FOREX
CURRENCY MARKET
FOREX TRADING
The Forex market was forever the private domain of hedge funds, global banks, multinational corporations, and wealth private investors until the internet based technology brought about a revolution of online trading. Forex market can be one of the fastest and most volatile financial market to in comparison to stock market. With the above statement, money can be made and lost very quickly hence a need for a good risk management in other words RISK CAPITAL- only risking money that you can afford to lose. Currencies can display a significant trends which can last several days to weeks and even years. The average daily currency trading volume is into $2 trillion per day.
Some of the main components of trading Forex is of course learning the basic which comprises selling or buying one type of currency in exchange for another currency. the currency that you are selling is called Base Currency' whilst the currency that you are buying is called 'Quote Currency'. So the amount of quote currency that one gets for the sell depends on the constantly changing exchange rate, and it is paramount to understand the movement of this exchange rate is main key to learning how to trade Forex. Other issues of paramount importance are understanding the terms 'Long Position' and Short Position'. The 'Long Position'/ BUY means that you are buying the base currency and selling the quote whilst the 'Short Position'/ SELL means that you are selling the base currency and buying the quote currency.
The other issue is opening an online account of which you must activate it. There are many brokerages offering accounts and select the right one is very very IMPORTANT. The best advice would be to look into several alternatives that are out there before embarking on a decision.
A VERY Crucial factor to consider whilst choosing a broker is a broker who will not change the margins whenever there is a major event that will affect the volatility of the market. A good example of such an event is the BREXIT which happened on the 23rd Thursday June 2016.
Some factors to consider before settling for a particular broker are:
REGULATION
EXPERIENCE
WEBSITE
REVIEWS
REGULATION:
Is of the outermost importance and most countries actually provide government supervision of which the best brokerages do abide to this supervision. Well known supervisors are:
i. Australia- Australian Securities and Investment Commission (ASIC)
ii. United States- National Futures Association (NFA)
iii. Untied Kingdom- Financial Services Authority (FSA)
iv. Switzerland- Swiss Federal Banking Commission (SFBC)
v. Germany- Bundesnanstalt fur Finanzdiestleistungsaufsicht (BaFIN)
vi. France- Autorite des Marches Financiers (AMF)
EXPERIENCE
Experience in Forex trading online is very crucial hence it is paramount to choose with at least 5 years or more would be termed safe, minimizing the exposure of risk.
WEBSITE
Compare the websites between different brokerages. A professional brokerage will have an active website and will provide a professional insight.
REVIEWS
Reading of reviews tends to give various perspective from different traders and their experience with brokerage firm. Try as much as possible to distinguish bewteen genuine and fakes reviews.
FOREX TRADING
WHAT IS FOREX TRADING
Forex Trading is both about the dynamics of market speculation, or trading and the various factors that indeed do affect the value of the currencies. You combine these attributes and one has the largest in the tunes of $ 3 trillion volumes traded, most dynamic and exciting financial market in the world. The currency rates are usual affected by information such as fundamental news that reflects the macroeconomics and political fortunes of the countries. Also the technical analysis do tend to play a crucial role whilst trading. The economic fundamentals are based on:
- Monetary policy
- Economic data reports
- Interest rate levels
- International investment flows
On the aspect of technical analysis the fluctuation of prize or volatility in the market is analysed using chart analysis, mathematical studies of price behavior by looking at momentum or moving averages and trend- lines analysis just to name a few.
Forex Traders
FOREX BIG TRADERS
Some of the FX players are the Interbank Market such as UBS, Deutsche Bank, Citibank, JPMorgan Chase just to name a few, Hedgers, Financial Investors, Hedge Funds, Day traders, Governments/ Central Banks, the Bank for International Settlements and last but not the least the Group of Eight.
The Interbank Market is where the really big money changes, it is the network of international banks operating in financial centers around the world so as to facilitate trade and commerce between nations.
Hedgers are those who are looking to insure themselves against an adverse price movement in a specific currency rate.
Financial Investors are the other main group of nonspeculative players who are just passing through on their way to another investment.
Hedge Funds are a type of leveraged fund ehich refers to any number of different forms of speculative asset management funds that borrow money for speculation based on real assets under management.
Day Traders which also includes the intraday traders that's probably you and we fit into.
Govt & Central Banks, government are involved in the forex market through routine funding of its operations, making
transfer payments, and managing foreign currency reserves. whilst the Currency Reserve Management refers to that aspect of the national governments develop and invest their foreign currency reserve.
The BIS the acronym of Bank for International Settlements is the central bank for central banks which is located in Basel, Switzerland which acts also as the quasigovernment regulator of the international banking system.
The Group of Eight which comprises of Canada, France, Germany,Italy, Japan, Russia, the United Kingdom, and the United States always creates a platform for the major global powers to express their collective perception on relative currency values and the need for any adjustments.
Forex Trading Sessions
AROUND THE WORLD IN 24 HOURS A DAY TRADING
The Forex market is open and active 24 hours a day staring from the business hours on Monday morning. Normally from the Asia Pacific time zone to Friday close of business in the New York.
ASIA-PACIFIC TRADING SESSION
The market action starts with Wellington, New Zealand; Sydney, Australia and eventually Tokyo, Japan which makes up the Asia Pacific session. News data from these countries affects the currency movement of NZD, AUD and JPY with inclusion of news from China.
EUROPEAN/ LONDON TRADING SESSION
Then we have the European / London session with news and data from the Eurozone, Switzerland and the United Kingdom affecting European currencies such as Eur, GBP and CHF.
NORTH AMERICAN SESSION
Last session is the North America which tends to overlap the European trading session. The news data released in this session mostly are from US and Canada which tend to affect the direction of USD and CAD currencies.