1. Learn how to read a forex quote. This is a ratio of one currency to another. USD/EUR is the price of a US dollar as expressed in Euros. The currency listed first is the base currency (usually the stronger currency at the time of the quote) and is given a value of 1. The second currency is the counter currency and derives its value in relation to the base. If the USD/EUR quote is 1.21, that means 1 US Dollar has the same value as 1.21 Euros.
2. Understand the definitions of pip and spread. Prices in foreign exchange are expressed in pips--percentage in points. The pip is the number in the fourth place from the decimal point, or 1/100th of 1 percent. If USD/EUR is 1.1300/1.1304, there is a 4-pip spread between the two currencies.
3. Learn about bid and ask. The 'bid' is the selling price for the base currency and the 'ask' is the price to buy the base currency. Both transactions are done simultaneously.
4. Learn about leverage and margin. Leverage is the ability to trade without having to put up the entire amount of the transaction. Margin is the minimum amount required in order to participate in a trade, usually 1 to 2 percent. The forex market allows higher leverage because major currencies are less volatile than stocks; higher leverage also allows amplification of both profit and loss. Because of this, the forex market is more volatile than the stock market.
5. Select a mutual fund. Unlike the stock market, the forex market has tiers of access. An individual investor would find it difficult to gain significant access. Furthermore, in a 24-hour market, it is difficult for individuals to keep track of investments with any degree of vigilance. Most retail investors work through specialized mutual funds. Search online for managed funds to choose from. Your choice will depend on your desired level of risk, the fund's past performance, the fee structure, and restrictions on deposits and withdrawals.
Monday, May 25, 2015
Sunday, May 24, 2015
How to Master Forex Trading (5 Steps)
1. Join a Forex trading website. Some websites have a minimum of $200 investment, and some have practice accounts where you can work on your trading skills.
2. Update yourself on terms frequently used in the Forex Trading world, such as 'intraday' and 'overnight position,' which relates to trading times.
3. Study economic and political trends and stay up to date on current events. The best Forex traders have extensive knowledge on trends and other economic traits. This can take some time, but its' rewards are great.
4. Invest in a bot. If you don't want to go deep into studying trends and such, you can buy a bot that recognizes trends and advises when to buy, and sell. You will want a bot that is frequently updated to optimize trading strategies.
5. The last step is to give yourself time to get used to trading. It can take a long time to understand the Foreign Exchange.
2. Update yourself on terms frequently used in the Forex Trading world, such as 'intraday' and 'overnight position,' which relates to trading times.
3. Study economic and political trends and stay up to date on current events. The best Forex traders have extensive knowledge on trends and other economic traits. This can take some time, but its' rewards are great.
4. Invest in a bot. If you don't want to go deep into studying trends and such, you can buy a bot that recognizes trends and advises when to buy, and sell. You will want a bot that is frequently updated to optimize trading strategies.
5. The last step is to give yourself time to get used to trading. It can take a long time to understand the Foreign Exchange.
Friday, May 22, 2015
How to Identify the Trend in the FOREX Market
1. Open your Forex charting software and create a price chart for any currencies you wish. In Forex, you chart 'currency pairs,' which show an exchange rate between any two currencies.
2. Identify the peaks and valleys on the price chart. These are the 'pivots' where the exchange rate reversed its direction, even if temporarily. For example, if prices are moving higher and then start to decline, this leaves a peak called a 'high.' Similarly, if prices fall and then reverse higher, this forms a 'low.'
3. View the most recent price action on the chart, and find the most recent high that formed. Then identify the previous high that formed before the most recent high. Similarly, find the two most recent lows on the chart. If the chart clearly shows all these as a pattern of 'higher highs and higher lows,' you can safely identify this Forex currency pair as in a solid up trend.
4. Buy into the trend if it shows this up trend pattern. However, if instead you see a pattern of 'lower highs and lower lows,' this is a solid down trend. These simple patterns are the basis of trend recognition techniques, first outlined by Charles Dow in the 'Dow Theory' nearly a century ago. Today, traders continue to use this technique to identify trends.
5. Draw a straight line on the price chart, connecting all the recent lows, if you see what appears as an up trend. These 'trend lines' are an additional aid in identifying trends. If the trend is declining, instead draw a straight line connecting all the highs. In solid trends, it is easy to draw or imagine a straight line on the chart, and some charting software lets you draw directly on the chart.
2. Identify the peaks and valleys on the price chart. These are the 'pivots' where the exchange rate reversed its direction, even if temporarily. For example, if prices are moving higher and then start to decline, this leaves a peak called a 'high.' Similarly, if prices fall and then reverse higher, this forms a 'low.'
3. View the most recent price action on the chart, and find the most recent high that formed. Then identify the previous high that formed before the most recent high. Similarly, find the two most recent lows on the chart. If the chart clearly shows all these as a pattern of 'higher highs and higher lows,' you can safely identify this Forex currency pair as in a solid up trend.
4. Buy into the trend if it shows this up trend pattern. However, if instead you see a pattern of 'lower highs and lower lows,' this is a solid down trend. These simple patterns are the basis of trend recognition techniques, first outlined by Charles Dow in the 'Dow Theory' nearly a century ago. Today, traders continue to use this technique to identify trends.
5. Draw a straight line on the price chart, connecting all the recent lows, if you see what appears as an up trend. These 'trend lines' are an additional aid in identifying trends. If the trend is declining, instead draw a straight line connecting all the highs. In solid trends, it is easy to draw or imagine a straight line on the chart, and some charting software lets you draw directly on the chart.
Monday, May 18, 2015
How to Trade The Forex (5 Steps)
1. FOREX TRAINING
Proper training is key in this fast paced dynamic climate. Training includes understanding charts, forex currency patterns, developing a forex trading system, forex courses, forex forums and more. 6 months to a year should be spent learning your own trading system before investing a dime.
2. FOREX COURSE
As you might imagine, the training opportunities are endless and need to be approached with caution. Everybody thinks they have a system that works and they are ready to share it with you for a fee. Start deciding on a forex course after you have looked at some forex trading websites and learned the basics for free before investing in a forex course. Some forex courses are free from websites.
3. FOREX PIP
Understanding the spread in forex and the pip of currency pairs will help you in choosing an online forex broker. Viewing forex real time quotes is imperative if you are going to trade. The online marketplace is competitive and multiple trading platforms and brokers should be researched prior to signing up.
4. ONLINE TRADING
You will be trading online and in a day trading type style. Once you develop your system and put into place your stop losses, understand charting and devoting time to training you will have a strong foundation to go live with your training.
5. FOREX PLATFORMS
The forex platform is the trading platform that you will be executing your trades with. Each forex trading company has their own platform that operates basically the same but each system will need to be learned by the trader to feel comfortable with the process.
Proper training is key in this fast paced dynamic climate. Training includes understanding charts, forex currency patterns, developing a forex trading system, forex courses, forex forums and more. 6 months to a year should be spent learning your own trading system before investing a dime.
2. FOREX COURSE
As you might imagine, the training opportunities are endless and need to be approached with caution. Everybody thinks they have a system that works and they are ready to share it with you for a fee. Start deciding on a forex course after you have looked at some forex trading websites and learned the basics for free before investing in a forex course. Some forex courses are free from websites.
3. FOREX PIP
Understanding the spread in forex and the pip of currency pairs will help you in choosing an online forex broker. Viewing forex real time quotes is imperative if you are going to trade. The online marketplace is competitive and multiple trading platforms and brokers should be researched prior to signing up.
4. ONLINE TRADING
You will be trading online and in a day trading type style. Once you develop your system and put into place your stop losses, understand charting and devoting time to training you will have a strong foundation to go live with your training.
5. FOREX PLATFORMS
The forex platform is the trading platform that you will be executing your trades with. Each forex trading company has their own platform that operates basically the same but each system will need to be learned by the trader to feel comfortable with the process.
Wednesday, May 13, 2015
How to Calculate FOREX Rollover Rates (6 Steps)
1. Review the definition of a rollover. All forex spot trades must be settled within two business days. If you would like to extend your position without settling at the end of each trade day you can close your position by 5 p.m. (EST) on the settlement day and reopen the following trading day. This is referred to as a rollover. Traders do this by using a swap agreement.
2. Review how currency is quoted. Currency is quoted in pairs. The first currency is referred to as the base currency, and the second is referred to as the counter currency. The trader borrows money to purchase another currency. Interest is paid on the borrowed currency and earned on the purchased currency. The net is the rollover interest.
3. Obtain the short-term rate of interest for both the base and counter currency. Go to the treasury department of the issuing nation for current short-term rates. It is usually listed on the home page of the website for the treasury.
4. Work through an example. Let's say you purchase 100,000 CAD/USD at a rate of .9155. The short-term interest rate on the Canadian dollar (base currency) is 4.25 percent, and the short term interest rate on the U.S. dollar (counter currency) is 3.5 percent.
5. Set up the calculation. For the rollover rate, subtract the base currency short- term interest rate from the counter currency interest rate.
6. Find the dollar of the interest. Multiply the number of CAD/USD held by the difference between the CAD short-term interest rate and the USD short-term interest rate. Divide this by the product of the rate at which you purchased CAD/USD and 365. The calculation looks like this: {100,000 x (4.25% - 3.5%)}/(365 x 0.9155) and the answer is $224.40.
2. Review how currency is quoted. Currency is quoted in pairs. The first currency is referred to as the base currency, and the second is referred to as the counter currency. The trader borrows money to purchase another currency. Interest is paid on the borrowed currency and earned on the purchased currency. The net is the rollover interest.
3. Obtain the short-term rate of interest for both the base and counter currency. Go to the treasury department of the issuing nation for current short-term rates. It is usually listed on the home page of the website for the treasury.
4. Work through an example. Let's say you purchase 100,000 CAD/USD at a rate of .9155. The short-term interest rate on the Canadian dollar (base currency) is 4.25 percent, and the short term interest rate on the U.S. dollar (counter currency) is 3.5 percent.
5. Set up the calculation. For the rollover rate, subtract the base currency short- term interest rate from the counter currency interest rate.
6. Find the dollar of the interest. Multiply the number of CAD/USD held by the difference between the CAD short-term interest rate and the USD short-term interest rate. Divide this by the product of the rate at which you purchased CAD/USD and 365. The calculation looks like this: {100,000 x (4.25% - 3.5%)}/(365 x 0.9155) and the answer is $224.40.
Thursday, May 7, 2015
How to Promote FOREX Products (8 Steps)
1. Present FOREX to individuals as a way to diversify an investment portfolio. Segment invitations based on professional occupations, retirees, young working families with income of certain levels and other key demographic information.
2. Schedule a luncheon topic on doing business overseas for small companies and show how FOREX is used in trade on the international markets. Invite three to five other non-competing businesses to exhibit and invite their own client lists.
3. Provide benefits to small business owners by presenting a series of mini-workshops with presenters from complementary yet non-competing business that offer valuable services. Invite a professional employer organization to present tips on cash flow and request that on handouts they give that they imprint the benefits of trading FOREX for small business owners.
4. Develop internships with undergraduates at local business schools to come learn trading and then assist in the marketing of FOREX products and accounts. Develop a task per week for 12 weeks that will focus on trading basics and, once every two months, have an open house where the students can invite specified family members to try a hands-on approach to learning.
5. Host a free workshop once monthly like a trading club where prospective traders or those wishing to have their accounts managed can come in, open a demo account and trade with assistance at no risk. Explain how, and why, there are different types of accounts as noted in “Forex Basics: Setting Up An Account” by trader David Hunt on the website “Investopedia.”
Promotional Material
1. Design a website that features the reasons to trade FOREX, the benefits and a sign-up page for a free, no-risk demonstration account. Create a PowerPoint or Flash presentation on the website that runs one to two minutes giving an introduction to trading FOREX and how viewers can sign up for a demo account. Build credibility with links to neutral and notable organizations like the American Finance Association.
2. Build a permission-based email list. Send newsletter updates about industry news, personal success stories and latest government figures that impact FOREX.
3. Run ads on shopping carts or in community newspapers circulating in local grocery stores offering people the chance to learn risk-free how to trade money. Write the ad as a way to run a business and earn money part-time.
2. Schedule a luncheon topic on doing business overseas for small companies and show how FOREX is used in trade on the international markets. Invite three to five other non-competing businesses to exhibit and invite their own client lists.
3. Provide benefits to small business owners by presenting a series of mini-workshops with presenters from complementary yet non-competing business that offer valuable services. Invite a professional employer organization to present tips on cash flow and request that on handouts they give that they imprint the benefits of trading FOREX for small business owners.
4. Develop internships with undergraduates at local business schools to come learn trading and then assist in the marketing of FOREX products and accounts. Develop a task per week for 12 weeks that will focus on trading basics and, once every two months, have an open house where the students can invite specified family members to try a hands-on approach to learning.
5. Host a free workshop once monthly like a trading club where prospective traders or those wishing to have their accounts managed can come in, open a demo account and trade with assistance at no risk. Explain how, and why, there are different types of accounts as noted in “Forex Basics: Setting Up An Account” by trader David Hunt on the website “Investopedia.”
Promotional Material
1. Design a website that features the reasons to trade FOREX, the benefits and a sign-up page for a free, no-risk demonstration account. Create a PowerPoint or Flash presentation on the website that runs one to two minutes giving an introduction to trading FOREX and how viewers can sign up for a demo account. Build credibility with links to neutral and notable organizations like the American Finance Association.
2. Build a permission-based email list. Send newsletter updates about industry news, personal success stories and latest government figures that impact FOREX.
3. Run ads on shopping carts or in community newspapers circulating in local grocery stores offering people the chance to learn risk-free how to trade money. Write the ad as a way to run a business and earn money part-time.
Friday, May 1, 2015
How to Trade on the Forex Market Using the U.S. Dollar Index
1. Understand that the U.S. dollar index is a measure of the relative strength of the U.S. dollar in comparison to other major currencies. It is calculated using a trade-weighted index methodology, which is similar to the way most market indexes are calculated.
2. Understand how the index is calculated. The index factors in the exchange rates for six major world currencies: euro, yen, cad, pounds, krona, and Swiss francs.
3. Understand how to interpret the index.The index was started at a base of 100 in 1973. An index value of 130 suggests that the U.S. dollar has increased by 20 percent in value since 1973.
4. Use the U.S. dollar index value to help provide information about the direction of a particular currency. Look at the 52-week high and low for the index. Take note of the date of the high and low and where they are in contrast to the current price.
5. Chart a moving average of the index over the past three months and then chart another moving average over six months and 12 months. The three-month chart will be more volatile than the six-month; likewise the six-month chart will be more volatile than the 12-month chart.
6. Use the moving average charts of the index to find buy and sell points. When the three-month chart breaks out of the six- or 12-month moving average line it can be used as a signal to enter or exit the market depending on your strategy.
2. Understand how the index is calculated. The index factors in the exchange rates for six major world currencies: euro, yen, cad, pounds, krona, and Swiss francs.
3. Understand how to interpret the index.The index was started at a base of 100 in 1973. An index value of 130 suggests that the U.S. dollar has increased by 20 percent in value since 1973.
4. Use the U.S. dollar index value to help provide information about the direction of a particular currency. Look at the 52-week high and low for the index. Take note of the date of the high and low and where they are in contrast to the current price.
5. Chart a moving average of the index over the past three months and then chart another moving average over six months and 12 months. The three-month chart will be more volatile than the six-month; likewise the six-month chart will be more volatile than the 12-month chart.
6. Use the moving average charts of the index to find buy and sell points. When the three-month chart breaks out of the six- or 12-month moving average line it can be used as a signal to enter or exit the market depending on your strategy.
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