The foreign exchange market can be a baffling place for newcomers, and one of the sources of confusion is the forex quote. A forex quote is a small bit of information, yet it’s packed with numbers that may not make sense to someone unfamiliar with the forex system. Here’s a basic explanation of how it works.
A forex quote consists of a currency pair -- forex deals always involve simultaneously selling one currency and buying another -- a bid price and an ask price. For example, one quote might be this:
USD/JPY 118.71/75
The first currency is the base currency, and the other one is the quote currency. The value of the base currency is always 1 -- in this case, 1 U.S. dollar. The number tells you how many of the quote currency (the Japanese yen, in this case) you can buy with $1.
But what kind of number is 118.71/75? It’s actually forex shorthand for two numbers: 118.71 and 118.75. The lower number is the bid price, the other is the ask price. The bid price is the price that dealers will buy the base currency for. The ask price is what dealers will sell it for.
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So if the above were the current quote, it would mean right now, you could SELL U.S. dollars in exchange for 118.71 yen per dollar. Or, if you preferred, you could BUY U.S. dollars at a rate of 118.75 yen per dollar.
The difference between the bid price and the ask price in a forex quote is called the “spread,” and those tiny units are called “pips.” In our example, the spread for USD/JPY was four pips. The spread is usually that small for the most commonly traded currencies, which means anything involving the U.S. dollar, Japanese yen, Great British pound, the euro, Swiss franc or Australian dollar. In fact, thanks to the great competition in the forex trading market, some quotes will have spread of as little as one pip.
Of course, for less commonly traded currencies, the spread can be much greater. And even when the quote delivers a small spread, it adds up when you’re trading hundreds of thousands of units. If you were dealing with 100 U.S. dollars, the difference between selling them for 11,871 yen and buying them for 11,875 yen wouldn’t be much at all -- just four yen. But if it were 100,000 U.S. dollars, suddenly that four-pip spread means a 4,000-yen difference. So the spread in a quote is more important than its smallness would suggest.
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Monday, 4 August 2008
Wednesday, 16 July 2008
How to find a Forex broker
So you want to get involved in the foreign exchange market, or Forex. You’re itching to get started trading one currency for another and making some profit. But you can’t just barge into Citigroup or Merrill Lynch and start throwing Euros and Yen around. To get going you need to find a Forex broker.
Choosing your Broker
The preeminent Forex broker for day traders (ordinary investors) is Advanced Currency Markets, or ACM. To many people, the Swiss company, founded in 2002, is synonymous with Forex brokerage, trading about $70 billion a month.
There are many, many other brokers, though, who provide service to day traders. This service is almost exclusively conducted online, and in fact ordinary citizens rarely got involved with Forex trading at all until the computer boom of the 1980s. Since the advent of the Internet in the 1990s the number of day traders has risen staggeringly and Forex brokers have proliferated.
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As you might expect, levels of reliability and competence vary from one broker to another. The Internet is riddled with unsavory types seeking to take advantage of the inexperienced, so you would do well to investigate thoroughly any broker you’re planning to use.
1. Does their Web site look professional and reassuring, or is it riddled with dead links and spelling errors?
2. Search Google for the broker to see if they’ve been mentioned in news articles.
3. Ask about their track record. Get testimonials where possible.
4. Above all, avoid anyone who promises things that sound too good to be true, or who downplay the financial risk involved in Forex trading.
Look for a broker that seems to genuinely want your business.
Does the firm have customer service representatives available?
Is there a phone number you can call to speak to a live person?
The Web site should explain things clearly. If the site is full of terms that seem designed to go over your head, then look for a different broker.
Setting up your account
If you set up an account with an online Forex broker, this is usually how it will work. Firstly, you must apply for an account, which most brokers allow you to do online. This is to verify your identity and the validity of your bank accounts and financial records. Some brokers will also require you to download their Forex trading software, while others let you use whatever software you prefer. You will also have to transfer a minimum deposit to your account with your new broker. The minimum can be anywhere from $100 to $2,500.
Summary
Ideally, the broker you choose should offer service and support whenever you need it but should mostly stay out of the way and let you conduct your business. If you can find a Forex broker who is professional and helpful, your experience in the Forex market should be an enjoyable one.
EXPLODE YOUR FOREX TRADING PROFITS
Choosing your Broker
The preeminent Forex broker for day traders (ordinary investors) is Advanced Currency Markets, or ACM. To many people, the Swiss company, founded in 2002, is synonymous with Forex brokerage, trading about $70 billion a month.
There are many, many other brokers, though, who provide service to day traders. This service is almost exclusively conducted online, and in fact ordinary citizens rarely got involved with Forex trading at all until the computer boom of the 1980s. Since the advent of the Internet in the 1990s the number of day traders has risen staggeringly and Forex brokers have proliferated.
FOREX TRADING SOFTWARE
As you might expect, levels of reliability and competence vary from one broker to another. The Internet is riddled with unsavory types seeking to take advantage of the inexperienced, so you would do well to investigate thoroughly any broker you’re planning to use.
1. Does their Web site look professional and reassuring, or is it riddled with dead links and spelling errors?
2. Search Google for the broker to see if they’ve been mentioned in news articles.
3. Ask about their track record. Get testimonials where possible.
4. Above all, avoid anyone who promises things that sound too good to be true, or who downplay the financial risk involved in Forex trading.
Look for a broker that seems to genuinely want your business.
Does the firm have customer service representatives available?
Is there a phone number you can call to speak to a live person?
The Web site should explain things clearly. If the site is full of terms that seem designed to go over your head, then look for a different broker.
Setting up your account
If you set up an account with an online Forex broker, this is usually how it will work. Firstly, you must apply for an account, which most brokers allow you to do online. This is to verify your identity and the validity of your bank accounts and financial records. Some brokers will also require you to download their Forex trading software, while others let you use whatever software you prefer. You will also have to transfer a minimum deposit to your account with your new broker. The minimum can be anywhere from $100 to $2,500.
Summary
Ideally, the broker you choose should offer service and support whenever you need it but should mostly stay out of the way and let you conduct your business. If you can find a Forex broker who is professional and helpful, your experience in the Forex market should be an enjoyable one.
EXPLODE YOUR FOREX TRADING PROFITS
Understanding the Forex market
If you read about investing, you've seen the word Forex trading. Historical roots of the Forex currency trade from the days of the gold exchange, through the Bretton Woods Agreement. The Bretton Woods Agreement, established in 1944, fixed national currencies against the dollar, and set the dollar at a rate of USD 35 per ounce of gold.
The Forex market as we know it today was actually established in 1971.
Today, the Forex market handles about $1.9 trillion in transactions every day, and it runs 24 hours a day, five days a week. The most traded currencies are the U.S. dollar, the Euro, Japanese yen, British pound, Swiss franc and Australian dollar. . As recently as ten years ago, currency trading had high barriers to entry, so only large banking and institutional firms had access to the tools and systems required to play in the Forex trading game. The advent of internet technology is what made Forex trading grow considerably popular as well as accessible with various types of investors.
Forex market basics
Forex markets are the most liquid and accessible markets in the world. The Forex market is overwhelmingly dominated by international banks, government banks, investment banks, corporations, and hedge funds. Individual traders account for only about 2 percent of the market. Forex trading must always be considered high risk, but with good Forex risk management it is possible to generate some excellent returns on your investment.
PROVEN FOREX PROFIT SYSTEM
Forex is the simultaneous buying of one currency and selling of another as forex is traded in what is known as "cross pairs" for example GBP/USD or EUR/USD. Forex, also known as foreign exchange, has many advantages over stocks and futures for both day trading and swing trading. Forex is all about investing money in foreign currencies, just gain profit by selling at a higher price, the one you hold, just to buy another one at a lower price. You buy one currency and sell another one. The idea is to make a trade when you believe the currency you’re buying is going to go up in value compared to the one you’re selling. Then, if it turns out that your prediction was correct, you do another trade in the reverse direction. Sell the currency you originally bought and buying the one you sold and collect the profits.
For example, let’s say the market reports this: GBP/EUR 1.2200. That means the cost of buying one British pound is 1.22 Euros. If you believed that was going to change, and the Euro was going to become more valuable than the Pound, you might sell £100,000, buy 100,000 Euros, and then wait. Then let’s say a few weeks later, the exchange rate changed to this: EUR/GBP 1.3100. You can see the Euro is now worth 1.31 pounds, a profit of 0.11 per unit.
Summary
The Forex market is vast and daunting and mostly inhabited by giant organizations. Forex trading is a serious business and it is vitally important that you are properly educated and informed before committing your hard-earned money to the markets.
But it can be navigated by individuals who have studied the finer points and who want to take a risk on something potential profitable. And since the whole world uses money, the trading of currency is always going to be a major force in the financial world.
#1 RATED FOREX SOFTWARE
The Forex market as we know it today was actually established in 1971.
Today, the Forex market handles about $1.9 trillion in transactions every day, and it runs 24 hours a day, five days a week. The most traded currencies are the U.S. dollar, the Euro, Japanese yen, British pound, Swiss franc and Australian dollar. . As recently as ten years ago, currency trading had high barriers to entry, so only large banking and institutional firms had access to the tools and systems required to play in the Forex trading game. The advent of internet technology is what made Forex trading grow considerably popular as well as accessible with various types of investors.
Forex market basics
Forex markets are the most liquid and accessible markets in the world. The Forex market is overwhelmingly dominated by international banks, government banks, investment banks, corporations, and hedge funds. Individual traders account for only about 2 percent of the market. Forex trading must always be considered high risk, but with good Forex risk management it is possible to generate some excellent returns on your investment.
PROVEN FOREX PROFIT SYSTEM
Forex is the simultaneous buying of one currency and selling of another as forex is traded in what is known as "cross pairs" for example GBP/USD or EUR/USD. Forex, also known as foreign exchange, has many advantages over stocks and futures for both day trading and swing trading. Forex is all about investing money in foreign currencies, just gain profit by selling at a higher price, the one you hold, just to buy another one at a lower price. You buy one currency and sell another one. The idea is to make a trade when you believe the currency you’re buying is going to go up in value compared to the one you’re selling. Then, if it turns out that your prediction was correct, you do another trade in the reverse direction. Sell the currency you originally bought and buying the one you sold and collect the profits.
For example, let’s say the market reports this: GBP/EUR 1.2200. That means the cost of buying one British pound is 1.22 Euros. If you believed that was going to change, and the Euro was going to become more valuable than the Pound, you might sell £100,000, buy 100,000 Euros, and then wait. Then let’s say a few weeks later, the exchange rate changed to this: EUR/GBP 1.3100. You can see the Euro is now worth 1.31 pounds, a profit of 0.11 per unit.
Summary
The Forex market is vast and daunting and mostly inhabited by giant organizations. Forex trading is a serious business and it is vitally important that you are properly educated and informed before committing your hard-earned money to the markets.
But it can be navigated by individuals who have studied the finer points and who want to take a risk on something potential profitable. And since the whole world uses money, the trading of currency is always going to be a major force in the financial world.
#1 RATED FOREX SOFTWARE
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