Asset Management companies

Asset Management companies employ foreign currency market to assist dealings in foreign investments.They are the ones which basically handle big money accounts on behalf of their clients, like pension funds etc. . While such companies are into Forex market and trading currencies, they take these transactions as secondary to their real investment business, and hence, are not intended for revenue-maximization. According to the BIS study of Triennial Central Bank Survey, year 2004, a finance manager and a major 53% of transactions were totally inter-bank, 14% were between a non-financial company and a dealer, and 33% concerned a dealer (i.e a bank) .

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How Forex Get Started

The FOREX trading system was originated centuries ago. Although, during that time, it was more known as the Barter System, which we call Trading, today! More like a give and take situation, Barter system involved weighing the worth of one good in terms of the other. But with time and extensive use of this Barter system, lots of apparent limitations also came on the surface slowly, hence convincing the people to seriously think on the lines of establishing some more well-known and recognized mediums of exchange.When extensive trading started happening between the people of various countries like Africa and Asia with the help of this system, another main issue of concern came into existence. Where in some economies, goods such as feathers, stones and teeth provided as base economies, in others, other goods were given more importance. Soon, it became very important for all the people to demand for a establishing a common base of value. And shortly, assorted metals like gold, silver and bronze began to ascertain themselves as the established payment methods. Further more, they also established themselves as a consistent storage of value. With the invention of the Coins in the Middle Ages, which were originally cast in the chosen metal, the creation of a papered structure of governmental I.O.U. also achieved approval and recognition under the steady political administration. Though earlier when introduced, it was not easily accepted by people, and so establishing it through force had proved more effective than through advising. And today, this papered form is the basis of our modern day currencies. Along with being credited with the first use of paper notes, they also initiated the use of papered receipts.

During that time, speculation in trade was hardly experienced by people, and if we compare that market situation to the one we have today, the huge speculative movement in the exchange markets nowadays, would not have been appreciated at all. The elimination of the gold standard in the year 1931 along with a big decline in the market created some severe stillness in the Forex trading activities. From 1931 to 1973, the Forex market underwent a lot many modifications and alterations. So, with the aim of guarding the nationwide interests, improved foreign exchange controls were set up to stop market forces from demanding economic inconsistency. The Bretton Woods contract was achieved on the proposal of USA in July 1944, nearing the conclusion of World War II. The conference being held in Bretton Woods, New Hampshire for this agreement discarded John Maynard Keynes proposal for a new world reserve exchange in support of a structure built on the US Dollar. As a result to the Bretton Woods agreement, a method of fixed exchange rates was decided upon, which partially re-established the Gold Standard, setting up the USD price at $35.00 per ounce of Gold. While this was how a USD was priced, other main currencies were set up against the dollar.

Retail foreign exchange brokers

There are two types of retail brokers offering the opportunity for speculative trading: retail foreign exchange brokers and market makers. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks. Retail brokers, while largely controlled and regulated by the CFTC and NFA might be subject to foreign exchange scams. At present, the NFA and CFTC are imposing stricter requirements, particularly in relation to the amount of Net Capitalization required of its members. As a result many of the smaller, and perhaps questionable brokers are now gone. It is not widely understood that retail brokers and market makers typically trade against their clients and frequently take the other side of their trades. This can often create a potential conflict of interest and give rise to some of the unpleasant experiences some traders have had. A move toward NDD (No Dealing Desk) and STP (Straight Through Processing) has helped to resolve some of these concerns and restore trader confidence, but caution is still advised in ensuring that all is as it is presented.

Forex Trade Software

The idea of automated Forex trading when you first come across, Forex trading software will work for you, as it has worked for thousand other people. Using forex trading sofware people are now enjoying extra income without doing anything. Many of them have actually quit their old job and living solely from automated Forex trading software. Why did they quit their job? Because they do not need them since trading Forex is more than enough to cover their expenses for all there need.

You might have question that Forex trade software performs such task. Did you know that foreign currency actually behaves according to a certain pattern? Researches on these patterns have been conducted in many universities. They actually found out that while erratic, Forex movements can be predicted to a certain extent. The researches have reached a point where the predictions become so accurate therefore it is very profitable. So experts simply compile these formulas and knowledge into Forex trade software.

There are various sites or software that allow you to make trades, but just like every other software, accuracy is most important. In a acquiring a software tool to help you make your decisions for trading, it is best you try it out first. There are a lot of trading sites that give you trial runs to test their products. Aside from just knowing what the rates of the currencies are for the day, you want to have software that will help you analyze data and help you predict the behavior of the market. The most common method is the utilization of graphs showing the rise and fall of the currency.

Why Trading FOREX

Forex Market is a market where traders buy and sell currencies with the hope of making a profit when the values of the currencies change in their favor. People are making vast amounts of money from Forex trading. The Forex Market has a big potential for everyone, ranging from large corporate firms to ordinary, everyday people like you and me.

Here are some good reasons to enter the Forex Trade:

-Forex trading allows for small investments. You do not have to be able to invest thousands of dollars to get started with this trade. You can start trading Forex with as little and could be well on your way to earning more than that you invested if trade at right time.

-The Forex markets are open 24 hrs almost. You are able to trade anytime and from anywhere in the world. No waiting for the stock exchange to open. The market is ongoing, with generally only minor breaks on the weekends.

-The funds that you invest are liquid; you can cash them anytime you want. No waiting for days to get your stocks converted into hard cash.

-Although the value of different currencies goes up and down, the fluctuations are not as dramatic as stock prices and generally follow a predictable trend.

-You do not have to worry about commissions, exchange fees nor any hidden charges when you trade Forex. Forex brokers make only a small percentage of the bid and there are very respectable and free brokers available as well. Is that not wonderful for you?

-You will not worry about a falling currency value if you know what to do with it and make good gains.You make profits no matter which way the currency is going.

-Forex is a very transparent market. Unlike equity markets, where analysts have an unfair advantage over the layman because of their insider knowledge, the relevant information for Forex is equally available to every one through international news. Therefore, all Forex traders are in a position to make pertinent decisions according to the current market situations.

-Forex market is extremely quick! It takes not more than 1 to 2 seconds to complete your transactions because it is all done electronically, online and in Real Time.

-The final good news is that you do not need any formal education, licensing, diploma or degree to trade Forex. All you need is the know-how of how it works, trading strategies and some tips and techniques and you can be on your way to earn big profits.

Forex trading online may be the fastest path to financial freedom and an end to all your financial worries. It truly is an excellent, if not the best home business opportunity for ordinary people. You owe it to yourself to give it a try.

Online Currency Trading

It is estimated that over US$2 trillion is traded daily globaly. The system of currency trading is also referred to as foreign exchange, Forex, or FX for short. The currencies traded have a relative value to other currencies. To leverage the shift in order to earn profit trader uses the purchase and sale of large quantities of currency .

The cause of fluctuation in the relative value of a currency have two reasons. The first reason being the heavy buying and selling in the market can radically impact the value of the currency. This speculation has been responsible for drastic consequences on the national currency, consequently effecting the growth of a country’s economy.

Another factor on which the currency fluctuates. the “real” market, i.e. in case a foreigner wants to buy a commodity, he is forced to convert his domestic currency into the currency of the visiting place, the currency also fluctuates as it leaves a state.

Online currency trading is a very “fast market” which is highly unpredictable, analysts also consider it. An individual has to take into account technical and fundamental data and make an informed decision based on his perception of forex futures trading market sentiments and market expectations to become a successful trader. One of the variables that is most important in currency trading is timing. The trader has to be aware of the happenings in the market, and also has to understand the nuances of the market to play safely.

FOREX Most Traded Currencies

Currencies are traded in dollar amounts called “lots”. One lot is equal to $1,000, which controls $100,000 in currency. This is what is known as the "margin". You can control $100,000 worth of currency for only 1,000 dollars. This is what is called “High Leverage”.

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.

Here are some of the common symbols used in the Forex:

USD - The US Dollar

EUR - The currency of the European Union "EURO"

GBP - The British Pound

JPN - 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 a EUR by itself. You always need to compare one currency with another currency to make a trade possible.

Foreign Exchange Market Types

Over-the-counter (OTC)
It is composed of commercials banks, investment banks, others financial institutions and corporations. Each bank has a separate forex trading room. They are surrounded by telephones and terminals displaying up-to-date information. Most of the forex activities take place in this market. This market caters to both wholesale and retail clients.

Exchange-Traded
Security exchanges trade in certain types of forex instruments such as futures and options. The dealing is done through stockbrokers.
Dealers can trade foreign currency through voice brokers, electronic brokerage services and directly with other dealers. Internet trading of forex is increasing. Many large newspapers quote exchange rates daily.

Foreign Exchange Market Terminology

Bid: The rate at which traders buy foreign exchange (buying rate).

Offer: The rate at which traders sell foreign exchange (selling rate).

Spread: The difference between bid and offer rates. It is profit margin.

American Terms (Direct quote): The number of dollars per unit of foreign currency.

European Terms: The number of units of foreign currency per unit of dollar.

Cross Rate: The relationship between two nondollar currencies.

Multiple Exchange Rate System: Different exchange rates for different types of transactions.

Arbitrage: Buying and selling of foreign currencies at a profit due to price discrepancies.

Speculators: Trader’s position in foreign exchange market for earning a profit.

Hard Currency: A fully convertible currency which is relatively strong and stable in value.

Convertible Currency: A currency that can be freely traded for other currencies.

Exotic Currency: Currency of developing country which is weak, unstable and unpredictable.

Foreign Exchange Rate: Price of a currency.

Discount: It exists when forward rate is less than spot rate.

Premium: It exists when forward rate is exceeds spot rate.

Black Market: Price of currency based on supply and demand conditions instead of government controls.

Disadvantages of Forex Trading

24 hours market

Although it is convenient for the trader to trade whenever it is suitable to him, it can be a rather tough job too. This is because, at times, it is not possible for an individual trader to keep track of the Forex market, 24 hours a day.

This is where a broker comes into the picture. Retail or individual investors should try taking help from a professional broker rather than doing all the dealings himself straight with the huge market.

The broker will be an experienced professional who will act as an equal in your transactions, keeping you informed and updated about minute to minute details and fluctuations, and even guide you about the conditions, when to and when not to trade in the market.

High Leverage

While high leverage serves as an advantage to attract traders to the market, it can at times also act as a disadvantage for them. With such high levels of leverage available to traders in the Forex market, comes an equally high level of danger.

This can be true for the high stake positions which carry along with them, too much risk, leading to margin calls. This is where efficient money management comes into play for playing safe.

Advantages of Forex Trading

24 Hour Trading
Forex currency trading market offers its traders with a 24 hour trading opening, wherein, a Forex investor can trade ant any time of the day, whatever suits him/her, as the market is open for trading 24 hours a day, When Asia market is close, the European market start follows by the USA market and continue by Asia market again the next day. Thus, this allows Forex traders to take positions regardless of the hour and locations. This gives the Forex traders a choice to opt for timing for the trade according to their convenience.

High Leverage
Starting from a minimum of 100:1, Forex markets offer its traders with huge amounts of leverage which means that fat profits can be produced by investing small amounts of deposits.

Highest Liquidity
There is always buyer and seller in Forex market. The Forex market absorbs trading volumes and per trade size which dwarfs the capacity of any other market. On the simplest level, liquidity is a powerful attraction to any investor as it suggests the freedom to enter or exit the market at any time. Forex traders benefit from the ability to respond to breaking news immediately. There is no other market or investments that you can ever make an exit exactly at the time you wish to.

No Commissions or fees
If dealing with a financial market on daily basis, the regular investors or traders are the ones who are really benefited by the “free of commission” trading. The currency trading market lets its traders keep a whole 100% of their trading profits.

Profit on Bulls and Bears
"Buy low sell high", this is what every investor knows and practising in whatever market. One of the most exciting advantages of Forex trading is the ability to generate profits whether in the bull or bear condition. In the Forex market, apart form buy low sell high, Forex traders can always sell high and then buy back at lower price to generate profit.

Forex instruments (types of transactions)

There are six types of transactions that take place in the foreign exchange market. They are the instruments of foreign exchange market. They are:

spot transactions
they involve exchange of currencies two day after the date of deal. The rate of transaction is known as spot rate. Spot transactions account for 60% of foreign exchange market.

Forward transactions
They involve exchange of currencies three or more days after the date of deal. It is transaction for future delivery. The rate of transaction is known as forward rate. The forward rate is used to settle the forward transaction. Forward transactions account for 10% of foreign exchange market.

Fx swap transactions
They involve simultaneous spot and forward transaction. One currency is swapped for another on one date and then swapped back on a future date. Swap transactions account for about 30% of foreign exchange market.

Currency swaps
They deal with interest-bearing bonds. They involve the exchange of principal and interest payments. They are over-the-counter instruments.

Options
They are the right to trade foreign currency in future. They are not obligations. It can be traded over-the-counter or security exchange.

Futures
It is an agreement between two parties to buy or sell a particular currency at a particular price on a particular future date. A contract is entered. It guarantees a future price for the trading of foreign exchange.

An Introduction to Forex

Forex is money denominated in the currency of another nation or group of nations. Market consists of all buyers and sellers willing to engage in exchange relationships. Exchange rate is the price of a currency. International business is transacted in forex. It is one of the hottest topics around these days. But what exactly is it, and how can the average person make good money in Forex?

Forex (foreign exchange) also called "FX". It doesn’t get the big press like stocks, options, and commodities. But the forex is the biggest market in the world and it offers investors an incredible opportunity for profit. In this we trade in currency, not in stocks and bonds.

Simply, Forex trading is just the buying of one currency and the selling of another. As exchange rates go up and down, you either make gain or lose money.

For example, let's say you are analyzing the US Dollar and the Japanese Yen. Your research seems to indicate that the US dollar is undervalued and is due for a rise in price, and at the same time you expect the Japanese Yen to lose value. In this case you would execute a trade to buy US dollars and sell Japanese yen. If you are correct and the exchange rate rises, you make a profit!

you do not have to limit yourself to only one pair of currencies. There are dozens of different currencies to choose from. But if you are just starting out, I suggest sticking to the seven major currencies:

USD - US Dollar

EUR - the Euro

GBP - British Pound

JPY - Japanese Yen

CHF - Swiss Franc

AUD - Australian Dollar

CAD - Canadian Dollar

Most small investors concentrate their trading on just these seven currencies.