|
|
|
Using Bollinger Bands to Increase FOREX Profits
Bollinger Bands are line plots above and below a moving average, with the spacing between the lines dependent on price volatility...
Trading Range
FOREX traders can increase profits by recognizing trading ranges and trading the opportunities presented at the top and bottom of the range...
The foreign exchange market (FOREX) has several advantages over the futures market
The futures market has grown to a worldwide market for all sorts of commodities including manufactured goods, agricultural products, and financial instruments such as currencies and treasury bonds...
Forex Broker Commissions
Most forex brokers do not charge direct commissions for currency trading transactions; they are compensated for making currency transactions by the spread of the trade...
Fundamental Analysis
Fundamental analysts use fundamental economic and political information (e.g. unemployment rates, economic policies, inflation, and growth rates) about the countries involved in the currency pairs they trade...
|
|
| |
|
|
|
|
|
A Short Description of FOREX Operations
FOREX is the generic term for the worldwide institutions that exist to exchange or trade currencies. This foreign exchange market is an Over The Counter (OTC) market. There is no central exchange and clearing house where orders are matched. FOREX dealers and market makers around the world are linked to each other around-the-clock via telephone, internet, and fax, creating one cohesive market. Since FOREX is a decentralized market, it will have multiple market makers - all of whom have the right to quote different prices. Since there is no centralized exchange, competition between market makers prohibits monopolistic pricing strategies. If one market maker attempts to drastically skew the price, then traders can easily find another market maker whose price is set by supply and demand. Likewise, if one market maker attempts to drastically widen the spread, then traders can easily find another market maker with a normal spread. This is a big advantage over a centralized market which could be monopolistic with a single specialist controlling the market of a specific asset, allowing prices to be skewed to accommodate the interests of the specialist rather than those of the traders.
Recently technology has broken down the barriers that used to stand between the end-users of foreign exchange services and the Interbank market. In the interbank market, the largest banks can deal with each
other directly, via interbank brokers or through electronic brokering systems like EBS or Reuters. The online trading revolution opened its doors to retail clientele by connecting market makers and market participants in an efficient low cost manner. Average traders can now trade alongside the biggest banks in the world, with virtually similar pricing and execution. What used to be a game dominated and controlled by large institutions is becoming a level playing field where individuals can profit and take advantage of the same opportunities as big banks.
One does not need to be on the trading floor to be involved in the forex market. Today, forex trading can be done from home on a computer through the internet. The forex market is basically a worldwide connection of traders, who make investment moves based on the price of currencies, or their values relative to other currencies. These traders constantly negotiate prices with other traders resulting in small fluctuations or movements of a currency’s value. The value of a currency on the forex market also corresponds with supply and demand. If there is greater demand for the Euro, there will be less supply of it on the forex market, which will tend to increase the price of a Euro relative to other currencies. Analyzing the forex market’s fluctuations allows investors to make predictions on how a currency will move in relation to another currency, influencing their buy and sell decisions.
Although there are many large players in FOREX, it is now accessible to the small investor due to recent changes in the regulations. Previously, there was a minimum transaction size and traders were required to meet strict financial requirements. With the advent of Internet trading, regulations have been changed to allow large interbank units to be broken down into smaller lots. Each lot, worth about $100,000, is accessible to the individual investor through loans extended for trading. Typically, lots can be controlled with a leverage of 100:1 meaning that US$1,000 will allow one to control a $100,000 currency exchange. This greatly magnifies the potential reward from the transactions, as well as the risk.
The buying and selling of currencies is necessary to support trade between countries in today's global marketplace and, as the major world currencies fluctuate against one another there is, and will continue to be, money to be made from currency transactions. The major players in the market are of course buying and selling in single deals often running into many millions of dollars. The smaller players however, the brokerage houses and individual brokers, are often trading in individual deals of as little as one hundred thousand dollars.
When you are analyzing potential option positions, it
helps to have a computer program like Option-Aid that
swiftly calculates volatility impacts, probabilities,
statistics, and other parameters of interest. These
programs can pay for themselves with the first trade that
they help you with.
Get FREE Option Tips
The Option Trading Tips Newsletter is published by MindXpansion, the developers of Option-Aid. This newsletter gives you information for maximizing your profits in options trading, including option strategies and market indicators. Fill in the following information to subscribe to this FREE service.
| Privacy Policy | Disclaimer | Resources |
|
|
|
|
|
|