|
Home::Currency Trading
How To Start Trading The Forex Market ? (Part 4 )
Author : Martin Maier
How Currencies are quoted and what moves individual currencies?
ONE of the best advantages in FOREX Trading is
The amount of money you need to place a trade (known as "margin") is all that can be lost !
You have to know, that despite the super-high leverage offered by some Forex brokers up to (400:1); meaning if you put up $ 1000 the broker will allow you to trade like you really have $400.000).
Forex trading is still less riskier than Stock or Futures Trading, where you can loose more than you have deposited in your account.
This type of LEVERAGE does NOT EXIST in the equities or futures market
In the Equities or Futures markets, very often, sudden and dramatic moves occur, against which you cant protect yourself, even by having placed your protective stops.
Your position may be liquidated at a loss, and youll be liable for any resulting deficit in the account.
But because of the FX markets deep liquidity and 24-hour, continuous trading, dangerous trading gaps and limit moves are almost eliminated.
Orders are executed quickly, without slippage or partial fills. And finally, there are no margin calls. For your protection, the broker will automatically close out some or all of your open positions if your account equity falls below the level required to hold the positions.
Think of this as a final, automatic stop, always working on your behalf to prevent a debit balance.
Currencies are traded in dollar amounts called LOTS
In Forex trading, with most Brokers, you have the choice between 2 different lot sizes.
Standard Lots or Mini Lots.
One Standard lot is equal to $100,000 in currency. The margin requirements, using a 400:1 Leverage, would be US$ 250, in other word you control $100,000 worth of currency for only 250 US dollars.
You mean, depositing $250 with a broker, I could trade 100,000$ worth of currency ???
NO, be aware, that your account size has to be more than the required margin of US 250. For example, if you place an order to buy 1 Standard lot ( @100,000) of USD/JPY and USD/JPY is quoted as 112.10/112.13, you buy USD/JPY at 112.13.
Your account balance would be $220, because you paid 3 pips or $ 30 for this trade.
If you would close this trade immediately, you have to sell it at 112.10 (the bid price) , for a loss of $ 30.
In fact you could not get executed on this trade, as the brokers trading platform would reject your order, for the reason of having insufficient funds in your account).
So, your account balance has to be minimum $280. $250 for margin and $30 for the trade.
BUT....IF, after you have initiated the trade to buy USD/JPY at 112.13, and the USD/JPY falls the next second 1 pip ( approx. $8), your position would be closed automatically, because of margin deficit.
I will explain later about having an adequate account size to trade the Forex Market.
Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded.
The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.
Some of the most common symbols used in Forex are:
USD - The US Dollar
EUR - The currency of the European Union "EURO"
GBP - The British Pound or cable
JPY - The Japanese Yen
CHF - The Swiss Franc
AUD - The Australian Dollar
CAD - The Canadian Dollar
There are symbols for other currencies as well, but these are the most commonly traded ones.
A currency can never be traded by itself. So you can not ever trade the USD by itself. You always need to BUY one currency and SELL another currency to make a trade possible.
Some of the most traded currency pairs are:
EUR/USD Euro against US Dollar
USD/JPY US Dollar against Japanese Yen
GBP/USD British Pound against US Dollar
USD/CAD US Dollar against Canadian Dollar
AUD/USD Australian Dollar against US Dollar
USD/CHF US Dollar against Swiss Franc
EUR/JPY Euro against Japanese Yen
The currency left of the / is called the base currency.
The currency right of the / is called the counter currency.
When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD.
If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency.
The best way to remember is, by just thinking of the entire currency pair as one item.
If you buy it...you buy the first currency and sell the second currency. If you sell it...you sell the first currency and buy the second currency.
That means you would to be able to short-sell with no restrictions so you could make money when the market drops as well as when it rises.
The problem with traditional stock market or commodity trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.
Article Source: http://www.articledashboard.com
Veteran Trader Martin Maier is the Founder of Fenix Capital Management LLC He is the developer of various futures and commodities trading programs and his systems have been ranked and rated by various large American Investment Profile Rating Companies such as STAR and MAR.
Spam emails More free articles Related articles
|
More related feeds |
Forex software review|Forex Autopilot System
In fact, I traded part-time for 6 years, and only became full-time trader for the last 2 years. Yet I am making an extraordinary living trading the forex market. To tell you the truth, back in 1996, I did not have any background in ...Forex software review|Forex Killer|Advanced Automated Forex ...
With the Forex Killer manual, detailed “Forex Learning Book” and “Crush course” beginners will learn everything they need to know about the forex market to start trading within the next hours! Forex Killer is successfully used by ... Currency Trading - How Much Do You Need to Spend to Learn How to ...
4. Read all you can of the free information you can find online. The Forex Mentor. This is likely to be the most expensive option and is probably only considered by people who have quite a large amount of cash to start with. ... The best Collection of FOREX ebooks !! Start Making Real Money
Forex Shockwave Analysis is packed with practical information for mastering shockwave trading, including a refined minimum reversal algorithm that converts raw security data (OHLC quotes) to swing data, numerous charts and diagnoses ... Stop Losing And Start Making Money In The Forex Market
One Forex trading habit that can make you lose your money is putting real money onto a new forex trading strategy that they have just learned. That should be a big NO-NO. Always use virtual money first and apply what you have learned. ... Stock Market Basics
Forex Trading Room: JT - $13050 Daily Swing Trades: Barry - $7640 Weekly Swing Trades: Jeannie - $-2200 Bond action for the day: 2 year bond closed with no change at 99 12/32 with a Yield of 2.44, Yield Change +-0.01; 5 year bond closed ... “How To” Start Trading The Forex Market ? (Part 4 )
Forex trading is still less riskier than Stock or Futures Trading, where you can loose more than you have deposited in your account. This type of LEVERAGE does NOT EXIST in the equities or futures market ... Online Investing and Stock Market
Executive Vice President of New York Fed William Dudley: Forex Market suggests funding costs are higher; bank balance sheet squeeze ups Libor/OIS spread; most Fed actions `associated with decline' in spread; limits to Fed ability to ... ?How To? Start Trading The Forex Market? (Part 6)
Unlike stocks, currency charts do not spend much time in trading ranges and have the tendency to develop strong trends. Furthermore, Forex with its 4 Mayor currencies is easier to analyze than tens of thousands of stocks. ... Forex Benefits Of Trading The Forex Market
Forex Benefits Of Trading The Forex Market This article summarizes the benefits of forex quite concisely. Note the point about… How To Start Trading The Forex Market Part 4 Here, an often overlooked point about margin is pointed out by ...
|
|
|
