Who is the Forex Market?

The forex market, “Spot FX market” or foreign exchange market is made up of two main groups.

The one is the interbank market which consists of banks and other institutions who trade with one another on a daily basis.

The total turnover is estimated at 1.5 trillion US dollars per day and the banks trade with each other in the millions and multimillions.

As for the other portion making up the forex market, we are talking about the retail investor. This is any person who trades with their own capital either through the technology of the internet or via some other way, such as by telephone with a broker.

Retail investors tend not to move markets because the trades they place are insignificant in size to those of the banks.

Until fairly recently, it was very difficult for the retail investor to trade with the banks, especially intraday and with similar spreads as those offered within bank trading floors.

However, with the advent of the internet and technology, brokerage firms have cropped up all over the place providing a middle-man who allows the retail investor to trade with very similar spreads to the banks themselves, in realtime.

The advantage of this to the trader is that the broker, because most trades occur only in his books in reality, requires only a “margin deposit” to allow the home-trader to be able to control vast sums of real currency and hence make big profits with small capital.

For example, if a broker offers 100:1 leverage, the investor need only give the security of $1000 (in other words have at least $1000 free capital to place on the trade as security) to the broker in order to control $100,000 – or 1 lot – of currency.

This allows for losses and would mean each 4th decimal place movement of the currency pair price (eg – GBP/USD = 1.7689 – 1/7690) which may occur within seconds of placing the trade will be worth $10.
It would only take a change of 20 points (ie 1.7689 – 1.7709) to make a profit of $200 in a long.

The price would have to move considerably for the trader to actually lose that $1000 although it is possible for the market to move more than 100 points. Risk management such as setting a “stop loss” of 20 points would ensure a maximum loss of 20 points could be set as protection from further losses in the case of unexpected market movement.

So, in order to trade, we must trade through the environment of the margin broker. This is advantageous to us, in that we need a lot less capital to control fairly vast amounts of currency easily, legally and with real high profit potential on a daily basis.

What is required is an understanding of fundamental analysis and a sound technical strategy in the author’s opinion. The rest is abitrary. Most importantly, though, it must be said, trade only what you can afford to lose. Becoming a winner takes persistence and time in front of the charts.

Who is the Forex Market? / Sam Beatson

Sam Beatson is “THE Master Forex Trainer”. He owns http://www.fasttrackforex.com the Forex training crash course. His mentoring program is via http://www.fasttrackforex.com/special

An Introduction To The FOREX Trading System

For those new to the foreign exchange market, also known as FOREX, the prime thing you need to know is that it is a currency exhange market. There are high volumes of transactions 24 hours a day, 5 days a week. Because what you are trading is money itself, it is more liquid than any other exchange – you will never get stuck with trading a product that no one is interested in anymore.

1. FOREX History

Created in the early 70′s, fixed currency exchanges are determined by supply and demand just like the stock market. FOREX grew steadily throughout the 1970′s, but with the technological advances of the 80′s FOREX grew to over 1.5 trillion dollars daily.

2. Foreign Currency Exchange

Because there is no centralized location of FOREX – major trading centers are located all over the world and can be completed using software, over the internet or by phone. Businesses use the market to buy and sell products in other countries, but most of the activity on the FOREX is from currency traders who use it to generate profit from minisculte changes in currency values.

3. Enter Small Business

No longer is FOREX exclusive to big players such as the huge banks and corporations. 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 is worth about $100,000 and is accessible to the individual investor through leverage – loans extended for trading. The leverage rate is typically 100 – 1, meaning you can control up to 100,000 dollars worth of currency with just 1,000 dollars!

4. The FOREX Advantage – Liquidity
There will always be a buyer waiting for you due to the large number of transactions per day – Accessibility
The market is open 24 hours a day, 5 days a week – Open Market
News about currency fluxuations is available to everyone so insider trading is impossible. – No Commission
Brokers do not take a cut of the profits

5. How It Works

Every transaction has both a buy and a sell simultaneously. For example, if you believe the Canadian dollar will fall and the US dollar will rise, you would buy into the US dollar and sell the Canadian dollar. Meanwhile, someone else in the world will believe the opposite to be true, or more cunningly, will know the Canadian dollar is falling but buy into it anyways because it will be cheaper so when he sells it later, presumably when it has raised in price, he will make a lot of money. Software tools are available both to brokers and investors to help protect investments, and are generally regarded as a must-have for FOREX trading.

An Introduction To The FOREX Trading System / John Morris

For more great forex trading related articles and resources check out http://www.forexhq.info

When Is the Best Time to Start Investing

The answer to this question is easy yesterday. Of course, assuming that you haven’t begun investing yet, then the answer has to be now. Unfortunately, many of us fail to understand how valuable even a few years can be in making a difference to the funds that you have earned during your investing. This is due to the power of compound interest. The longer that you have to invest, or the longer that you let your investments earn a return, the more incredible an amount of money you can earn from your investments. Let’s take a look at a few examples.

There is an easy to remember investment formula called the rule of 72. It is an easy way to help you estimate how much time you will need in order to double your investment. Now, this rule is useful for those who have a large sum of money to invest all at once, but it demonstrates the power of interest. If you take the number 72 and divide it by your return, or interest rate, then you will know the number of years that it takes for you to double your money. For example, if you invest your money at a 6% interest rate, then 72 divided by 6 is 12. Meaning it will take 12 years for you to double your money. Now, if you have a specific goal in mind and you know how long that you have before you need your money to double, you can use the same formula to figure out what kind of return you will need to reach that goal. For example, let’s say that you need to double your money in 8 years. Divide 72 by 8 and you get 9. This means that you would need to earn 9% on your investment in order for the money to double in 8 years. The more money you start with, the more you will have earned, of course.

But if you, like many of us, don’t have a lump sum to invest all at once, you should still invest as soon as possible. The longer the length of time that you leave money to compound on itself, the more money you will earn. And what’s even more interesting is that the growth can be startling if you leave the money for 30 or 40 years as opposed to just 10 or 20. For example, let’s say that you begin investing $300 dollars a month at age 20. If you add $300 every month, and allow that money to sit, compounding the interest that you earn, with an 8% interest rate you will have $52,220 at the end of 10 years. You will have put 120 months of deposits into the account, or $36,000. So your interest would have earned you $16,200. Now, what if that same savings plan continued for 20 years? You would have invested $72,000, but your account would show a balance of $164,880. At 30 years, your $108,000 investment would be worth $407,880. But at 40 years, your $144,000 invested would have become an amazing $932,760.

Remember that as you age, your income will likely increase as well. So whereas now, you might be able to afford only $50 a month, in 10 years you might be able to invest $500 a month. The important thing is that you start immediately, and that you invest regularly. Then sit back and watch your money grow.

When Is the Best Time to Start Investing / Mika Hamilton

More Articles & Tutorials and a Free Investing For Beginners E-Course at http://www.Global-Investment-Institute.com