Sunday, May 31, 2009

Advantages of the Forex Market

What are the advantages of the Forex Market over other types of investments?
When thinking about various investments, there is one investment vehicle that comes to mind. The Forex or Foreign Currency Market has many advantages over other types of investments. The Forex market is open 24 hrs a day, unlike the regular stock markets. Most investments require a substantial amount of capital before you can take advantage of an investment opportunity. To trade Forex, you only need a small amount of capital. Anyone can enter the market with as little as $300 USD to trade a "mini account", which allows you to trade lots of 10,000 units. One lot of 10,000 units of currency is equal to 1 contract. Each "pip" or move up or down in the currency pair is worth a $1 gain or loss, depending on which side of the market you are on. A standard account gives you control over 100,000 units of currency and a pip is worth $10.

The Forex market is also very liquid. When trading Forex you have full control of your capital.
Many other types of investments require holding your money up for long periods of time. This is a disadvantage because if you need to use the capital it can be difficult to access to it without taking a huge loss. Also, with a small amount of money, you can control

Forex traders can be profitable in bullish or bearish market conditions. Stock market traders need stock prices to rise in order to take a profit. Forex traders can make a profit during up trends and downtrends. Forex Trading can be risky, but with having the ability to have a good system to follow, good money management skills, and possessing self discipline, Forex trading can be a relatively low risk investment.

The Forex market can be traded anytime, anywhere. As long as you have access to a computer, you have the ability to trade the Forex market. An important thing to remember is before jumping into trading currencies, is it wise to practice with "paper money", or "fake money." Most brokers have demo accounts where you can download their trading station and practice real time with fake money. While this is no guarantee of your performance with real money, practicing can give you a huge advantage to become better prepared when you trade with your real, hard earned money. There are also many Forex courses on the internet, just be careful when choosing which ones to purchase.

What are the advantages of the Forex Market over other types of investments?

The foreign exchange market (Forex) offers many advantages to investors. But you need to know where to begin.

This short guide will give you the Forex basics, so you can quickly start participating in this fast growing market.

In the past, foreign exchange trading was limited to large players such as national banks and multi-national corporations. In the 1980's the rules were changed to allow smaller investors to participate using margin accounts. Margin accounts are the reason why Forex trading has become so popular. With a 100:1 margin account, you can control $100,000 with a $1,000 investment.

A Learning Curve
Forex is not simple, though, so you'll need some knowledge to make wise investment decisions. Although it is relatively easy to start trading on the Forex, there are risks involved.
Your first move as a beginner should be to find out as much as possible about the market before risking a dime.

Find A Broker
Forex traders usually require a broker to handle transactions. Most brokers are reputable and are associated with large financial institutions such as banks. A reputable broker will be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.

Open an Account
Opening a Forex account is as simple as filling out a form and providing the necessary identification. The form includes a margin agreement which states that the broker may interfere with any trade deemed to be too risky. This is to protect the interests of the broker, since most trades are done using the broker's money.

Once your account has been established, you can fund it and begin trading.
Many brokers offer a variety of accounts to suit the needs of individual investors. Mini accounts allow you to get involved in Forex trading for as little as $250. Standard accounts may have a minimum deposit of $1000 to $2500, depending on the broker. The amount of leverage (how much borrowed money you can use) varies with account type. High leverage accounts give you more money to trade for a given investment.

Trades are commission-free, meaning that you can make many trades in one day without worrying about incurring high brokerage fees. Brokers make their money on the 'spread': the difference between bid and ask prices.

Paper Trading
Beginning traders are strongly advised get accustomed to Forex by doing "paper trades" for a period of time. Paper trades are practice transactions that don't involve real capital. They allow you to see how the system works while learning how to use the various software tools provided by most Forex brokers.

Most online brokers have demo accounts that allow you to make free paper trades for up to 30 days. Every new Forex investor should use these demo accounts at least until they are consistently showing profits.

Forex Software
Each broker has its own set of software tools for making transactions, but there are a few tools that are common to all Forex brokers. Real-time quotes, news feeds, technical analyses and charts, and profit-and-loss analyses are some of the features you can expect to see on most online brokers' web sites.

Almost every broker operates on the Internet. To access a broker's online services you'll need a reasonably modern computer, a fast Internet connection, and an up-to-date operating system. Once your account is set up, you can access it from any computer just by entering your account name and password. If for some reason you are unable get to a computer, most brokers will allow you to make trades over the phone.

There are lots of ways to make money. Forex trading is just one more potential stream of income -- if you are prepared to learn and practice.

What is Forex (Foreign Exchange)?

Foreign Exchange (FOREX) is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location and no central exchange (off-exchange). It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.

Traditionally, retail investors' only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the FOREX market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets.

MG Financial, now operating in over 100 countries, serves all manner of clients, comprising speculators and strategic traders. Whether it’s day-traders looking for short-term gains, or fund managers wanting to hedge their non-US assets, MG's DealStation™ allows them to participate in FOREX trading by providing a combination of live quotes, Real-Time charts, and news and analysis that attracts traders with an orientation towards fundamental and/or technical analysis.

Forex Trading Information

Forex — the foreign exchange (currency or forex, or FX) market is the and the most liquid financial market with the daily volume of more than $3.2 trillion. Trading on this market involves buying and selling world currencies taking the profit from the exchange rates difference. Forex trading can yield high profits, but it is also very risky. Everyone can participate in Forex trading via the Forex brokers.
Don’t forget to check and bookmark my Forex blog to get the latest updates about Forex market and this site’s content. You can also join a friendly Forex traders community at the Forex Forum

Forex Trading Information

Forex — the foreign exchange (currency or forex, or FX) market is the and the most liquid financial market with the daily volume of more than $3.2 trillion. Trading on this market involves buying and selling world currencies taking the profit from the exchange rates difference. Forex trading can yield high profits, but it is also very risky. Everyone can participate in Forex trading via the Forex brokers.
Don’t forget to check and bookmark my Forex blog to get the latest updates about Forex market and this site’s content. You can also join a friendly Forex traders community at the Forex Forum

Tuesday, May 26, 2009

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CJ’s restoration propels aggressive buying at KSE; Index up 313 points
Updated at: 1915 PST, Friday, April 03, 2009 KARACHI: The benchmark KSE-100 Index witnessed a big push on Friday at Karachi Stock Exchange (KSE), surging by 242 points to close at 7432.The share market carried forward the continuing upbeat mood at today’s opening and remained in the green zone throughout the session on the back of aggressive buying across the board by the investors. The traders looked encouraged by the new petroleum policy and the positive reports on the political front.The major Index was seen above the level of 7,400 for the first time in last three months.The market turnover was strong at 330 million shares which is 40 million shares higher than yesterday’s trade.NIB bank emerged as a new volume leader today which advanced by paisas 19 to close at Rs5.83.KSE-30 Index finished 261 points up to 8,064 at the weekend.

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Sunday, May 24, 2009

US Dollar Strength Will Outlast Risk Aversion as Economy Recovers

The US Dollar has fallen sharply over recent weeks as a rebound in risky assets weighed on the safety-linked currency. Looking ahead, however, evidence continues to suggest that the sell-off is a correction in the context of a larger uptrend rather than a sustainable change in Dollar’s overall trajectory, whether or not it is driven by risk sentiment.

The US Dollar Has Been Driven by Trends in Risk Sentiment

Recent months have seen the US Dollar exhibit a very strong inverse correlation with trends in risk appetite. Indeed, the US Dollar Index’s link with MSCI World Stock Index (a composite metric tracking global stock performance) was as strong as -95.9% in mid-December and now stands at a formidable -85.4%. As global demand weakened, expectations of dour earnings weighed on stock markets and pushed traders to pull capital from equities and other risky assets to seek safe haven in the greenback: the US continues to have the deepest, most developed capital markets and the most stable geopolitical profile, making dollar-based assets the venue of choice for risk-averse investors. Since March 10th, this relationship has worked against the Dollar as equities rebounded, sending the greenback 7.95% lower against its top counterparts.

Risk Aversion Aside, the Outlook for the Dollar Remains Bullish

Despite the recent selloff and taking risk aversion out of the picture, the case for US Dollar strength still looks compelling. The latest economic forecasts reveal expectations that US economic growth will outpace that of most other developed economies by the second half of this year, with differentials remaining in favor of the States into 2010. This suggests that the US Federal Reserve will lead its top counterparts in starting to raise short-term interest rates, boosting demand for Dollar-denominated assets.

Further, the US government is almost certain to issue billions in Treasury bonds to finance the tremendous amount of deficit spending that has been undertaken to combat the current crisis. This likely flood of government debt will send Treasury prices lower and add substantial upward pressure at the long end of the yield curve. The US fiscal effort dwarfs most anything else undertaken in industrial economies thus far, suggesting yields on US government bonds will see a far greater boost from new debt issuance and thereby become comparatively more attractive to investors.

Will Quantitative Easing Undermine the Dollar?

A chief concern about the US Dollar’s future prospects has been the Federal Reserve’s policy of “quantitative easing” (QE), a method of targeting long-term lending rates with the goal of adding to monetary stimulus as short-term borrowing costs approached 0% with no visible sight of improvement in economic activity. Put simply, the process works as follows:

1. The Fed creates some predetermined amount of new money (which is can do as the steward of the money supply) and uses it to buy government bonds from banks in the open market.
2. Because the supply of bonds has been reduced, their price goes up. This means that the yields required to make them attractive investments are reduced.
3. The banks that sold the bonds to the central bank now have more money on hand that they are able to lend. Because the yield on bonds is now lower, lending money to someone other than the government (i.e. individuals or businesses) at a higher rate becomes more lucrative, spurring credit access to the private sector and encouraging economic activity.

The chief concern with QE has been a fear of what printing money “out of thin air” will do to inflation once global economic growth rebounds in earnest. Assuming the scheme works as intended, the extra money divined by Fed will enter into circulation, making the US Dollar more abundant. As with anything made more readily accessible, the currency’s value will decline, leading to an “artificial” spike in prices. Depending on the size of the monetary injection, prices could skyrocket so dramatically as to erode the Dollar’s status as a store of value and effective medium of exchange, undermining economic activity altogether.

While such fears are reasonable, it is not entirely guaranteed that it will necessarily materialize. Monetary efforts to boost access to lending have been coupled by a massive jump in government spending. As we mentioned above, this spending has will need to be financed by borrowing. The issuance of new government bonds will pressure yields higher, attracting investors and working against the depreciative effects of QE. Assuming the Fed does not print so much money as to offset the impact the forthcoming demand for Treasuries, it is reasonable to expect a boost in demand for the greenback at the expense of nearly every other major currency.

Thursday, May 21, 2009

Analysis of forex

Fundamental Analysis

Fundamental analysis refers to the study of the core underlying elements that influence the economy of a particular entity. It is a method of study that attempts to predict price action and market trends by analyzing economic indicators, government policy and societal factors (to name just a few elements) within a business cycle framework. If you think of the financial markets as a big clock, the fundamentals are the gears and springs that move the hands around the face. Anyone walking down the street can look at this clock and tell you what time it is now, but the fundamentalist can tell you how it came to be this time and more importantly, what time (or more precisely, what price) it will be in the future.
There is a tendency to pigeonhole traders into two distinct schools of market analysis - fundamental and technical. Indeed, the first question posed to you after you tell someone that you are a trader is generally "Are you a technician or a fundamentalist?" The reality is that it has become increasingly difficult to be a purist of either persuasion. Fundamentalists need to keep an eye on the various signals derived from the price action on charts, while few technicians can afford to completely ignore impending economic data, critical political decisions or the myriad of societal issues that influence prices.
Bearing in mind that the financial underpinnings of any country, trading bloc or multinational industry takes into account many factors, including social, political and economic influences, staying on top of an extremely fluid fundamental picture can be challenging. At the same time, you'll find that your knowledge and understanding of a dynamic global market will increase immeasurably as you delve further and further into the complexities and subtleties of the fundamentals of the markets.
Fundamental analysis is a very effective way to forecast economic conditions, but not necessarily exact market prices. For example, when analyzing an economist's forecast of the upcoming GDP or employment report, you begin to get a fairly clear picture of the general health of the economy and the forces at work behind it. However, you'll need to come up with a precise method as to how best to translate this information into entry and exit points for a particular trading strategy.
A trader who studies the markets using fundamental analysis will generally create models to formulate a trading strategy. These models typically utilize a host of empirical data and attempt to forecast market behavior and estimate future values or prices by using past values of core economic indicators. This information is then used to derive specific trades that best exploit this information.
Forecasting models are as numerous and varied as the traders and market buffs that create them. Two people can look at the exact same data and come up with two completely different conclusions about how the market will be influenced by it. Therefore is it important that before casting yourself into a particular mold regarding any aspect of market analysis, you study the fundamentals and see how they best fit your trading style and expectations.
Don't succumb to 'paralysis by analysis.' Given the multitude of factors that fall under the heading of "The Fundamentals," there is a distinct danger of information overload. Sometimes traders fall into this trap and are unable to pull the trigger on a trade. This is one of the reasons why many traders turn to technical analysis. To some, technical analysis is seen as a way to transform all of the fundamental factors that influence the markets into one simple tool, prices. However, trading a particular market without knowing a great deal about the exact nature of its underlying elements is like fishing without bait. You might get lucky and snare a few on occasion but it's not the best approach over the long haul.
For forex traders, the fundamentals are everything that makes a country tick. From interest rates and central bank policy to natural disasters, the fundamentals are a dynamic mix of distinct plans, erratic behaviors and unforeseen events. Therefore, it is best to get a handle on the most influential contributors to this diverse mix than it is to formulate a comprehensive list of all "The Fundamentals."

Tuesday, May 19, 2009

Why opt for Forex trading?

With more than $1.5 trillion USD being traded daily, the foreign exchange market has managed to become the world's largest financial market, over the last three decades. With the large minimum deal sizes and rigid financial requirements, the Forex market, till recently, was not explored by the common trader or individual investor. But now the average investors can also engage in Forex trading. Some of the advantages of Forex trading are as follows:

24 hours trading

Forex gives its traders a 24 hour trading opportunity. Being a Forex trader, you can trade 24 hours a day from Sunday 5:00 pm (ET) to Friday 4:30 pm. This gives traders an opportunity to trade according to their convenience, going by their own schedule and also a chance to react instantly to any breaking news of the markets.

2. High levels of liquidity

Also, acting as a huge attraction is the high liquidity. With almost 90% of all the currency transactions consisting of 7 major currency pairs, helps these currencies display price stability, smooth trends, narrow spreads and high levels of liquidity. This liquidity mainly comes from the banks which offer cash flow to companies, investors and market players.

3. No commissionWith

“free of commission” trading, Forex trade lets you keep 100% of your trading profits. This makes Forex trading even more attractive as a business opportunity, especially for those who want to deal on a regular basis.

4. Steady trading prospects

The market is constantly moving and since Forex trading involves buying and selling of currencies, so traders can easily operate in a rising or falling market. This is because, there are always trading prospects, whether a currency is rising or deteriorating in relation to another currency. So there is always profit potential in the Forex market, whether it’s a rising one or a falling one.

Along with these major advantages, the Forex market also has some other merits such as, Forex trading gives its traders, an opportunity to bigger profits as returns on their invested money. Also, since the market is open 24 hours a day, 5.5 days a week, it gives the investors can make their deals anytime they want to.

With such superior speed of the market, and fine liquidity, even the largest of transactions are conducted within a few seconds. You can study the Advantages and Disadvantages of Forex Trading as well on our website.