The Forex Nitty Gritty

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Archive for December, 2010

How to Trade Forex Online

Posted by TFNG Admin On December - 23 - 2010

If you are going to trade Forex online you will want to know how to trade Forex online successfully. Online trading puts the trader closer to the action but does not change the basics of trading. How to trade Forex successfully requires a firm grasp of economics, monetary policy, and international policy, and politics involving the countries whose currencies one trades. How to trade Forex online successfully is to work at a trade station with sophisticated computer software that is linked to a Forex market such as London or Tokyo through a broker. The software needs to be compatible with that used by the broker and should contain technical analysis software. How to trade Forex online successfully, versus offline through a broker, is to trade minute by minute, and second by second, reading changes in the relative prices of the two currencies in a trading pair. How to trade Forex successfully online or otherwise is to stay in touch with pertinent market making news and developing price patterns as highlighted by trading software.

How to trade Forex online successfully is through an electronic communications network or ECN. With the advent of internet supported systems, orders are placed and acted upon electronically although they are typically routed through a broker. Brokers who provide online access typically offer lower fees that traditional brokers and are often referred to as “discount” brokers. In choosing an online broker a wise choice is to check licensure of the broker in your state in order to avoid unscrupulous companies who claim to provide online access but only act as a front. Because such companies exist a little research is wise. To look into Forex investments the trader can refer to the Security and Exchange Commission’s EDGAR database. He will want to check out where to get important Forex news as well.

How to trade Forex online successfully includes understanding the nature and scope of risk in Forex trading. Trading online requires staying in constant touch with the market. A power outage taking the internet down with it can leave a trader detached from London, New York, or Tokyo just after buying Euros with dollars and before entering a selling point in the software. The minutes or hours it may take to get connected again can be devastating in an active Forex market. Active online Forex traders will commonly set sell and stop loss targets immediately with every buy or sell order in order to lock in gains and contain losses. Doing so also protects against a glitch in communication due to inadequate computer band width. Hardware and software glitches aside the trader will want to develop Forex technical strategies and review them periodically in order to improve long term profitability and reduce the risk that comes with all investing. All said, how to trade Forex online successfully is the same as how to invest successfully in general. Do your homework, learn and practice your trading skills, and honestly review your results. Every trader has unsuccessful trades. Learning from ones mistakes is a key factor in how to trade Forex online successfully.

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How Currency Exchange Rates Affect Global Business

Posted by TFNG Admin On December - 17 - 2010

Effective and profitable Forex trading takes into account how currency exchange rates affect global business. As rates changes so do imports, exports, and national wealth. As national wealth and economies change the work their affects back on currency rates. Fundamental analysis of the specifics of how currency rates affect global business will help the Forex trader spot opportunities and trade profitably in the foreign exchange markets. How invest in Euro is not just to short the currency due to the current debt crisis. Having more than a passing appreciation of the specifics of how currency exchange rates affect global business tells the trader where the money goes. As in most things if you want to get it right you follow the money.

How to trader Forex, or at least the details, can vary depending upon whether one is always trading major currency pairs or is trading a major again a minor currency such as the Indian rupee, Brazilian real, or Russian ruble. These countries have growing economies and are vying for first rank status in world affairs. Brazil is now considered by many to be the South American “super power.” Russia is the world’s leading oil and gas producer. India has transformed its economy and is becoming increasingly prosperous as well as the world’s most populous nation. It is quietly seeking a seat on the UN Security Council. The countries are seeing the values of their currencies rise steadily against the dollar, Yen, and Euro. This is because of their economic successes. How currency exchange rates affect global business for these countries varies according to what they produce, what they import, and what they export.

How to trade Forex successfully with these currencies is to learn about their economies, monetary policies, politics, and import/export policies. These nations are seeing their economies rise and their currencies along with. However, success has its price. How currency exchange rates affect global business for the ruble, real, and rupee is that as their values go up the cost of imports is reduced. This is a plus for consumers in these countries. As their currencies go up the cost of their exports goes up too. Russia has large oil and gas reserves. These assets are priced in dollars on the world market. The higher value of the ruble makes their oil cheaper in rubles. Brazil, which also has oil reserves, as a similar problem. India, which does work outsourced from English speaking countries across the globe could find itself less competitive with a pricier rupee. If India’s economy suffers from this state of affairs rupee could eventually fall in price. Watching how currency exchange rates affect global business and how business affects exchange rates can lead to profitable Forex trading for those interested in doing a little research and paying attention to these economies and currencies. Forex trading and economic news are always intertwined. Paying attention to a broader range of economic news from a more international set of sources could help the savvy trader find profitable opportunities in the Forex market.

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FX Trading, Forex, Forex Trading

How to Invest in Euro

Posted by TFNG Admin On December - 13 - 2010

As the Irish debt crisis drags the European currency lower we may well ask how to invest in Euro. One is reminded of the famous saying that the time to invest is “when there is blood in the streets.” Although the seemingly interminable bloodshed has ceased on the Emerald Isle there is a financial version of bloodshed with the nation’s recently downgraded national debt. Fitch, the debt rating service, reduced Ireland’s national debt to BBB+ and the Euro fell in value again in response to traders’ concern about another bailout similar to that floated for Greece. For the trader or investor who heeds to time honored advice of buying when times look worst we look at how to invest in Euro before the currency bottoms out and heads back up. Watching for Forex double bottoms is a useful way to spot a turnaround in the exchange rate but how to invest in Euro may go beyond short term trading.

The PIIGS and Forex crisis has been going on ever since word surfaced about debt problems in Portugal, Ireland, Italy, Greece, and Spain (thus PIIGS). The Euro has been driven lower and the situation has provided traders with the opportunity for profits as the EUR/USD pair and other have fluctuated. The silver lining around the black cloud of European debt is that a weaker Euro makes it easier and more profitable for companies manufacturing in the European to export their goods. The Euro debt crisis has created a situation for which the Japanese, Chinese, Taiwanese, and other have had to pay. It has weakened the home currency of export driven economies. No matter how a nation comes to a weaker currency there are those in the economy who will prosper. An example might be Siemens, the “General Electric” of Germany. How to invest in Euro might be by buying cheap Euros with more expensive Yen, Dollars, or Swiss francs and then investing in a company like Siemens who may stand to profit from the fall in the Euro. When the Euro starts to rise an investor could then sell his Euro for a second profit. This would essentially be a variation on the Yen carry trade in which an investor moves from currency to currency to take advantage of where profits are.

Asking the question how to invest in Euro implies a long term commitment. That is not necessarily the case. As with all currency trading the trader will move in and out of currencies as profit calls and loss threatens. How to trade Forex with the Euro, as with all currencies, is to keep in touch with the news relating to the currency and carefully watch market technical factors for price opportunities. How to invest in Euro may simply be to commit a set amount to trading the currency versus other majors and profit from market fluctuations along the way. The Irish debt crisis, and others, will not be solved soon. Thus the trader can expect to see his “Euro trading investment” be a source of income for the foreseeable future. We are not suggesting that the trader buy or sell or even trade Euro. The point of the discussion is to consider how to find and exploit opportunities in the Forex markets.

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FX Trading, Forex Trading

Why is the Yen Considered a Safe Haven Currency?

Posted by TFNG Admin On December - 3 - 2010

As conflict threatened again on the Korean Peninsula, both the dollar and Yen, safe haven currencies, rose in value. Why is the Yen considered a safe haven currency? Why is the dollar also thought to be a safe haven currency? The Swiss franc, the dollar and the Yen are typically considered the “safe haven” currencies. Although these currencies fluctuate in value like all others they are inherently stable currencies tied to politically stable democracies and stable economies. When economic, political, and social chaos roams the world individuals with assets exchange their currencies for Yen, dollars, and Swiss francs. With the threat of war it its doorstep why is the Yen considered a safe haven currency today? Although the southern end of Japan lies across the Korea Strait from the tip of South Korea the industrial and population centers of Japan are substantially removed from any potential areas of combat should North Korea be so foolish as to attach South Korea and the trip wire US military presence along the 38th Parallel. How to trade Forex during chaotic times is to remember why is the Yen considered a safe haven currency and use that fact for making Forex profits.

Why is the Yen considered a safe haven currency when armed conflict could possibly erupt at its doorstep? Aside from the fact that Japan is a comfortable distance from the immediacy of combat it also has the world’s third largest GNP behind the USA and the European Union. Although Japan has been in relative currency stagnation for years due to dismally low interest rates its economy continues to produce products and its society and governance are stable. Forex technical strategies during times of high market volatility will follow statistical analysis of price movement. However, the limits of currency trading are still set by the fundamentals of national currencies and national economies. Why is the Yen considered a safe haven currency? It is because the country and it currency are rock solid stable even during times of international crisis.

So, if the Yen is such a strong currency is it good to buy Yen? Not necessarily. The fundamentals of any national currency are already factored into every currency pair in which it trades. It is by exploiting profitable price movement through the use of technical Forex analysis that traders will typically profit in trading Forex with the Yen. Having said that we still must ask ourselves why is the Yen considered a safe haven currency when the Yen seems to be especially volatile. The strength of the Japanese economy and the country’s currency reserves are such that the Yen is never likely to plummet in value. Because of the leverage of Forex trading a trader can profit from small to moderate changes in the value of the Yen versus the US dollar, Euro, Pound Sterling, and others but to expect a huge devaluation of the Yen will be to deny to realities of Japan’s economic strength. How to trade Forex successfully in Yen in today’s market commonly has to do with the “carry trade.” Traders borrow Yen for which they pay a low interest rate and then convert to currencies such as the Aussie dollar where interest rates are higher. They then invest in bonds, CD’s, or other investments in the AUD. They gain a premium on the interest rate and then convert the investment and profits back to Yen, pay off the loan, and pocket the profits. Part of why this works is because of the stability of the Yen.

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FX Trading, Forex, Forex Trading
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Disclaimer - Forex, futures, stock, and options trading is not appropriate for everyone. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can guarantee profits or ensure freedom from losses. No representation or implication is being made that using this methodology or system or the information in this site will generate profits or ensure freedom from losses.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN OR MENTIONED.

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