"Choosing FOREX"

Are you tired of the vagaries of stocks or futures volatility in oil and gold? If so, pay attention to the largest "market" in the world. This is not the U.S. stock market, Japan or Europe, it is Forex, also known as Forex, FX or spot currency market.

Speculators are working quite successfully in this vast market, where one day turns into almost $ 2 trillion, which far exceeds the amount of trades on all stock exchanges around the world put together. Traders and speculators in the spot occupied by about 37 percent of the market, another 43% goes to swaps and 20% - on options and forward contracts.

The main function of the forex market - provide a mechanism for cross-border payments and to determine exchange rates. Trade takes place through the simultaneous buying of one currency and selling another (currency pair). Although the majority of the market exchange rates, the lion's share of the market occupied by the U.S. dollar and the other four currencies: the euro (EUR / USD), Yen (USD / JPY), British pound (GBP / USD) and Swiss Franc (USD / CHF).

Choosing FOREX


Forex - an ideal market for sophisticated traders who have already passed the "training trade" in other markets. For trading on Forex are not charged commissions - indicate only spreads are measured in "pips," which are one tenth of one percent (0.01%). Since the spread in pips represents the cost of inputs, it is desirable chtby he was as small as possible. That's why forex trading is concentrated on the major currency pairs with the lowest spreads, two to four pips.

The lot size in the spot market is generally from 5 to 10 million dollars, the minimum contract is set to 500 000. Smaller lots can be traded through a brokerage firm, offering minimum investments of only a few hundred dollars, with the leverage of about 100:1.

Advantages of Technical Analysis
Of all financial instruments, the Forex market is best suited for technical analysis, for several reasons:

1. Forex exceeds the volume of all other markets. This volume in the last thirty years has grown by about 2000 percent, from $ 1 billion per day in 1974 to about $ 2 trillion in 2005, so the liquidity of the market is almost unlimited.

2. Foreign exchange market never closes during the trading week, so there is no build-up or delay client orders. There are virtually no gaps, leading to uncontrolled losses. Trading Week begins in Sydney, Australia, on Monday morning, when North America and Europe is still Sunday and ends in New York on Friday afternoon.

3. We know two basic types of markets - and trendy side. It is much easier to make money in trending markets. Currencies tend to go longer-term trends that can last for months or even years. This makes them ideal for trading and trend-break systems. For the same reason as well the analysis works on forex chart patterns. With such a wide spread of the market in the world a huge role in the movement of currencies is the behavior of crowds, and it is - the basis of tools and techniques of technical analysis.

4. Partly due to its size, forex less volatile than other markets. Lower volatility means lower risk. For example, the daily trading range for the S & P 500 - 4 to 5 percent, while the daily range euros - about 1 percent.

WORLD FOREX


5. Forex - an ideal market for "intermarket" method of market analysis, developed many years ago, Louis Mendelssohn (Louis B. Mendelsohn). Veterans trading know that markets are interdependent, with some stronger than others affect the motion of the chosen currency pair. Analysis program Mendelsohn, VantagePoint, discovers hidden recurring patterns that occur between related markets. Using neural networks to analyze data from a variety of related markets (see picture above), the program designs mean that precede the actual average rotation (see figure below) in 80% of cases.

FOREX FOREX


Do not forget about the fundamentals
Successful forex trading - traders, like their commodity and stock counterparts, should not forget about the fundamental factors that affect the forex market.

1. Decisions to change interest rates by central banks.

2. The numbers of government debt and budget deficit indicate changes for the better or worse. Growth deficit, for example, often heralds an increase in interest rates, as the government competes with the private sector for investment capital. The difference between the stock market and forex is that rising rates are usually favorable news for the currency.

3. Quarterly Report on GDP (gross domestic product).

4. Economic or geopolitical events. It can be elections, armed conflicts, political riots, etc., which, according to investors or traders can destabilize the market.

5. Economic indicators. For example, industrial performance, jobs (non-farm payrolls in the U.S.) and employment. They can affect the markets, including foreign exchange, because they directly affect the domestic interest rates and economic policies.

6. Japanese reports. Traders monitor the yen's quarterly reports Tankan.

7. Reviews of market sentiment. These reviews publish commentators and news services. They help to buy on the rumor, sell - on the news.

Available forex trader - the whole arsenal of tools of the trade. The better these fundamental and technical tools, the greater their chance of successful trading.

Darrell Jobman