied by lower gold prices.

In the short term, the relationship between gold prices and US Dollar may not be as solid as it has been historically in the long term. This makes short term relationship between the gold prices and US Dollar generally tenuous. However, in the short term, each market has its own dynamics and liquidity. Overall, the gold market is much smaller than the forex market. There is only a limited and finite quantity of gold. No major gold mine has been discovered in the past many decades. Only the discovery of a major gold mine can bring the prices of gold right now.

If you are a currency trader than it is not difficult for you to trade gold also! Al most the same technical analysis tools are used in gold trading as in currency trading. Extreme movements in the gold prices tend to attract currency traders attention and usually influence the US Dollar in a mostly inverse fashion. At the same time, gold traders tend to keep an eye on whats happening to the US Dollar.

Oil: The global economy runs on oil. In 2008, crude oil prices skyrocketed from $60-70 to almost $150. It was being predicted at that time that oil prices will reach $200. It made the whole world jittery. Oil prices rise is a cause of inflation in almost every economy in the world. Then all of the sudden the bubble burst in a few months. Were the hedge funds involved in the sudden increase in the oil prices and than their collapse? A lot of confusion is usually spread on the relationship between oil and US Dollar and other currencies like CAD and JPY. Correlation studies show no appreciable relationship to that effect in the short run which is where most of the currency trading is focused. The idea behind these theories is that if the country is an importer of oil, its currency will be hurt by the higher oil prices and helped by lower oil prices. - 23162

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try These 1500 Pips A Day Forex Signals From Heaven. Develop Your Own Forex Trading System!