Forex Currency Trading

The title is deceptive actually. What is being talked about is that if you are holding substantial amounts of Pounds, or Dollars or the Euro, or other currency, you can use that currency to make money on your currency by trading.

Currency Trade is where the currency is bought and sold. Just like stocks and shares are traded in the NYSE or the NASDAQ.

The difference in the two is only one. In stocks and shares, you are buying into or exiting from the companies in which you are holding stocks and shares, based upon the stock movements in the Stock Exchange, again based on supply/demand equations. You bought low and sold high, depending upon your perception of how much you wanted to cash in, and how much you wanted to retain in the long term. This depended on the individual company AND the way the market indices were moving. Currency trading works exactly the same way as the stock market does, based on demand and supply, but was earlier restricted to banks only. They traded on currencies based on values and requirements and whether the economic situation in that currency was good or likely to be good or bad, etc.

Today with the world having gone global, and individual countries freeing up foreign exchange regulations, even private companies (corporates) can trade in currencies. For this they have set up separate funds. Today, if the US dollar is fetching say 2 British Pounds Sterling, and it is expected that since the US economy is going down, then the holding of that dollar would fetch only 1 British Pound Sterling. So you have lost one British Pound Sterling. Conversely, if it is felt that the economy of the US is doing better than the British economy, one US Dollar could fetch as much as 2.5 British pound sterling.

So you now have an opportunity to use the ETFs or your portfolio manager to go in for currency trading. If you put in say $100 you would be getting 200 British Pounds sterling. But if the dollar is going down, you would get much less, say only 100 pounds. Normally in currency trading, a long term option is used. Because, it is based on long term indications of the currency of the country using it. Generally, the managers use a basket of currencies to trade, that smoothens the ups and downs of the currency market. Basket here means holding multiple currencies against which the dollar values goes up or down, and trade is accordingly conducted.

As an individual, you will have to check whether you can yourself trade in the currency market. That depends upon your countries Foreign Exchange Policy. You will have to check it out with your investment group. If you are allowed, you can do pretty well. But start slowly and hedge your bets always. It requires a lot of reading, keeping track of the global economy, your own economy, and of course your personal economy!

Try it through your investment manager, and see for about six months what your return is. Meanwhile, you can read up about it on various media, such as books, the internet, etc.

Mark Plummer is a UK based independent Offshore Investment advisor.Has been involved in the financial services and financial planning business since leaving full time education.If trading on your own is not for you then you must visit http://www.wealthcapfund.com

When trading currencies online, there are several basic order types that you need to know. While there are a variety of orders that may be placed, remember to keep it simple, especially you beginning forex traders.

Market Order: Orders to get in or out of a position at the current market price. Execution is typically guaranteed, but price is not. A market order ensures that you will get into or out of the market.

Limit Order: Orders that specify that a trade must be executed at a specific price in the future. Execution is typically not guaranteed, but rather a “best efforts”. They can be used to enter or exit a position.

Take Profit Order: A limit order that currency traders can use in an attempt to capture accrued profits and exit a position.

Stop Order: A stop order is used most often to protect against accruing additional losses, although execution and price is not always guaranteed. The most common use of a stop order is to set an exit point for a losing trade to try to limit risk. The term “stop” refers to stopping a loss.

Trailing Stop Order: A trailing stop order allows you to configure your stop order to continue to follow the price movement in real-time by specifying the distance in pips you would like your stop to move, depending on the market direction. As opposed to a hard stop like above.

Order Cancels Order (OCO): Also known as One Cancels Other. After entering the market, a limit order to protect profits, and a stop-loss order to limit losses can be placed. When either the limit or the stop order is executed, it will cancel the other order automatically.

Day Order: A day order remains in effect until the end of the trading day. Because the forex market is a 24 hour ongoing market, the end of the day is either a set hour or until the opening of the Asian market.

Good till Canceled Order (GTC): A good till canceled order remains active until the trader decides to cancel it, or it is triggered by the parameters set by the forex trader. It is the traders responsibility, not the dealers, to remember there is an open order.

When trading currencies in the forex market, stay away from complex order methodologies because of the increased possibility for mistakes and errors. It’s just too easy to push the wrong button in a complex sequence during the fast moving trading hours.

The forex market is changing rapidly. Even as recently as two years ago it was relatively rare to find a dealer who offered trailing stop orders. Now it seems most, if not all do. So keep abreast of new technology by reading articles and forum posts. Good luck in your currency trading!

James is a successful online currency trader and also runs the popular website http://www.todayscurrencytrading.com. Go there now and you can sign up for his FREE, “Currency Trade of the Week”.

Online currency trading (also known as FOREX, for foreign exchange) has all the benefits that a trader could want. With the 24 hour, 6 days a week marketplace, you can trade before work, during work, or after work. Whenever you see fit. The day begins in New Zealand and follows the sun through Asia, into Europe, and then the US. Then it starts all over again.

The FOREX market is the most liquid market in the world. That means that a trader can enter or exit the currency market whenever they want. With no commissions and no gaps, or lock limits, and no daily trading limit either. This market is bigger in daily volume than all of the other stock, bond, and futures markets of the world combined! And then some!

Leverage of 100 to 1 is considered normal when currency trading. Compare that to the 2 to 1 margin accounts at your stock brokerage. Plus, there’s no margin interest expense either. But you better have your risk management system in place because, remember, leverage cuts both ways.

You’ve heard the saying,the trend is your friend. Well guess what the best trending market is? That’s right, the FOREX market. Central banks and governments set their own monetary policy. Take the Fed for example. They don’t (usually) raise interest rates today and then next week lower them. And then raise them again. No, they tend to gradually, over time, raise them, month by month, until they feel they are correctly positioned. And then they lower them, month by month, or quarter by quarter, whichever. That gradual tightening and loosening over an extended period of time is what creates those wonderful trends.

When you are trading currencies online, remember to trade with the trend. And when the trend ends, get out. It’s that simple, just not that easy. Then start looking for the trend to reverse itself. You need to have no hang ups about being long or short when you trade currencies. At any given time, approximately a third of the currency pairs are are going up, a third are going down, and the other third are going sideways. So don’t be afraid to go short. If you are coming from the stock market, there are no short squeezes to worry about, no one uptick rule, or any other crazy rules. You just decide to buy or sell; that’s it.

When you trade currencies online, they are always bought and sold in pairs. An example of a currency pair is the popularly traded EUR/USD. This is the Euro vs. the U.S. Dollar. The currency on the left is called the base currency. The one on the right is the cross currency

If you buy the EUR/USD currency pair, you are buying euros, and at the same time, selling dollars. You would do this if you think the Euro is going to rise in value and/or you think the Dollar is going to fall in value.

If you sell the EUR/USD currency pair, you are selling euros, and at the same time, buying dollars. You would do this if you think the Euro is going to decline in value and/or you think the Dollar is going to rise in value.

Currency trading has so many benefits and advantages to it, it is no wonder why it is the fastest growing segment of the online trading community. The FOREX market offers superior potential to realize profits in any market condition or business cycle, making online currency trading an ideal diversification element in your total investment portfolio.

James is a successful online currency trader and also runs the popular website http://www.todayscurrencytrading.com. Go there now and you can sign up for his FREE, “Currency Trade of the Week”.