StephanFX - Forex Trading

Friday, December 08, 2006

About Forex Trading systems

Forex trading systems are all about getting investments into the foreign markets. Foreign exchange markets are abbreviated to be called Forex. The worldwide trading of stocks in companies and in products happen over the Forex trading system. There are over a trillion dollars traded on the Forex market everyday. You can learn to chart and follow markets in the Forex trade world on your own, or you can rely on a broker as you would in the New York stock exchange. The Forex trading systems are similar in method, but each is a proven method of how to make money, how to learn about companies and how to follow what is going on with the money you are investing in the Forex trading markets.

You can live anywhere in the world and trade stocks and investments in the companies that are involved in the Forex markets. There are no limitations to the money you can make, or the money you can lose. The Forex markets can be tapped into online, over the phone or by contacting a broker in person. If you are interested in making money, you can do it on the Forex market, without having to have employees, or a broker to do this. You can get involved in learning about the investments in the Forex markets, and take on the responsibility for your own money, and making your own money. Many are starting their own businesses using their education and experience on the Forex market to make money.

The Forex market is one that is world wide, so there is sure to be something of interest to just about anyone that wants to expand their investments and expand their learning about money in the world wide markets. There are many experts in the Forex markets, and using the Forex trading system that you feel most comfortable with, you can be a Forex market expert as well.

There are no go betweens, such as large banks or such when you are involved in the Forex market. There are no need for fees and transaction fees when you do your own trading on the Forex markets. You can learn the Forex trading system that best suits your learning needs, and follow it to chart companies, chart growths, and to invest in companies that have a solid future. There are companies and markets through out the world that you can invest with, to increase your wealth and your investment portfolio.

A few different regions of trading exist in the Forex markets, with sessions in Tokyo, Asia Pacific, and in the Americas. Trading is always non-stop, and moving from London to New York, to Tokyo and so on again and again. You can invest in the US dollar, the Euro, the Japanese Yen, or in Swiss Franc among others.

Wednesday, December 06, 2006

Technical Analysis - Reading FOREX Charts

Price charts can be simple line graphs, bar graphs or even candlestick graphs. These are graphs that show prices during specified time frames. These time frames can be anywhere from minutes to years or any time interval in between.

Line charts are the easiest to read, they will show you the broad overview of price movement. They only show the closing price for the specified interval, they make it very easy to pick out patterns and trends but do not provide the fine detail of a bar or candlestick chart.

With a bar chart the length of a line displays the price spread during that time interval. The larger the bar is the greater the price difference between the high and low price during the interval. It is easy to tell at a glance if the price rose or fell because the left tab shows the opening price and the right tab the closing price. Then the bar will give you the price variation. When printed bar charts can be difficult to read but most software charts have a zoom function so you can easily read even closely spaced bars.

Originally developed in Japan for analyzing candlestick contracts candlestick charts are very useful for analyzing FOREX prices. Candlestick charts are very similar to bar charts they both show the high, the low, open and close price for the indicated time. However the color coding makes it much easier to read a candlestick chart, normally a green candlestick indicates a rising price and a red one indicates a falling price.

The actual candlestick shape in reference to the candlesticks around it will tell you a lot about the price movement and will greatly aid your analysis. Depending on the price spread various patterns will be formed by the candlesticks. Many of the shapes have some rather exotic names, but once you learn the patterns they are easy to pick out and analyze.

Price charts are not usually used by themselves to get the full affect you need to supplement them with some technical indicators. Technical indicators are normally grouped into some pretty broad categories. Some of the more common ones used to monitor and track the market movement are: trend indicators, strength indicators, volatility indicators, and cycle indicators.
Here is a list of some of the more commonly used indicators as well as a brief description.
Average Directional Movement Index (ADX) – This index will help indicate if the market is moving in a trend in either direction and how strong the trend is. If a trend has readings in excess of 25 then this is considered a stronger trend.

Moving Average Convergence/Divergence (MACD) – This shows the relationship between the moving averages which allows you to determine the momentum of the market. Any time that the signal line is crossed by the MACD it is considered to be a strong market.

Stochastic Oscillator – This compares the closing price to the price range over a specific time frame to determine the strength or weakness of the market. If a currency has a stochastic of greater than 80 it is considered overbought. However if the stochastic is under 20 then the currency is considered undersold.

Relative Strength Indicator (RSI) – This is a scale from 1 to 100 to compare the high and low prices over time. If the RSI rises above 70 it is considered overbought where as anything below 30 is considered oversold.

Moving Average – This is created by comparing the average price for a time period to the average price of other time periods.

Tuesday, December 05, 2006

FOREX Trading Fundamental Analysis

Most FOREX traders rely on analysis to make plan their trading strategy. This article will discuss fundamental analysis. The other common form of analysis is technical analysis. After reading this article you should have a better understanding of fundamental analysis and how to use it as part of your FOREX strategy.

Political and economic changes are the basis of fundamental analysis. These can frequently affect currency prices. Traders that take advantage of fundamental analysis will gather their information from a variety of news sources. They are looking for information about unemployment forecasts, political ideologies, economic policies, inflation and growth rates.

Fundamental analysis will provide you with an overview of currency movements and a broad picture of the economic conditions. Most traders then will combine their fundamental analysis with technical analysis to plot actual entrance and exit points as well as confirming the information provided by their fundamental analysis.

Just like most markets the FOREX market is controlled by supply and demand. Many economic factors can affect the supply and demand but the two most critical ones are interest rates and the strength of the economy. The over all strength of the economy is affected by changes in the GDP, trade balances and the amount of foreign investment.

There are many economic indicators released by government and academic sources. These indicators are usually released on a monthly basis but will sometimes be released weekly. These are pretty reliable measures of economic health and are closely followed by all traders.

There are many indicators that are released but some of the most important and commonly followed are : interest rates, international trade, CPI, durable goods orders, PPI, PMI and retail orders.

Interest Rates - can cause a currency to either strengthen or weaken depending on the direction of movement. In some cases high interest rates will attract foreign money, however high interest rates will frequently cause stock market investors to sell of their portfolios. They do this believing that the higher cost of borrowing money will adversely affect many companies. If enough investors sell of their holdings in can cause a downturn in the market and negatively affect the economy.

Which of these two affects will take place depends on many complex factors, but there is usually an agreement among economic observers as to how the current change in interest rates will affect the general economy and the price of the currency.

International Trade - If there is a trade deficit (more items imported than exported) it is usually considered a negative indicator. When there is a trade deficit it means that more money is leaving the country to buy foreign goods than is entering the country and this can have a devaluing effect on the currency. Usually though trade imbalances are already factored into the market consideration. If a country normally operates with a trade deficit then there should not be an affect on the currency price. The currency price will normally only be effected by trade differences when the deficit is greater than the market expected.

The measurement of the cost of living (CPI) and the cost of producing goods (PPI) are a couple of other important indicators. You should also watch the GDP which measures the value of all the goods produced in a country and the M2 Money Supply which measures the total amount of currency for a country.

In the US alone there are 28 major indicators, these can have a strong effect on the financial market and should be closely watched. This information can be found many places on the internet and is provided by many brokers.

Monday, December 04, 2006

Beware Of The Typical Forex Trading Scam

It’s very easy for new forex trading investors to get taken in by some sort of forex scam or another. This can include just about any idea under the sun that scammers can come up with. Usually the realm of forex scams can include, software and e-books that ‘guarantee’ a profit in the forex market, an unscrupulous market maker that spikes costumer accounts so they can get their fees, general false advertising, and even those with fake sites that just take your money and disappear.

The nature of the currency market tends to leave new investors vulnerable to such scams, simply because it fluctuates a lot and little is known about the market by the general population. It’s up to investors to educate themselves on forex trading, just as they would before making any other investment if they expect to do well. This includes being aware of common scams. In 2001 the US Commodity Futures Trading Commission (CFTC) released nine tips investors in the forex market should keep in mind when looking for a broker:

• Stay Away From Opportunities That are Too Good To Be True
• Avoid Any Company that Predicts or Guarantees Large Profits
• Stay Away From Companies That Promise Little or No Financial Risk
• Be Wary of Trading on Margin Unless You Know What That Means
• Be Wary of Those Claiming To Trade in the "Interbank Market" because Its ‘Safer’
• Be Wary of Sending or Transferring Cash on the Internet, By Mail or Otherwise
• Scams Often Target Members of Ethnic Minorities
• Get the Company's Performance Track Record
• Anyone Who Won't Give You Their Background Isn’t Worth the Risk

Many forex scams, as is common with other types of scams, rely on getting dollar signs to appear in their victims eyes in order to pull off the scam. If at any point in the decision making process you start to feel yourself getting overly excited by the prospect of making what seems like easy money, then set your plans aside for the time being and come back to them later. You’ll be much calmer and in a better position to decide if the broker or deal you are interested in is really worth it.

One of the most common scams simply involves selling a product or system online that will ‘guaranteed’ make you profits in forex trading. Be careful of online advertisements for these products, after all most of them contain information about the forex market that you can obtain by reading any other book on forex trading. It will give you information on the forex market if you are doing research, but it probably won’t give you the guaranteed secret to success.