hr: Currency

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Currency trading involves purchasing a currency while at the same time selling another. Profit is realized when the currency bought surges in value in comparison to the currency sold.

A lot of new currency traders get caught up in the hype that they can millions of dollars. This is simply due to a lack of understanding as regards the trading fundamentals. Trading entails discipline as well as planning.

As a novice currency trader, you can avoid mistakes by taking time to learn the skill before you start losing money. Here are some of the steps to help you become a better forex trader:

1. Have a thorough understanding of leverage. This allows you to trade huge sums of currency for a small amount of money. If you don’t understand how leverage works, you will lose a great deal of money, including your capital.
2. Write a trading plan. Do this each time you are about to make a trade. This plan should outline the rules for entering and exiting the trade, if the trade becomes profitable. Your plan must also include ideas on how the trade will be closed, if the trade becomes a loss. Keeping a trading plan will turn you into a consistent and focused forex trader.
3. Focus on one major currency pair. Keeping track of several currency pairs is not only tiresome but inviting trouble. This makes you prone to mistakes. Conversely, staying focused a particular major pair eliminates confusion and mistakes.
4. Practice proper money management. Money and related risk management are critical to the survival of the trading account. The trader must know how much money to risk on every trade without losing more than the risked amount.

Good luck and happy trading!

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In currency or forex trading, simple is better. The desire to reap huge profits in currency trading can drive us nuts sometimes as we tend to keep adding indicators in a never-ending quest for that one big hit.

If you’re new to forex trading, keep in mind that utilizing a dozen trading indicators is actually not necessary. More often than not, a lot of these indicators will just add redundant information that you don’t really need.

Here are a few tips to give you an idea of how to use indicators to your advantage:

• Trend direction;
• resistance;
• support; and
• buying and selling pressure.

One tool helpful with all of these factors is the point-and-figure chart.

Point-and-figure charts are one of the earliest forms of technical analysis. Now, with technology, they have all the more become easier for traders to use.

Point-and figure analysis is available on several stand-alone programs and there are a few online platforms that offer these charts.

Take care and good luck!

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One of the most basic concepts in trading is leverage. If you intend to become a good currency or forex trader, then it is important that you understand what this means. So, what do we mean by leverage?

The concept involves the use of different financial instruments or borrowed capital that includes margin, for the purpose of increasing the potential return of a particular investment. Also, it pertains to the amount of debt used in order to finance company assets.

A company that has more debt than equity can be deemed as highly leveraged.

Leverage is created through options, futures, margin as well as financial instruments. If you have for example about a thousand dollars to invest, then you can utilized this amount by putting it in, say, ten shares of Microsoft stock, but in order to increase leverage, you might opt to invest your money in five options contracts.

In this case, you would have control of about five hundred shares instead of just ten.

A majority of companies utilize debt to finance their operations without increasing its equity. If a company has a five million initial investment from investors, then the equity in the company is equal that amount — which is five million.

This will be what the firm will use to operate or run its day to day business.

If the firm utilizes debt financing by borrowing, say, twenty million, the company now has twenty five million to invest in day to day operations plus added opportunity to jack up value for shareholders.

Leverage helps both the investor and the firm to invest or operate. However, leverage is not without risks.

If you as an investor is using leverage and the investment moves against you, then your loss will be much greater than it would have been if you had not leveraged the investment.

Keep in mind: leverage magnifies both gains and losses.

Leverage, is capable of generating shareholder wealth. However, if it fails to do so, the interest expense and credit risk of default will most certainly destroy shareholder value.

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While is true that the forex market offers more excitement to traders, the risks are also higher in comparison to trading equities.

Now we are going to examine the differences between forex and equities. A major area where forex and equities markets differ is in the number of traded instruments.

The forex market has very few traded instruments in contrast to the thousands that are found in equities market.

Most forex traders devote their attention on seven different currency pairs: the four majors, which include (EUR/USD, USD/JPY, GBP/USD, USD/CHF); and the three commodity pairs (USD/CAD, AUD/USD, NZD/USD).

All other pairs in that you will find in the market are merely different combinations of these currencies, also known as cross currencies.

This allows currency traders to easily keep track of the market because instead of having to choose the from 10,000 stocks to find the best value, all that forex traders need to do is get updated on the economic and political news of eight countries.

On the other hand, the equity markets often can hit a lull, resulting in shrinking volumes and activity. As a result, it may be hard to open and close positions when desired.

Also, in a declining market, it takes extreme ingenuity to make a profit. It is difficult to short-sell in the U.S. equities market because of strict rules and regulations regarding the process.

Forex on the other hand offers the opportunity to profit in both rising and declining markets because with each trade, you are buying and selling simultaneously, and short-selling is, therefore, inherent in every transaction.

In addition, since the forex market is so liquid, traders are not required to wait for an uptick before they are allowed to enter into a short position, unlike if you were into equities market.

Because the forex market is extremely liquid, margins are low and leverage is high. In the equities market, it’s just not possible to find such low margin rates where most margin traders in the equities markets need at least 50% of the value of the investment available as margin. Luckily for currency traders, they need only as little as 1%.

Furthermore, commissions in the equities market are much higher compared to that in the forex market. Traditional brokers usually get commission fees on top of the spread, including the fees that have to be paid to the exchange. Spot forex brokers take only the spread as their fee for the transaction.

You see if you’re trying to decide whether to delve into forex or equities, you’ll be much better off if you’ll stick with forex.

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Without a doubt, there are benefits and risks associated with the forex market. Factors such as the size, volatility as well as global structure of the foreign exchange market all contribute to its success. Needless to say, this market is one of the most liquid you can find, and investors are able to go into extremely large trades without affecting any given exchange rate.

Large positions are accessible to forex traders because of the low margin requirements used by most of the brokers in the forex industry. It is possible for a trader, for example, to control a position of $100,000 by placing a small amount say $1,000 while borrowing the rest of the money from his or her forex broker. This leverage is like a double-edged sword since investors can reap huge profits when rates make a small favorable change, but they also run the risk of a devastating loss when the rates move against them.

Given these risks, the foreigh exchange market is still very attractive to many speculators, because the amount of leverage that is available.

The currency market is also the only market that is open 24 hours a day with decent liquidity throughout the day. For traders who may have a day job or just a busy schedule, it is an optimal market to trade in.

While the forex market may offer more excitement to the investor, the risks are also higher in comparison to trading equities. The extremely high leverage of the forex market, can quickly turn the tide and can result in damaging losses, wiping out the your account in a matter of minutes. This is important for all new traders to understand, because in the forex market — because of the large amount of money involved and the number of players — traders will react quickly to information released into the market, leading to sharp moves in the price of the currency pair.  Therefore, when you enter in forex trading it is important to take into consideration the risks involved in the forex market before delving into it.

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Just recently after the strong revision to US Q2 GDP, the markets have begun to judge that the economic outlook is stabilizing.

While the United States at this point may be in a somewhat more advantageous position as compared to the the Euro-zone and UK economies, the ISM release seem to indicate that the US recovery is not about to happen anytime soon.

According to an ISM manufacturing analysis, factories have failed to capitalize on the relative weakness of the US currency as well as the decline in raw material costs, such as oil and metals recently. What’s even worse, is that production has cooled, inventories have grown, and employment conditions have worsened in the sector.

What one might likely expect is that there could be a bullish fundamental bias for the US currency over the next few days simply because the US economy appears strong compared to regions like the UK and Euro-zone.

However, it appears likely that the US dollar may be nearing a near-term top. First, one of the greatest threats to the US dollar rally this week is commodity prices. The correlation between EURUSD and NYMEX Crude Oil futures has recently hit its highest levels since the inception of the euro.

Next, forex positioning reveals that euro and British Pound shorts are at record levels, suggesting that the currencies may be bottoming out. In this light, your US Dollar fundamental bias for the week should be cautiously bullish. On second thought, it may also be a good idea to start looking for levels at which to sell the US currency.

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The Euro is struggling to hold above 1.45 ahead of retail sales. While some recent European data seem to indicate a mildly bullish euro, the currency, in general, remained weak.

The Euro-zone producer price index increased 9.0 percent in July as compared to the previous year, marking the currency’s highest surge since record keeping began in 1990.

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While this would seem to indicate that factory price pressures are strong, sharp declines in commodities at both the end of July and August should help put under check upcoming figures related to inflation.

Euro-zone retail sales and Q2 GDP revisions are expected to be released. Euro-zone sales could be surprisingly weak, as German retail sales all of a sudden plummeted 1.5 percent. Meanwhile, GDP should be a non-event as no revisions are forecasted.

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So you want to make money by becoming a forex trader. Getting into the currency trading market can be quite intimidating at first. However, there’s no real reason to be, since you’re actually not competing against anyone; in fact a lot of traders are quite willing to share with each other since they’re looking to ride the market waves and profit.

News, you must realize, is just isn’t aimed at forex traders. Nothing you’ll ever hear will be directly informative to you as a trader, but you will hear information that eventually tells you where the economy is headed. Economic news is what makes currencies rise and fall. It is necessary to make sure you got that right. Good news, is good for currency and bad news is bad for currency.

Keep your trading strategy very simple. Those who end up losing in forex are the ones that have very long conflicting strategies that are hard to understand. In fact, all the strategy that you need to make profit can be very simple.

You also need be logical. You cannot afford to be emotional when you’re in this kind of business. It’s deadly simply because it makes you make bad trades, making you hold onto unprofitable currency and in the long run leads you into financial ruin. If you try to be logical, you become a cold calculated machine that makes trades for one reason alone — profit!

Another thing: You need to get some sort of an automated software such as Forex Killer. This will save you a lot of time and headaches since it will take in a lot of currency data in search for profitable trends that you can then use to your advantage.

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Former Fed Reserve member Lyle Gramley has been tracking how the rising US currency will affect inflation as well as economic growth. In other words, what it means is that the Fed will, most likely, stay on hold this year.

Now Gramley puts it into perspective this way: The simulation indicates is that real GDP growth between now and the end of 2009 will decline by approximately one-half percentage point. On the other hand, the inflation rate will go down by a slightly more than one-fourth percentage point. At a time when the growth of the economy is expected to be slow, losing half a percentage point due to the US dollar’s increase is not welcome.

While the decrease in the inflation rate is small, it is happening partly because of plunging oil prices, moderation in rents — which are one-third of the consumer price index — and slightly improving labor and product markets.

For Federal Reserve policy, the dollar’s surge has weakened even more the case for raising interest rates to combat the current inflationary trends. The hawks on the Federal Open Market Committee are being increasingly isolated. The chances of that the Federal Reserve will be increasing interest rates before some time next year have have practically been reduced to zero.