For example if you see, EUR/USD 1.2100, 1 Euro is worth $1.21 Currency Pair: Two currencies that make up an exchange rate. Base Currency The first currency in the pair. This also describes the currency your account is traded in Counter Currency: The second currency in the pair. This is also described as the counter currency. ISO Currency Codes – Below are listed currency codes, there are many more, but
these are the main ones:
USD = US Dollar
EUR = Euro
JPY = Japanese Yen
GBP = British Pound
CHF = Swiss Franc
CAD = Canadian Dollar
AUD = Australian Dollar
NZD = New Zealand Dollar

Currency Pair Terminology-This is basically the slang terms for trading certain currency pairs.

EUR/USD – “Euro”
USD/JPY – “Dollar Yen”
GBP/USD – “Cable” or “Sterling”
USD/CHF – “Swissy”
USD/CAD – “Dollar Canada”

FX market

For fundamental traders, countries can be analyzed like forex. For technical traders, the FX market is perfect for technical analysis,since it is already the most commonly used analysis tool by professional traders. It is there fore important to take a closer look at the individual attributes of the FX market to really understand why this is such an attractive market to trade.

FX market the ideal market to trade

One of the primary reasons why the FX market is popular is because for active traders it is the ideal market to trade.

24-hour FX market

Its 24-hour nature offers traders instant access to the markets at all hours of the day for immediate response to global developments. This characteristic also gives traders the added flexibility of determining their trading day. Active day traders no longer have to wait for the equities market to open at 9:30 a.m. New York time to begin trading.

FX market and FX Trader

In addition, most people who want to trade also have a full-time job during the day. The ability to trade after hours makes the FX market a much more convenient 8 market for all traders. Different times of the day will offer different trading opportunities as the global financial centers around the world are all actively involved in foreign exchange.

Online FX broker

With the FX market, trading after hours with a large online FX broker provides the same liquidityand spread as at any other time of day.

FX market

As a guideline, at 5:00 p.m. Sunday, New York time, trading begins as the markets open in Sydney, Australia. Then the Tokyo markets open at 7:00 p.m. New York time. Next,Singapore and Hong Kong open at 9:00 p.m. EST, followed by the European markets in Frankfurt (2:00 a.m.) and then London (3:00 a.m.). By 4:00 a.m. the European markets are in full swing, and Asia has concluded its trading day.

The U.S. markets open first in New York around 8:00 a.m. Monday as Europe winds down. By 5:00 p.m., Sydney is set to reopen once again. The most active trading hours are when the markets overlap; for example, Asia and Europe trading overlaps between 2:00 a.m. and approximately 4:00 a.m.,Europe and the United States overlap between 8:00 a.m. and approximately 11:00 a.m.,while the United States and Asia overlap between 5:00 p.m. and 9:00 p.m..

Actively FX market Trade

During New York and London hours all of the currency pairs trade actively, whereas during the Asian hours the trading activity for pairs such as the GBP/JPY and AUD/JPY tend to peak.

Attractive FX market

The existence of much lower transaction costs also makes the FX market particularly attractive. In the equities market, traders must pay a spread (i.e., the difference between the buy and sell price) and/or a commission. With online equity brokers, commissions can run upwards of $20 per trade. With positions of $100,000, average round-trip commissions could be as high as $120. The over-the-counter structure of the FX market eliminates
exchange and clearing fees, which in turn lowers transaction costs.

Efficiencies FX market

Costs are further reduced by the efficiencies created by a purely electronic marketplace that allows clients todeal directly with the market maker, eliminating both ticket costs and middlemen.

FX market

Because the currency market offers around-the-clock liquidity, traders receive tight competitive spreads both intraday and at night. Equities traders are more vulnerable to liquidity risk and typically receive wider dealing spreads, especially during after-hours trading.

online FX trading

Low transaction costs make online FX trading the best market to trade for short-term traders. For an active equity trader who typically places 30 trades a day, at a $20 commission per trade you would have to pay up to $600 in daily transaction costs.

This is a significant amount of money that would definitely take a large cut out of profits or deepen losses. The reason why costs are so high is because there are several people involved in an equity transaction.

More specifically, for each trade there is a broker, the exchange, and the specialist. All of these parties need to be paid, and their payment comes in the form of commission and clearing fees. In the FX market, because it is decentralized with no exchange or clearinghouse (everything is taken care of by the market maker), these fees are not applicable.

Even though many people realize that higher leverage comes with risks, traders are humans and few of them find it easy to turn away the opportunity to trade on someone else’s money. The FX market caters perfectly to these traders by offering the highest  leverage available for any market. Most online currency firms offer 100 times leverage on regular-sized accounts and up to 200 times leverage on the miniature accounts.

Compare that to the 2 times leverage 9 offered to the average equity investor and the 10 times capital that is typically offered to the professional trader, and you can see why many traders have turned to the foreign exchange market.

The margin deposit for leverage in the FX market is not seen as a down payment on a purchase of equity, as many perceive margins to be in the forex markets. Rather, the margin is a performance bond, or good faithdeposit, to ensure against trading losses. This is very useful to short-term day traders who need the enhancement in capital to generate quick returns.

Leverage is actually customizable, which means that the more risk-averse investor who feels comfortable using

only 10 or 20 times leverage or no leverage at all can elect to do so. However, leverage is really a double-edged sword. Without proper risk management a high degree of leverage can lead to large losses as well.

Profit in Both Bull and Bear Markets In the FX market, profit potentials exist in both bull and bear markets. Since currency trading always involves buying one currency and selling another, there is no structural bias to the market. Therefore, if you are long one currency,you are also short another.

As a result, profit potentials exist equally in both upward-trending and downward-trending markets. This is different from the equities market,where most traders go long instead of short forexs, so the general equity investmentcommunity tends to suffer in a bear market.

Perfect Market for Technical Analysis For technical analysts, currencies rarely spend muchtime in tight trading ranges and have the tendency to develop strong trends. Over 80 percent of volume is speculative in nature, and as a result the market frequently overshoots and then corrects itself.

Technical analysis works well for the FX market and a technically trained trader can easily identify new trends and breakouts, which provide multiple opportunities to enter and exit positions. Charts and indicators are used by all professional FX traders, and candlestick charts are available in most charting packages.

In addition, the most commonly used indicators—such as Fibonacci retracements, stochastics, moving average convergence/divergence (MACD), moving averages, (RSI), and support/resistance levels—have proven valid in many instances.

Many equity and futures traders have begun to add currencies into the mix of products that they trade or have even switched to trading currencies exclusively.

The reason why this trend is emerging is because these traders are beginning to realize that there are many attractive attributes to trading FX over equities or futures.

Foreign Exchange Market Key

• Foreign exchange is the largest market in the world and has growing liquidity.
• There is 24-hour around the clock trading.
• Traders can profit in both bull and bear markets.
• Short selling is permitted and there are no trading curbs.
• Instant executable trading platform minimizes slippage and errors.
• Even though higher leverage increases risk, many traders see trading the FX market as getting more bang for the buck.

foreign Exchange Currency Trading

Over the past few years, currencies have become one of the most popular products to trade. No other market can claim a 57 percent surge in volume over a three-year time frame. According to the Triennial Central Bank Survey of the foreign exchange market conducted by the Bank for International Settlements and published in September 2004,daily trading volume hit a record of $1.9 trillion, up from $1.2 trillion (or $1.4 trillion at constant exchange rates) in 2001. This is estimated to be approximately 20 times larger than the daily trading volume of the New York Forex

Exchange and the NASDAQ combined. Although there are many reasons that can be used to explain this surge in activity, one of the most interesting is that the timing of the surge in volume coincides fairly well with the emergence of online currency trading for the individual investor.

Traditionally FX has not been the most popular market to trade because access to the foreign exchange market was primarily restricted to hedge funds, Commodity Trading Adviser who manage large amounts of capital, major corporations, and institutional investors due to regulation, capital requirements, and technology.

Foreign Exchange Market

One of the primary reasons why the foreign exchange market has traditionally been the market of choice for these large players is because the risk that a trader takes is fully customizable. That is, one trader could use a hundred times leverage while another may choose to not beleveraged at all.

However, in recent years many firms have opened up the foreign exchange market to retail traders, providing leveraged trading as well as free instantaneous execution platforms, charts, and real-time news.

forex industry

A few years ago, the forex industry was plagued with forex scams that robbed forex traders of their money. Although the forex industry has clean up its act, you should still exercise caution when signing up with a forex broker. Always do a background checking – reputable forex brokers are usually associated with banks or insurance companies. They are also registred with the appropriate government agencies.

forex broker

But even if your forex broker is reputable, there are still forex risks that you need to take into consideration before even beginning a trade.

One risk is the Exchange Rate Risk. This refers to fluctuations in the prices of currencies within a trading period. You will lose a lot of money is you don’t use stop loss orders when trading in forex. A stop loss order automatically closes an open positions if the price of a currency passes a pre-determined level. A stop loss order is typically used with a limit order to automate the forex trading. A limit order closes an open position if the target profit is arleady reached.

Risk in Forex Trading

Another risk in forex trading is the Interest Rate Risk, which results from discrepancies between the interest rates in the two countries represented in a forex currency pair. This risk can result in variations in the expected loss or profit of a forex transaction.

Credit Risk is another risk that forex traders have to contend with. Credit risk refers to the possibility that one party to a forex transaction may not honor his debt when the deal is closed. You can minimize this type of risk by dealing only on regulated exchanges that monitors members for credit worthiness.

Country risk is when a government gets involved in forex by limiting the flow of its currency. However, this type of risk is associated more with exotic currencies than with major currencies that are traded freely.

Thankfully, there are always to limiting the risks and financial exposure associated with forex. If you are a beginning forex trader, never trade without a forex trading strategy, that is, always know (a) when to enter and exit a trade (b) what kind of movements to expect.

Online currency trading,currency trading

Other traders that participate in the forex trading market are Central Banks and that is so they can have an impact on their national currencies and their exchange rate. The most prevailing uses of thecurrency trading Market are as a way for hedging risk– or in other words the buying and selling of futures contracts so as to protect energy traders from unexpected or adverse price fluctuations, and in order to take on interest-rate and price predictions

The second type of currency trading transaction is the forward transaction which is an exchange of two currencies that take place in a future date agreed upon in advance and at a price agreed upon in advance.

online forex traders

Trading arena is a window of time to the online forex traders; it is constantly changing and affecting the exchange rate all the time. The bid rate is the price the buyer is willing to give for a currency exchange and the ask rate is the price the seller is asking in order to sell the specific currency. The difference between those two is called the spread.

Tellingly, Net Non-Commercial positions in the USDJPY grew to the most net-short since mid-March. At that point the USDJPY set an important multi-month bottom and rallied considerably. Yet we believe that risks remain for a further USDJPY breakdown through the near term.

The subsequent pullback in positions warns that traders may soon unwind overextended GBPUSD longs. Important technical support at the 1.6000 mark suggests bulls won’t give up without a fight, but our medium term bias remains bearish.

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The Euro/US Dollar recently hit a powerful bullish extreme on its run up to year-to-date highs, and we have consistently favored EURUSD declines through the past several weeks of trade. The fact that COT net Non-Commercial longs recently eased off of extremes adds weight to the argument, and we likewise note that both 1-week and 3-month Risk Reversals are considerably off of their highs. Though we may need to wait for a significant bounce in volatility expectations to call for a Euro breakdown, our options sentiment-based EURUSD forecast remains bearish.

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