Sunday, November 21, 2010
Saturday, November 20, 2010
What Does Commission Free Forex Trading Really Mean
Most retail foreign exchange brokers will list "commission free trades" as one of the benefits that they offer to clients, but this statement can be potentially misleading and it is important to understand this in its proper context so that you do not lose money due to a misunderstanding of how currencies are priced. When you trade the stock market you will likely work with a broker that will charge you a commission for every trade that you place, as this is how the brokerage earns a profit and is able to maintain the resources necessary for constant market liquidity.
The statement "commission free" in forex trading Does not Mean that it is completely free to trade this market, it simply means that broker commissions are priced in a different format. On the stock market you can trade stock from any publicly traded company, and since the stock brokerage Does not much care which of these companies you are trading they will charge a flat fee commission for buying or selling any stock. In the currency market however the amount of money that you pay for trading a particular currency pair has to do with the liquidity and market volume of that currency pair, and the lower the market volume is the more you will end up paying.
In forex instead of a commission you have a "spread," where the broker prices in a small difference between the buy and sell price of that currency pair. Unless you are a professional trader than the extent of your foreign exchange activity is likely confined to travelling to a foreign country, and when you exchange your dollars or pounds for another foreign currency you are likely only concerned with the second decimal place or the cents column. But in online foreign exchange trading you are concerned with the fourth decimal place or the 1/100th of a cent, and this is called a "price interest point" or commonly referred to as a pip. Your forex broker will determine a number of pips to separate the buy and sell prices for a certain currency pair, and when you enter into an open trade you will automatically need to gain this predetermined amount of pips in order to break even.
Some of the most popular and highly traded currency pairs will have lower spreads as low as one or two pips, and the more exotic and less frequently traded currency pairs will have spreads as high as 25 pips or more. When you are formulating your trading strategy for a given currency pair it is important to include the spread in your strategy, because if the spread is too high then you might need to hold an open trade for hours before you can even reach the break even point. This is the reason that common currency pairs such as the EUR/USD are very popular for day trading strategies where open trades are held only for minutes or a few hours, because the spread is low and it Does not take very long for an open position to become profitable as long as the market is moving in the right direction
The statement "commission free" in forex trading Does not Mean that it is completely free to trade this market, it simply means that broker commissions are priced in a different format. On the stock market you can trade stock from any publicly traded company, and since the stock brokerage Does not much care which of these companies you are trading they will charge a flat fee commission for buying or selling any stock. In the currency market however the amount of money that you pay for trading a particular currency pair has to do with the liquidity and market volume of that currency pair, and the lower the market volume is the more you will end up paying.
In forex instead of a commission you have a "spread," where the broker prices in a small difference between the buy and sell price of that currency pair. Unless you are a professional trader than the extent of your foreign exchange activity is likely confined to travelling to a foreign country, and when you exchange your dollars or pounds for another foreign currency you are likely only concerned with the second decimal place or the cents column. But in online foreign exchange trading you are concerned with the fourth decimal place or the 1/100th of a cent, and this is called a "price interest point" or commonly referred to as a pip. Your forex broker will determine a number of pips to separate the buy and sell prices for a certain currency pair, and when you enter into an open trade you will automatically need to gain this predetermined amount of pips in order to break even.
Some of the most popular and highly traded currency pairs will have lower spreads as low as one or two pips, and the more exotic and less frequently traded currency pairs will have spreads as high as 25 pips or more. When you are formulating your trading strategy for a given currency pair it is important to include the spread in your strategy, because if the spread is too high then you might need to hold an open trade for hours before you can even reach the break even point. This is the reason that common currency pairs such as the EUR/USD are very popular for day trading strategies where open trades are held only for minutes or a few hours, because the spread is low and it Does not take very long for an open position to become profitable as long as the market is moving in the right direction
Beginning of the road in the Forex market for beginners
Beginning of the road in the Forex market for beginners
In order to understand the meaning of Forex you should understand the meaning of the Stock
Exchange first,
Bourse is a commercial market has a lot of traffickers, the most important of these traders are investors, banks and investment funds, brokerage firms and speculators, and there are many, many things that are traded in accordance with the type of stock, there is a stock exchange and bonds (which is the exchange of stocks and bonds) , and commodity exchanges (such as wheat and oil), and the stock exchange in which they are buying and selling major currencies
So is Forex: Foreign Currency Trading market through the purchase of one currency and selling of foreign currency against which the other is an abbreviation of the word ForeignExchange (which means the exchange of foreign currencies)
Example is the purchase of U.S. dollar to pay the single European currency (euro), or vice versa any purchase to pay the U.S. dollar Euro interview.
Or buy the U.S. dollar to pay the Japanese yen, or vice versa.
Or buy the U.S. dollar to pay the pound sterling, or vice versa.
And obtained a profit of exploiting the differences minor between the price of currencies, which spreads a simple majority of the time, but it can turn into huge profits when they are buying and selling large amounts of money, using the leverage provided by the brokerage firms, which up to 1: 400 (will be explained later)
The Forex market is the largest financial market in the world with an average daily circulation of more than 2 trillion (2000 billion U.S. dollars)
In contrast to other financial markets, the foreign exchange market has no physical location or central exchange. The Forex market operates 24 hours a day through an electronic network of banks, institutions and individual traders. Forex trading begins each day in Sydney, then moves to Tokyo, followed by London and then New York
Who are the participants in this market?
1 - international banks: The banks, the largest and most important players in the arena of global currency trading. They make thousands of transactions daily around the clock, they exchange among themselves, or with a broker or ordinary investors, through their Permanent Representatives in this area. It is no secret that the greatest influence in moving the market and to identify and exclusively in the hands of top global banks, as the daily transactions of billions of dollars.
2 - Central Banks: Central banks are transactions in this market commissioned by the government, a move often to influence the course of the direction taken by their own currencies, according to the interest that is consistent with monetary policy, and therefore protect its economic interests.
3 - Investment Funds: It was due mostly to institutional investors, Aosnadik retirement, or insurance companies, interfere in the market, according to the dictates of their interests.
4 - Forex Trading clients: These are the important permanent link between buyers and sellers. In other words, they move on the intermediaries between the various banks, on the other hand between the banks and private investors. In return for their work that you see them blow for a commission.
5 - Persons Independent: We These are ordinary people who make huge Iumiaamilit switch between currencies to finance their trips planned, or to secure access to their salaries, or at retirement, etc..
Today, after the revolution made by the online operations of global communications, and after successive collapses in the stock markets, there is growing little by little the role of independent dealers who have modest amounts of money in buying and selling daily fast (speculators) growing influence and grow in the foreign exchange market,
Is profitable when it changes prices of these currencies, you buy the euro, such as August 1 dollar increased the price and became 1 dollar and fifteen cents to get the difference the gain, and this will require capital of a relatively large, because the brokerage companies provide you with leverage of up to 100 times your capital or 400 times your capital
In order to understand the meaning of Forex you should understand the meaning of the Stock
Exchange first,
Bourse is a commercial market has a lot of traffickers, the most important of these traders are investors, banks and investment funds, brokerage firms and speculators, and there are many, many things that are traded in accordance with the type of stock, there is a stock exchange and bonds (which is the exchange of stocks and bonds) , and commodity exchanges (such as wheat and oil), and the stock exchange in which they are buying and selling major currencies
So is Forex: Foreign Currency Trading market through the purchase of one currency and selling of foreign currency against which the other is an abbreviation of the word ForeignExchange (which means the exchange of foreign currencies)
Example is the purchase of U.S. dollar to pay the single European currency (euro), or vice versa any purchase to pay the U.S. dollar Euro interview.
Or buy the U.S. dollar to pay the Japanese yen, or vice versa.
Or buy the U.S. dollar to pay the pound sterling, or vice versa.
And obtained a profit of exploiting the differences minor between the price of currencies, which spreads a simple majority of the time, but it can turn into huge profits when they are buying and selling large amounts of money, using the leverage provided by the brokerage firms, which up to 1: 400 (will be explained later)
The Forex market is the largest financial market in the world with an average daily circulation of more than 2 trillion (2000 billion U.S. dollars)
In contrast to other financial markets, the foreign exchange market has no physical location or central exchange. The Forex market operates 24 hours a day through an electronic network of banks, institutions and individual traders. Forex trading begins each day in Sydney, then moves to Tokyo, followed by London and then New York
Who are the participants in this market?
1 - international banks: The banks, the largest and most important players in the arena of global currency trading. They make thousands of transactions daily around the clock, they exchange among themselves, or with a broker or ordinary investors, through their Permanent Representatives in this area. It is no secret that the greatest influence in moving the market and to identify and exclusively in the hands of top global banks, as the daily transactions of billions of dollars.
2 - Central Banks: Central banks are transactions in this market commissioned by the government, a move often to influence the course of the direction taken by their own currencies, according to the interest that is consistent with monetary policy, and therefore protect its economic interests.
3 - Investment Funds: It was due mostly to institutional investors, Aosnadik retirement, or insurance companies, interfere in the market, according to the dictates of their interests.
4 - Forex Trading clients: These are the important permanent link between buyers and sellers. In other words, they move on the intermediaries between the various banks, on the other hand between the banks and private investors. In return for their work that you see them blow for a commission.
5 - Persons Independent: We These are ordinary people who make huge Iumiaamilit switch between currencies to finance their trips planned, or to secure access to their salaries, or at retirement, etc..
Today, after the revolution made by the online operations of global communications, and after successive collapses in the stock markets, there is growing little by little the role of independent dealers who have modest amounts of money in buying and selling daily fast (speculators) growing influence and grow in the foreign exchange market,
Is profitable when it changes prices of these currencies, you buy the euro, such as August 1 dollar increased the price and became 1 dollar and fifteen cents to get the difference the gain, and this will require capital of a relatively large, because the brokerage companies provide you with leverage of up to 100 times your capital or 400 times your capital
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forex Definintion - what is the meaning of forex
An over-the-counter market where buyers and sellers conduct foreign exchange transactions.
The Forex market is useful because it helps enable trade and transactions between countries, and it also allows an investment opportunity for risk seeking investors who don't mind engaging in speculation.
Individuals who trade in the Forex market typically look carefully at a country's economic and political situation, as these factors can influence the direction of its currency. One of the unique aspects of the Forex market is that the volume of trading is so high, partially because the units exchanged are so small.
It is estimated that around $4 trillion goes through the Forex market each day. also called foreign exchange market
The Forex market is useful because it helps enable trade and transactions between countries, and it also allows an investment opportunity for risk seeking investors who don't mind engaging in speculation.
Individuals who trade in the Forex market typically look carefully at a country's economic and political situation, as these factors can influence the direction of its currency. One of the unique aspects of the Forex market is that the volume of trading is so high, partially because the units exchanged are so small.
It is estimated that around $4 trillion goes through the Forex market each day. also called foreign exchange market
What does Pip Mean In Forex Trading?
To understand pips on the forex market you must understand how the market works. If you are new to forex trading there are many worthwhile, free offers and software online to help you learn and practise before risking your money.
Forex is an abbreviation of foreign exchange, the buying and selling of one foreign currency for another. As one currency strengthens so another weakens and knowing when to buy and sell is how money is made on the Forex markets. The Forex market is similar to the buying and selling of stocks but in many ways it is much more difficult. On the stock market you may spot a company that has potential, buy shares and hopefully make a profit, but on the money market there may be long term trends where a currency strengthens and weakens, but much of the trading is based upon daily fluctuations that change by the minute.
A pip is the smallest unit of price that is traded for a currency. Most currencies are traded to four decimal points, so that a pip is 0.0001 or 1/100 of a cent. This may seem a minuscule amount until you realise that on a standard trade of $100,000 that is $10. The exception to the four decimal points is the Japanese yen which is normally traded to two decimal points.
Obviously if you are buying a currency you must also be selling another and therefore prices are always quoted in pairs, the USD/EUR being the most active. The more active a pair the narrower the difference between the bid/ask price is likely to be, with a possible spread of just two pips for the most actively traded.
Unlike the stock market there are no broker fees to pay, but as each trade involves both selling one currency and buying another, the difference in the spread is the cost of the transaction and must be taken into account when calculating profit. Therefore, as a buyer, the pip spread is very important to you. When you buy you have to accept an immediate loss. The value of the currency you have bought must rise by the extent of the pip spread before you break even and the value rise again to make a profit. The lower the spread the easier it is to make a profit.
Active markets tend to have a lower pip spread, for example 2-3 pips. Currencies that are bought and sold less frequently may have a far higher spread. However, before you go to a broker offering a very narrow spread, do check that they are reputable. You should also remember that pip spreads are not guaranteed, they can change if the market fluctuates widely. It is wise to check a broker's spread policy before trading.
Unlike the stock market there are no broker fees to pay, but as each trade involves both selling one currency and buying another, the difference in the spread is the cost of the transaction and must be taken into account when calculating profit. Therefore, as a buyer, the pip spread is very important to you. When you buy you have to accept an immediate loss. The value of the currency you have bought must rise by the extent of the pip spread before you break even and the value rise again to make a profit. The lower the spread the easier it is to make a profit.
Active markets tend to have a lower pip spread, for example 2-3 pips. Currencies that are bought and sold less frequently may have a far higher spread. However, before you go to a broker offering a very narrow spread, do check that they are reputable. You should also remember that pip spreads are not guaranteed, they can change if the market fluctuates widely. It is wise to check a broker's spread policy before trading.
What Does Forex Mean Anyway?
I see a lot of ads for Forex trading here and there, but I’ve never really known what it is. It’s clearly a hot topic on the web, and many blogs seem to be discussing various tips and techniques. But I still didn’t know what the hell ‘Forex’ meant.
Then I got an email from Investopedia titled: “Forex Training“.
Hmmm… I thought, this might give me a clue. But then again, maybe not. When I followed the link, this is what I got:
So, I did a little more digging, and eventually found this:
Then I got an email from Investopedia titled: “Forex Training“.
Hmmm… I thought, this might give me a clue. But then again, maybe not. When I followed the link, this is what I got:
“What Does Forex Training Mean?Wow! That seems more like a definition of training as it applies to Forex trading, but what is Forex Trading?
A form of instruction or mentorship that provides information on forex trading tactics, methods and successful practices. Forex training acts as a guide for the retail forex trader, providing insight into successful strategies, signals and systems as well as other general information on Forex trading.”
So, I did a little more digging, and eventually found this:
“What Does Forex – FX Mean?It all makes sense to me now. It’s a bet on whether a given currency’s value will rise or fall. This is what George Soros made his billions in. I just don’t understand how it can be such a common term, and yet so narrow in its understanding. I guess if you don’t know what Forex means, you don’t need to know?
The market in which currencies are traded. The forex market is the largest, most liquid market in the world with an average traded value that exceeds $1.9 trillion per day and includes all of the currencies in the world.”
Forex
The foreign exchange (currency or forex or FX) market refers to the market for currencies. Transactions in this market typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The FX market is the largest and most liquid financial market in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global forex and related markets is continously growing and was last reported to be over US$ 4 trillion in April 2007 by the Bank for International Settlement.
The Forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.
The main enticements of currency dealing to private investors and attractions for short-term Forex trading are:
* 24-hour trading, 5 days a week with non-stop access to global Forex dealers.
* An enormous liquid market making it easy to trade most currencies.
* Volatile markets offering profit opportunities.
* Standard instruments for controlling risk exposure.
* The ability to profit in rising or falling markets.
* Leveraged trading with low margin requirements.
* Many options for zero commission trading.
Foreign Exchange (FOREX) is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location and no central exchange (off-exchange). It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.
The Forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.
The main enticements of currency dealing to private investors and attractions for short-term Forex trading are:
* 24-hour trading, 5 days a week with non-stop access to global Forex dealers.
* An enormous liquid market making it easy to trade most currencies.
* Volatile markets offering profit opportunities.
* Standard instruments for controlling risk exposure.
* The ability to profit in rising or falling markets.
* Leveraged trading with low margin requirements.
* Many options for zero commission trading.
Foreign Exchange (FOREX) is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location and no central exchange (off-exchange). It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.