Comparing Futures and FOREX Trading

How did the whole futures market begin? It all started with agricultural produce in the last century. Farmers began to contract with buyers to sell their produce at a future date and there was a kind of stabilization of demand and supply through the year. This is why it was called 'futures'. Today, however, the term encompasses a lot more than that. Today, futures refer to all kinds of commodities. This could range from agricultural goods to manufactured products to bonds and currencies. All a futures contract does is to say what will be paid for a product at a particular future date. What is even more complex is that a futures contract can be traded too! Once speculation began using futures contracts, it went beyond the demand and supply of actual goods. What the market is playing with is the value of the goods and what it is worth from day to day.

Here's how it works. A buying price is fixed, so is a selling price as well as a particular quantity. The buyer takes what is called the long position and the seller takes the short position. As the market prices fluctuate, so do the profits or losses that the buyer and seller make. When the contract period is over, the accounts are settled on the basis of the prevailing price on that particular day in the market. These kinds of contracts are based on speculation and the speculation is done based on market trends. How do speculators make their money? They try and buy short from the seller if they think that prices are going to fall and they buy long from the buyer if they feel that the prices will rise. However much they keep their ear to the ground, observing market trends, there is a large element of gambling to these dealings. The bottom line is that one can never be certain.

FOREX on the other hand, is probably a better deal. This stands for the foreign exchange market. This is much, much larger than the futures market. It is also more liquid and the markets are open 24/7 so it is easier for traders to take advantage of immediate good deals rather than wait for the markets to open. The earnings of brokers come from the difference in the buying and selling prices of a currency so there is no commission in FOREX transactions. The deals are immediate and go into very high volumes. This increases price certainty while it minimizes slippages. Thanks to the safeguards built into its system, FOREX transactions are less risky than futures. In futures, there is a possibility of slippage which could lead to debits.

The Size Of The Forex Market

Most of the experienced traders around the world consider the Forex market as the best and most profitable of the capital markets. During many years forex trading had been the great and exclusive domain of major banks, very large financial institutions and the countries central banks; a good example of such a bank would be the U.S. Federal Reserve Bank. But over the last few years, thanks to the internet era, the market has been opened to anyone willing to learn the right techniques in forex trading and with the intentions of making substantial profits as the above mentioned institutions, that annually and consistently make pretty high profits from trading in the Foreign Exchange market.

The foreign exchange market (FOREX) will exist wherever one currency is being traded for another. This market, also known as “currency market”, is by far the largest market in the world in terms of all the cash value traded per day, this trading includes all that is being performed between large commercial banks, central banks, currency speculators, governments, and other financial markets and institutions. The trades taking place in the forex markets across the globe it’s known to exceed on average $1.9 trillion/day. Retail traders, this is, small speculators are only a small part of this market, but this doesn’t mean they can’t grab huge profits if they have learn the right way to trade the Forex. These individual traders participate in the market through broker firms.

According to many experts, the foreign exchange market will have doubled in size in just three years, this thanks to increased participation by fund managers and pension funds. A financial services research firm said it expected the total global average daily volumes on the forex market to exceed $3,000bn next year (2007). Forex volumes, which rose from $1,770bn in 2004 to $2,000bn last year, were set to rise to $2,600bn this year and $3,600bn next year.

With these numbers you can easily realize why they say that the Forex market is a huge market that offers great opportunities for traders of all sizes.

A Quick Look at Currency Exchange Basics

“The blunt truth about the politics of climate change is that no country will want to sacrifice its economy in order to meet this challenge, but all economies know that the only sensible long term way of developing is to do it on a sustainable basis.” -Tony Blair

Investing in an exchange currency market is a hot new trend that has become extremely popular in the last two years. Many people are confused about what is actually being traded in the currency exchange markets.

The truth is nothing is physically being exchanged. Currency exchange markets are a place for speculators to come and play. It can be extremely popular but just as risky. All trades made in a currency exchange market happen through a computer system. No actual currency is ever exchanged which means you do not have to have Yen when you exchange it for the Australian dollars.

How it Works. Currency exchange traders swap one form of money for another for a profit. The faster you can trade between currencies the more profit you will be able to make. Trading occurs daily and profits can be made quickly. Most of the current currency exchange market is dominated by large financial corporations, hedge fund managers, and speculative individuals who feel they understand the nature of the global economy.

Currencies are traded in pairs where the original currency is considered short and the exchanged currency is considered long. For example, a trader might trade Euros for Dollars. Euros are consider short and dollars are consider long. For example, if you went into a shoe store and purchased a pair of shoes for a $100 dollars.

The store would be long $100 dollars but short one pair of shoes. This theory is the same theory which applied in currency exchange markets. Remember in this type of market only numbers of being exchanged instead of physical items. Money is made by taking advantage of the difference in value between the two forms of currency.

Currency exchange is a fun but complicated trading market. If you are interested in trading currency contact a financial advisor who can help inform you on the basics of currency exchange.

Commonly Exchanged Currencies. There are a number of currencies which are exchanged and they include the Euro, American Dollar, Japanese Yen, British Pound, Swiss Franc, Australian Dollar, Canadian Dollar, and the New Zealand Dollar.

One of the most popular currency exchange market is Forex. Forex offers online currency trading as well as a huge resource of research and background information. They also allow new investors to set up practice accounts which allow them to buy and sell currency in demo mode. This allows new investors to be able to get their feet wet in the currency markets without losing any more.

How To Read Forex Currency Pairs

The Forex market is known by its immense volume of transaction per trading day, and it is because of this that it’s impossible for a single of the market’s forces to noticeably control the market direction for any considerable length of time, opening many opportunities for traders of any size.

Among the most important factors that influence currency prices you must consider the economic and political conditions in the home country of the particular currencies you are willing to trade. There are three important factors influencing the price f any currency: Inflation, political stability, and interest rates. All this factors fall into what’s known as “fundamentals” in the trading world. Additionally, governments will always be a factor in the currency markets, they will often try to establish some kind of control over the price of their currency by either intentionally flooding the market, to lower the price; or buying large quantities, to raise the price.

The first thing you should know if you want to read currency quotes correctly is that each particular currency is given a three letter code which is used in forex quotes. The most common currencies are: European euros (EUR), US dollars (USD), United Kingdom pounds (GBP), Australian dollars (AUD), Japanese yen (JPY), Swiss francs (CHF) and Canadian dollars (CAD). One more thing you must learn when you start trading forex is that the foreign exchange prices are indicated by quotes in a fraction like mode, and this are called currency pairs. The first currency is called the 'base' and the second is called the 'quote' currency. In the following example: USD/EUR = 1.1896

This currency pair is formed by US dollars and European euros. The base currency (USD) is always considered ‘1’ and the quote currency shows how much it costs to buy one unit of the base currency. In this example, 1 US dollar will cost you 1.1896 euros.

By examining the data of any trading software, you will notice that forex quotes are shown in a 'bid' and 'ask' prices format. What ‘Bid’ means is the price that buyers will pay for the base currency, while at the same time selling the quote currency, and ‘Ask’ is the price at which the sellers will sell the base currency, while at the same time buying the quote currency.

Forex Trading – How It Compares With the Stock Market

There are many reasons why Forex Trading appeals to more people than the stock market. One of the main reasons is the fact that Forex offers a much greater return.

With foreign currency exchange fluctuations happening daily from as little as just one or two percent any investor who has planned his entrance and exit strategy properly and gets his timing right, can receive significant rewards.

Many people also like the fact that more leverage is available with a foreign exchange. For example: you could leverage the purchase of $100,000 with $10,000 through margins that could give a great return at only 1% and with less risk.

With Forex trading the market is open 24 hours a day compared to conventional business hours held by the stock market. Forex trading is also done without having to pay extortionate amounts of money in commission. This can of course mean great savings.

Because Forex trading is open 24/7 and because of its massive size, any trader is able to work 24 hours a day moving around from the difference markets, i.e. Asian, European and American. Add to this the Forex leverage opportunities available then the chance of huge profits are great.

There is a misconception about the size of the Forex market. Many people don’t realise that it is so huge that no single investor has a chance of cornering the market.

Unfortunately many people fail to understand Forex to its fullest and this is only through a lack of education. Because of this lack of education, traders who have previously experienced the stock market, seem to believe that Forex is risky and has low profit margins, some would say extremely small. However it does take more than just watching CNN.

As a Forex trader, people must educate themselves through newsletters etc. If people were to join a Forex trading site and make use of the on-line training programs available, of which the majority are free, then they would start to learn about the advantages of Forex against trading on the stock market.

As far as the stock market goes, it does have its advantages in that a person can invest in the stock market without any prior knowledge and possibly do very well. There are some stocks that are unlikely to devalue like blue chip stocks. For long term savings stocks can be fine, however, for short term gains you need to be definitely looking at Forex.

Forex is maybe considered by some people to be risky, mainly pension funds who rarely invest in Forex. However, for the smart ones that have taken the opportunity of educating themselves, they will find, without doubt, that Forex is the easy way to go.

Take the billionaire George Soros as a prime example. He shorted the British pound and made $2 billion in profit at one point. He also makes over 60% returns on the Quantum fund which he owns and has over $4 billion under management. There have been times of course, when Soros has lost money, however he simply says “I make a lot of money when I’m right and loose as little money as possible when I’m wrong”.

Soros’s philosophy is to scrutinize a country’s stock market to see if current trends are right or wrong. If he believes that a trend is overshot then he simply goes the opposite way and makes a killing.

Soros is a prime example of how good money can be made in Forex if investors are willing to study, learn, invest and of course take a risk. Whilst however it is not for the timid, if you’re a daring Entrepreneur then it’s the perfect place for you to try your hand as Forex offers the chances of a good return.

Forex Mini Account

Forex market has many advantages over other foreign exchange markets and due to its very high profitability potential most of the people around the world are looking for entering into the world of Forex trading. But one of the main worries of the new forex trader is if he needs lots of money in order to get accessed to this Fx market and also start placing trades. It is not necessary that you need to be super-rich or the owner of a big corporation. You just need a few dollars and the right strategy to start profiting from Forex trading. Mini forex trading is an outstanding way for small investors to learn about and take part in forex trading and with the most forex brokers presenting a leverage of 100:1, mini forex trading will allow you to control a $10,000 currency position with a deposit of only $100. Mini forex trading is a great way to get a feel for forex trading and learn the tricks and skills desired to succeed without having to go to great expenditure.

One greater new for the starting of forex trader is that there is no maximum trade volume when you use a forex mini account. Although the standard trade size is 10,000 units, you are not limited to trading one lot. For instance, you can trade 10,000 units or even 200,000 units. You can gradually increase the size of your positions to maximize profits as you become more seasoned and build up your confidence. The ability to customize the size of the trade will allow you to have a better risk management of your money. Once you have entered the world of Forex trading you will be finding it immediately that this field is not just about entering trades into your broker’s trading station, but for gaining profits.

The only way for reaching your goal of becoming a profitable currency trader is by finding the best sources to learn forex trading. You can start practicing with a paper trading account, which is highly recommended, and this will give you the feeling of what a real trading account is as you gain the knowledge and skills you need and without the constant fear of losing your money in a bad move you may make. Once you have been profitable with a paper trading account the next natural step would be to open a mini forex trading account, but with real money. But even considering you are risking real money this time, it would be just a few dollars on the table that will be at risk; and on the positive side, you will have the chance of gaining real money from your Forex trading skills, which at the end is the ultimate aim of all traders.

Don't Short-Change Yourself by Not Understanding Money Exchange Rates

One pesky problem you may encounter while on vacation in a distant country is the varying value of currency. Your vacation will be more relaxing if you are familiar with the intricacies of money exchange rates. Every country has its own monetary system, meaning their currency is different than yours and its value fluctuates constantly. For instance, most businesses in the United States will not accept Canadian currency. Since the monetary value of a Canadian quarter is not equal to that of an America quarter, accepting Canadian currency means a loss in profit.

Before spending your money abroad you should first bear in mind the difference in value between currencies. The value of yen and pounds for example are vastly different than the US dollar. Combined with the ever-changing money exchange rate converting your currency can be quite confusing. To avoid complications while on an overseas shopping spree always remember the differences in monetary value between currencies so you may have a rough estimate on the prices of different merchandise.

Fortunately for those on vacation, currencies can be exchange in the airport allowing you to convert dollar in the local currency of the country you are entering. Since money exchange rates fluctuate constantly, it is possible that the amount you receive when you converted five hundred US dollars last year may identical to what you receive this year. You may find out about the most recent money exchange rate online and with the help of a calculator you may come up with the amount you can get if you decide to convert your currency.

As with most services in our modern world, money exchange through airports and banks would require a fee. You can choose to skip this fee by making use of credit and debit cards while on vacation. The drawback with this would be finding an automatic teller machine that will accept our card. To avoid hassles, it would be wise to consult your bank about your trip, and they would be able to confirm the presence of ATMs at your destination.

The problem with monetary value is not limited to your vacation. It also extends to online purchases. If you are planning to acquire commodities from another country you should first look into the recent money exchange rate. When using an international money order it’s imperative to know the exchange rate before buying and hope that it doesn’t fluctuate too much before your payment arrive. Most business avoid international money orders because of this complication and also because of the huge fee involved in cashing them in.

Automated Trading Orders in Forex Trading

Practical trading involves lots of simulations and automated trade orders using the power of computer. Charting, graph plotting, and automated trade orders; all these are used to enlighten your routine trading work and it spares you more time in studying the market.

Some of the well known trading orders are zero stops, stop order, limit orders, good till cancelled (GTC), as well as market on close order. These orders are used along with different trade strategies in different trading market. In Forex trading, limit orders and stop loss orders are the two auto-trade order used.

Limit orders:

As a trader, you can place these orders when you wish to buy/sell the currency at a better price compare to current market. Limit orders are often used to take win automatically when the price reaches certain level. For example, current EUR/USD is at 1.2693 and your predetermined limit order is to sell all at 1.2700. The order will auto-execute whenever the price reach 1.2700.

It is important to learn that limit orders can be only placed at least the minimum distance from the current market price. Also, such order can be cancelled or modified anytime by you as long as the limit order price tag is set further than the minimum distance allowed.

Stop orders:

Stop orders, or sometimes known as stop loss orders, are automated orders used to restrict and limit the losses of an open position. It can also be used to lock on a profit in your trade when the market is going in your favored direction.

Stop orders work similarly to limit sell orders, it predetermine what is the lowest price to sell in certain deals. For example, EUR/USD 1.2693 with stop order at 1.2685, the system will sell your portion of USD if the price touches the 1.2685 level. The price 1.2685 is guaranteed on such case, meaning even if the market sink too fast and it falls below 1.2685, you still can sell your money in the price that you set earlier. Stop order works perfectly well in handling your risks profile.

Forex nowadays had become one of the most fast growing trading markets in the world. Since the currency exchange market is opened to public in year 1998, we are seeing more and more traders involve in the FX market. Trading Forex might sound easy but the risks involved are extensive. We suggest beginner traders to sharpen their skills and fully utilize trading orders to maintain their risks profile.

Automated Trading Orders in Forex Trading

Practical trading involves lots of simulations and automated trade orders using the power of computer. Charting, graph plotting, and automated trade orders; all these are used to enlighten your routine trading work and it spares you more time in studying the market.

Some of the well known trading orders are zero stops, stop order, limit orders, good till cancelled (GTC), as well as market on close order. These orders are used along with different trade strategies in different trading market. In Forex trading, limit orders and stop loss orders are the two auto-trade order used.

Limit orders:

As a trader, you can place these orders when you wish to buy/sell the currency at a better price compare to current market. Limit orders are often used to take win automatically when the price reaches certain level. For example, current EUR/USD is at 1.2693 and your predetermined limit order is to sell all at 1.2700. The order will auto-execute whenever the price reach 1.2700.

It is important to learn that limit orders can be only placed at least the minimum distance from the current market price. Also, such order can be cancelled or modified anytime by you as long as the limit order price tag is set further than the minimum distance allowed.

Stop orders:

Stop orders, or sometimes known as stop loss orders, are automated orders used to restrict and limit the losses of an open position. It can also be used to lock on a profit in your trade when the market is going in your favored direction.

Stop orders work similarly to limit sell orders, it predetermine what is the lowest price to sell in certain deals. For example, EUR/USD 1.2693 with stop order at 1.2685, the system will sell your portion of USD if the price touches the 1.2685 level. The price 1.2685 is guaranteed on such case, meaning even if the market sink too fast and it falls below 1.2685, you still can sell your money in the price that you set earlier. Stop order works perfectly well in handling your risks profile.

Forex nowadays had become one of the most fast growing trading markets in the world. Since the currency exchange market is opened to public in year 1998, we are seeing more and more traders involve in the FX market. Trading Forex might sound easy but the risks involved are extensive. We suggest beginner traders to sharpen their skills and fully utilize trading orders to maintain their risks profile.

Day Trading Forex Currency, Hype, Lies and TANSTAAFL

Day trading Forex currency is all about making big money. Some investors have found it quite easy to make a large amount of money by day trading the Forex currency markets as they change hour by hour. But, you see that "some" in the previous sentence? What that means is that a lot of people don't make a dime and even lose a lot of money.

Usually a Forex trading system course is hyped as an easy way to make a bundle. Get your Forex trading secret and your Forex trading tool and you're golden - day trading Forex currency for vast riches. Lies. What you tend to find is that there isn't any Forex trading secret, it's the same old tired stuff repeated over and over on sales page after sales page, generally by so-called "experts" who aren't. And that so-called Forex trading tool or software? Another lame canned system that promises but won't deliver.

And now, what's TANSTAAFL? Online and offline this is the antidote to the big con. There Ain't No Such Thing As A Free Lunch. Fast, easy, no work, instant riches. Doesn't exist. Absolutely anything that is worth your attention is going to cost you effort, time and probably money. Anything else is a pack of lies, hype or deceptive sales yap.

You will probably not make much money day trading Forex currency. In fact, you will probably lose money. Unless you are really smart about how you do it and who you listen to. Sorry, but that's the real truth. There is no secret, no magic tool, no perfect Forex day trading strategy.

What you're going to find are a bunch of Forex trading systems, courses, techniques and tools that purport to tell you just what to do and when and how to do it. If you buy into one of these things - a ready-made off-the-shelf turnkey Forex trading system course, you're going the wrong way. This is just the same old tired search for a magic, easy, thought-free and work-free solution that lies behind every successful scam. If it were that easy, we'd all be rich already, wouldn't we? If there really were a genuine Forex trading secret, tool or strategy that would make you rich, do you actually think anyone would be stupid enough to sell it? Think about it when you see one of those hyped sales pitches claiming it's easy and quick and the money will be rolling in.

In the Forex currency market, despite all the nonsense about leverage, timing and signals - if you test it out, you'll find most signals are little better than random noise and that trying to time the market will usually end up with you experiencing consistently bad timing. Canned, simplistic approaches to a complex market just don't work.

How about technical analysis like you'll find in many a Forex trading tool? It's been said (though not by the "wizards" selling technical analysis systems with some spiffy name) that of all the major markets, Forex is the least amenable to technical analysis.

Even the basic wisdom of "buy low, sell high" needs to be seen within a special context when you start working at day trading Forex currency.

If this seems overly discouraging overall, you need to remember the sheer amount of hype and outright lies that are prevalent in this area. You need to be prepared to be coldly realistic. You absolutely have to think of Forex as a serious, complex real business. One that requires close attention and serious study. You need to be careful getting into it, careful whose advice you take, and careful about learning as much as you can from a real expert.

Certainly it's possible to make money. But, your chances of making money by day trading Forex currency will be vastly increased if you are wide awake when you get into it. Stop dreaming about fast easy money with no work or effort. Get to learning the realities so you can develop your own Forex trading strategies, ones that work for you. It will take time and effort, but then, maybe Forex trading will truly be your road to financial freedom.

How to Trade Forex The Safe Way

In order to reduce losses in trading in the forex market, you will need the necessary and adequate amount of risk management systems in place. Staying afloat is essential in staying in the forex game. It will be unlikely that you will recover from a loss of money that you cannot afford to lose. A good trader will know how to reduce losses quickly and also ride profitable positions higher. Systems such as stop losses and profit caps are needed to keep losses manageable.

Stop losses are so essential to make a successful trade that most brokers will not allow you to trade without a stop-loss in place. A stop-loss is a system that automatically closes out a position when the bid or offer price reaches the given level. For example if your long (you have bought) a currency, your stop-loss will be placed below the current market price and will be activated if the price falls past this threshold. Stop losses are beneficial to traders because it is positive knowledge that you’re protected from a downside risk. This is useful for novice traders because they can become ‘emotionally trapped’ in a falling trade.

Guaranteed stop-losses are offered by some brokers and will provide extra protection for traders. Rare intervals where the market gaps – decreasing without trading at each consecutive rate – and traders who have no acquired guaranteed stop-losses are only assured of getting the next available price. Factors such as central bank or government intervention, political, war or natural crises may cause falls that expose traders without guaranteed stop-losses to substantial losses. Stop-losses can be moved higher or lower to suit the trader. By reducing the stop-loss (placing it closer to the purchase price) you’ll limit the potential size of your loss and by increasing it (placing it further away from the purchase price) you will increase your exposure.

Profit caps are opposite to stop-loss because you place a limit on the profits that you have made. It is beneficial for traders who leave trades unattended over night; a profit cap will be triggered when the market moves through a given threshold and will secure the profit made for the trader.

Automatic triggers are needed to limit the risk but money management is as important. This means making the decision on how much money you can afford to lose on a trade and how much you are able to invest. It is also recommended that you invest no more than 10% of your available funds in any single trade. These practices and systems will certainly help you in protecting your funds from losses. Mental discipline is also needed to become a successful trader.

I hope this is enough to inform you about what you need to trade it safe!