Participating in Forex Market

Forex participants can vary a lot. Forex is very marketable from long term investors to large credit line users. But its constant minimal daily rise and fall magnetizes investors with various trading techniques. This makes Forex consistently exist as a very interesting currency market.

The Main Players in the Forex Market

The five broad categories of participants are: consumers, businesses, investors, speculators, commercial banks, investment banks and central banks.

Consumers, including visitors of countries, tourists and immigrants, do need to exchange currencies when they travel so that they can buy local goods and services. These participants do not have the power to set prices. They just buy and sell according to the prevailing exchange rate. They make up a significant proportion of the volume being traded in the market.

Businesses that import and export goods and services need to exchange currencies to receive or make payments for goods they may have bought or services they may have rendered.

Investors and speculators require currencies to buy and sell investment instruments such as shares, bonds, bank deposits or real estate.

Large commercial and investment banks are the 'price makers'. They are the ones who buy and sell currencies at the bid-and-offer exchange rates that they declare through their foreign exchange dealers.

Commercial banks deal with customers on one hand, and with the Interbank or other banks, on the other hand. They profit by utilizing the bid-and-offer spread. The bid price is the exchange rate that the buyer is willing to buy and the offer price is the exchange rate at which the seller is willing to sell. The difference is called the bid-offer spread. They also make profits from speculating about whether the exchange rate will rise or fall.

Central banks participate in the foreign exchange market in their effective duty as banks for their particular government. They trade currencies not for the intention of making profits but rather to facilitate government monetary policies and to help smoothen out the fluctuation of the value of their economy's currency.

The Main Players in the Forex Market

The five broad categories of participants are: consumers, businesses, investors, speculators, commercial banks, investment banks and central banks.

Consumers, including visitors of countries, tourists and immigrants, do need to exchange currencies when they travel so that they can buy local goods and services. These participants do not have the power to set prices. They just buy and sell according to the prevailing exchange rate. They make up a significant proportion of the volume being traded in the market.

Businesses that import and export goods and services need to exchange currencies to receive or make payments for goods they may have bought or services they may have rendered.

Investors and speculators require currencies to buy and sell investment instruments such as shares, bonds, bank deposits or real estate.

Large commercial and investment banks are the 'price makers'. They are the ones who buy and sell currencies at the bid-and-offer exchange rates that they declare through their foreign exchange dealers.

Commercial banks deal with customers on one hand, and with the Interbank or other banks, on the other hand. They profit by utilizing the bid-and-offer spread. The bid price is the exchange rate that the buyer is willing to buy and the offer price is the exchange rate at which the seller is willing to sell. The difference is called the bid-offer spread. They also make profits from speculating about whether the exchange rate will rise or fall.

Central banks participate in the foreign exchange market in their effective duty as banks for their particular government. They trade currencies not for the intention of making profits but rather to facilitate government monetary policies and to help smoothen out the fluctuation of the value of their economy's currency.

Online Forex Trading Advice

Technological Advences

Forex has changed dramatically in the last 10 years due to technological advancements. With real-time streaming technology and faster computer systems, almost anything is available at the click of a button. I would like to go over a few of the benefits of online Forex trading. Consult with your broker to determine if trading online is right for you.

Try It Before You Buy

Before you spend any money on an online Forex trading program or subscription, ask about free trial offers. Many companies will allow potential customers to try out their software and tools before making an investment. This is a quick and easy way to begin trading immediately. Spend some time reading through the system tutorials and practice a few test trades. There will no doubt be a learning curve, and you want to make sure that you don't have a large investment riding on that curve. If you have a friend or family member that is in the online Forex trading market, find out what program or system they use. They may be willing to walk you through a trade and give you their opinion on the program. This is an excellent way to find out if a program is really worth it or not.

Practise Makes Perfect

One of the best ways to get a feel for the market or a particular program is to try it out. No one wants to experiment with their own money however; so many companies have come up with an innovative way to take all the risk out of trying a new program. It's called simulation trading and the premise is simple. The program is an exact copy of the broker or trading systems real-time trading program. The main difference is that they allow you to "play" the market just as you would if you were actually investing. You can do a simulation with a set amount of money, usually around 100,000$. You can practice setting bid and ask prices, and using their various analysis tools.

The benefits of such a system are two-fold. First, you get a feel for the program itself, so that you can determine if it is right for your needs and skill level. Second, you get to practice trading in the market. You can practice using the various tools and research available to you to make good trading decisions. Don't worry if you don't get it right away- since its play money, you don't lose anything!

The amount of time needed to understand the system will vary depending on your level of experience. Many programs offer similar functions, so if you are simply in the market for a different program you may be able to switch over quickly.

Benefits of Online Forex Trading

1. Real-time access- this is one of the great benefits of online Forex trading. Most brokers and trading companies offer their clients real-time quotes and data. This is very important when making decisions. Currencies are a very volatile market, and things can change at anytime. So having your thumb on the pulse of the market is very important to long term success.
2. 24-hour availability- another great feature about online Forex trading. In today's hectic world many traders find it difficult to manage their portfolio during normal business hours. The internet allows traders the ability to access their portfolio virtually anywhere and anytime. This is great for part-time traders that have a full-time day job.
3. Speed of transactions- can't be beat! With a good computer and a high speed connection you can process a transaction within minutes. This is a far cry from having to call up your brokerage firm or worse yet make an office visit. This is perhaps the main reason that day trading has become as popular as it has!

In Summary

Brokerage firms have become very skilled in online Forex trading over the past 10 years, and can serve as your guide into the technological world. Be patient with yourself during the learning process, and keep your eye on the prize. The more research and preparation that you partake in before trading; the better your chances are for success. So keep an open mind, and explore all the benefits that online Forex trading has to offer.

Forex Trading Software

If you are looking to get started trading the Forex, you will find that there are numerous software programs available (both web based and desktop based) for you to use in your trading. In fact, most brokers offer clients a software package for free or as part of their trading account. Usually the software that comes with your trading account is a very basic "bare bones" model. Sometimes, more features are available for a price. The software packages your broker provides can be an important consideration in choosing a broker. You may want to download and try some different packages using a demo account. This will give you a better idea of which software package you find most suitable to your unique style of trading.
Forex trading software comes in two basic flavors - desktop software, and web based software. Which one you choose to work with depends on your preference and other more technical factors. Obviously, the Forex market is very dynamic and you need to have the most reliable up to date connection to the data as possible. Your internet connection speed is a factor here, and if you can afford it, you really should be connecting via broadband. Your internet connection speed is just one of the factors you should consider when selecting forex trading software. The biggest consideration should be one of security
Generally speaking, web based forex software is more secure than a desktop based software package. Why is that? Well, with a desktop software, your information and data is stored on your hard drive thus making it vulnerable to numerous security issues.If your computer became infected by a virus, your personal data and the integrity of your trading system can become compromised. Likewise, in the event of hard drive failure, your important data can be lost. Then there is the threat of prying eyes accessing your trading systems.

Luckily, if you choose to go with a desktop based software for your forex trading, you can do some things to limit the risks. For starters, a dedicated computer just for trading the forex would be a wise investment. Due to the popularity of forex trading, there are computers made specifically with a forex traders needs in mind. Even if you cant afford a dedicated machine, you should still apply the following tips to your trading computer:

• Password protect your trading software and personal data
• Make regular backups of your trading data
• Use a anti virus program and keep it up to date
• Update your trading software regularly

If you choose to go with a web based trading software, allot of the security and maintenance issues are handled by the provider. Online based forex systems are hosted on secure servers, the same type of servers credit card processing is handled on. This gives you a great deal of protection, as your data is encrypted. Also, backups and mirrors of your account data are made by your software provider to protect you from data loss.

Aside from the security considerations, you may find that an online based trading software is simply more convenient. There is no software to download as the software runs in your regular web browser. This means that you always will have access to the latest versions and features. Also, if you travel you will certainly appreciate the ability to log in and trade from any computer with an internet connection.

As you can see, there are many options in forex trading software. You ultimately should choose to work with the software that you personally find easiest and most intuitive to use.

Forex Benefits Over Futures

The origins of the modern futures market lies in the agriculture markets of the 19th century. Farmers started selling contracts to deliver agricultural products at a later date. This was done to anticipate market needs and stabilize supply and demand during off seasons. The current futures market has moved far beyond agricultural products. It is a worldwide market for all sorts of commodities, including manufactured goods, agricultural products, and financial instruments such as currencies and treasury bonds.
When the futures market is played by speculators, the actual goods are not important because there is no expectation of delivery. Rather, it is the contract itself that is traded, the value of which changes constantly throughout the day as expectations change regarding the value of the commodity itself.

Win or Lose

In every futures contract there is a buyer and a seller. The seller takes the short position and the buyer takes the long position. The futures contract specifies a buying price, a quantity and a delivery date.
Speculators hope to profit by the daily fluctuations in the futures market by buying long (from the buyer) if they expect prices to rise, or by buying short (from the seller) if they expect prices to fall. Futures accounts are settled every day.

At the end of the contract period, the contract itself is settled. The final contract buyer can now take delivery of his truckload of whatevers. Of course, he may opt to just start the process all over again by writing up a contract to deliver his whatevers on a certain date at a certain price.

Forex Benefits

The foreign exchange market (Forex) has several advantages over the futures market.

More Liquid

Forex is an extremely liquid market. As the largest financial market in the world it dwarfs the futures market in daily exchanges. This means that Forex stop orders can be executed more easily and with less slippage. The Forex is open 24 hours a day, 5 days a week. Most futures exchanges are open 7 hours a day. This makes Forex more liquid and allows Forex traders to take advantage of trading opportunities as they arise rather than waiting for the market to open.

Commission-Free

Forex transactions have no commissions. Brokers earn money by setting a spread -- the difference between what a currency can be bought at and what it can be sold at. In contrast, traders must pay a commission or brokerage fee for each futures transaction they enter into.

Instant Transactions

Because of the high volume of trading, Forex transactions are executed almost instantly. This minimizes slippage and increases price certainty. Brokers in the futures market often quote prices reflecting the last trade -- not necessarily the price of your transaction.

Safeguards

Final prices in futures are always a little uncertain because of market gap and slippage. The Forex is less risky because of built-in safeguards in the trading system.

Forex Glossary

Accrual

The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals, over the period of each deal.

Actualize

The underlying assets or instruments which are traded in the cash market.

Adjustable Peg

An exchange rate system where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency. The official rate may be changed from time to time.

Adjustment

Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or.

Agent Bank

A bank acting for a foreign bank.

In the Euro market - the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.

Aggregate Demand

Total demand for goods and services in the economy. It includes private and public sector demand for goods and services within the country and the demand of consumers and and firms in other countries for good and services.

Aggregate Risk

Total amount of exposure a bank has with a customer for both spot and forward contracts.

Aggregate Supply

Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.

Agio

Difference in the value between currencies. Also used to describe percentage charges for conversion from paper money into cash, or from a weak into a strong currency.

Aggressor

A trader dealing on an existing price in the market.

Appreciation

A currency is said to 'appreciate' when it strengthens in price in response to market demand.

Describes a currency strengthening in response to market demand rather than by official action.

Arbitrage

Profiting from differences in the price of a single currency pair that is traded on more than one market.

Arbitrage Channel

The range of prices within which there will be no possibility to arbitrage between the cash and futures market.

Around

Used in quoting forward "premium/discount". "Five-five around" would mean five points on either side of the present spot value.

Ask Price

Sometimes called the Offer Price, this is the market price for traders to buy currencies. Ask Prices are shown on the right side of a quote - e.g. EUR/USD 1.1965 / 68 - means that one euro can be bought for 1.1968 US dollars.

Asset

An item having commercial or exchange value.

Asset Location

Dividing instrument funds among markets to achieve diversification or maximum return.

At Best

An instruction given to a dealer to buy or sell at the best rate that is currently available in the market.

At or Better

An order to deal at a specific rate or better.

Authorized Dealer

A financial institution or bank authorized to deal in foreign exchange.

Average Rate Option

A contract where the exercise price is based on the difference between the strike price and the average spot rate over the contract period. Sometimes called an "Asian option".

Back Office

The office location, or department, where the processing of financial transactions takes place.

Balance of Trade

The value of a country's exports minus its imports.

Bank Notes

Paper issued by the central bank, redeemable as money and considered to be full legal tender.

Bank Rate

The rate at which a central bank is prepared to lend money to its domestic banking system.

Bar Chart

A type of chart used in Technical Analysis. Each time division on the chart is displayed as a vertical bar which show the following information - the top of the bar is the high price, the bottom of the bar is the low price, the horizontal line on the left of the bar shows the opening price and the horizontal line on the right of bar shows the closing price.

Base Currency

In terms of foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. The base currency is the currency against which exchange rates are generally quoted in a given country. Examples: USD/JPY, the US Dollar is the base currency; EUR/USD, the EURO is the base currency.

Bear Market

An extended period of general price decline in an individual security, an asset, or a market.

Bid Price

is the price a trader can sell currencies. The Bid Price is shown on the left side of a quote - e.g. EUR/USD 1.1923 / 68 - means that one euro can be sold for 1.1923 US dollars.

Bid/Ask Spread

is the difference between the bid price and the ask price in any currency quotation. The spread represents the broker's fee, and varies from broker to broker.

Big Figure

The first two or three digits of a foreign exchange price or rate. Examples: USD/JPY rate of 108.05/10 the big figure is 108. EUR/USD price of .8325/28 the big figure is .83

Bretton Woods

The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s. The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.

Broker

An agent, who executes orders to buy and sell currencies and related instruments either for a commission or on a spread. Brokers are agents working on commission and not principals or agents acting on their own account. In the foreign exchange market brokers tend to act as intermediaries between banks bringing buyers and sellers together for a commission paid by the initiator or by both parties. There are four or five major global brokers operating through subsidiaries affiliates and partners in many countries.

Bull Market

A market which is on a consistent upward trend.

Bundesbank

Central Bank of Germany.

Buy On Margin

The process of buying a currency pair where a client pays cash for part of the overall value of the position. The word margin refers to the portion the investor puts up rather than the portion that is borrowed.

Buy Limit Order

An order to execute a transaction at a specified price (the limit) or lower.

Candlestick Chart

A chart that displays the daily trading price range (open, high, low and close). A form of Japanese charting that has become popular in the West. A narrow line (shadow) shows the day's price range. A wider body marks the area between the open and the close. If the close is above the open, the body is white (not filled); if the close is below the open, the body is black (filled).

Central Bank

A bank, administered by a national government, which regulates the behavior of financial institutions within its borders and carries out monetary policy.

Chartist

A person who attempts to predict prices by analyzing past price movements as recorded on a chart.

Closing a Position

The process of selling or buying a foreign exchange position resulting in the liquidation (squaring up) of the position.

Commission

The fee that a broker may charge clients for dealing on their behalf.

Cross Currency

A currency pair that does not include US dollars - e.g. EUR/GBP.

Currency

Money issued by a government. Coins and paper money. It is a form of money used as a unit of exchange within a country.

Currency Pair

Two currencies involved in a Forex transaction - e.g. EUR/USD.

Currency Risk

The risk that shifts in foreign exchange rates may undermine the dollar or any other foreign currency value of overseas investments.

Day Trade

A trade opened and closed on the same trading day.

Day Trading

Refers to a style or type of trading where trade positions are opened and closed during the same day.

Day Trader

A trader who buys and sells on the basis of small short-term price movements.

Dealer

An individual or firm that buys and sells assets from their portfolio, acting as a principal or counterpart to a transaction.

Depreciation

A fall in the value of a currency due to market forces.

Desk

Term referring to a group dealing with a specific currency or currencies.

Devalution

The act by a government to reduce the external value of its currency.

Direct Quotation

Quoting in fixed units of foreign currency against variable amounts of the domestic currency.

Discretionary Account

An account in which the customer permits a trading institution to act on the customer's behalf in buying and selling currency pairs. The institution has discretion as to the choice of currency pairs, prices, and timing-subject to any limitations specified in the agreement.

Economic Indicator

A statistical report issued by governments or academic institutions indicating economic conditions within a country.

Euro (EUR)

The single currency of the European Economic and Monetary Union (EMU) introduced in January 1999. This is the amalgamation of the following currencies, after Jan. 1, 2002 these currencies will be considered legacy currencies. Germany Deutsche Marks, Italy Lira, Austria Schillings, France Franc, Belgium Francs, Netherlands (Dutch) Guilders, Finland Markka, Portugal Escudo, Greece Drachmas, Ireland Punt, Luxembourg Francs, Spanish Pesetas.

European Central Bank (ECU)

The Central Bank for the new European Monetary Union.

Execution

The Process of completing an order or deal.

First In First Out (FIFO)

refers to the order open orders are liquidated. The first orders to be liquidated are the first that were opened.

Foreign Exchange (Forex, FX)

Simultaneously buying one currency and selling another.

Fundamental Analysis

Analysis of political and economic conditions that can affect currency prices.

Leverage or Margin

The ratio of the value of a transaction to the required deposit. A common margin for Forex trading is 100:1 - you can trade currency worth 100 times the amount of your deposit.

Limit Order

An order to buy or sell when the price reaches a specified level.

Lot

The size of a Forex transaction. Standard lots are worth about 100,000 US dollars.

Major Currency

The euro, German mark, Swiss franc, British pound, and the Japanese yen are the major currencies.

Minor Currency

The Canadian dollar, the Australian dollar, and the New Zealand dollar are the minor currencies.

Offer (Ask)

The rate at which a dealer is willing to sell a currency.

Offsetting transaction

A trade with which serves to cancel or offset some or all of the market risk of an open position.

One Cancels the Other (OCO)

Two orders placed simultaneously with instructions to cancel the second order on execution of the first.

A designation for two orders whereby one part of the two orders is executed the other is automatically cancelled.

Open Order

An order that will be executed when a market moves to its designated price. Normally associated with Good 'til Cancelled Orders.

Open Position

An active trade that has not been closed.

An active trade with corresponding unrealized Profit and Loss, which has not been offset by an equal and opposite deal.

Order

A customer's instructions to buy or sell currencies.

Over the Counter (OTC)

Used to describe any transaction that is not conducted over an exchange.

Overnight Position

Trader's long or short position in a currency at the end of a trading day.

Pips or Points

The smallest unit a currency can be traded in.

The smallest unit of price for any foreign currency. Digits added to or subtracted from the fourth decimal place, i.e. 0.0001.

Political Risk

Exposure to changes in governmental policy which will have an adverse effect on an investor's position.

Price

The price at which the underlying currency can be bought or sold.

Price Transparency

The ability of all market participants to "see" or deal at the same price.

Describes quotes to which every market participant has equal access.

Principle Value

The original amount invested by the client.

Profit /Loss or "P/L" or Gain/Loss

The actual "realized" gain or loss resulting fromtrading activities on Closed Positions, plus the theoretical "unrealized" gain or loss on Open Positions that have been Mark-to-Market.

Quote Currency

The second currency in a currency pair. In the currency pair USD/EUR the euro is the quote currency.

Rally

A recovery in price after a period of decline.

Range

The difference between the highest and lowest price of a future recorded during a given trading session.

Rate

Price at which a currency can be purchased or sold against another currency.

The price of one currency in terms of another, typically used for dealing purposes.

Resistance

Price level at which technical analysts note persistent selling of a currency.

A term used in technical analysis indicating a specific price level at which analysis concludes people will sell.

Revaluation

Daily calculation of potential profits or losses on open positions based on the difference between the settlement price of the previous trading day and the current trading day.

An increase in the exchange rate for a currency as a result of central bank intervention. Opposite of "Devaluation".

Risk (Forex Risk)

The risk that the exchange rate on a foreign currency will move against the position held by an investor such that the value of the investment is reduced.

Exposure to uncertain change, most often used with a negative connotation of adverse change.

Risk Management

The employment of financial analysis and use of trading techniques to reduce and/or control exposure to financial risk.

Rollover (Roll-Over)

The process of extending the settlement value date on an open position forward to the next valid value date.

Settlement

The process by which a trade is entered into the books and records of the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another.

Short Position

An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short.

Spot Market

Market where people buy and sell actual financial instruments (currencies) for two-day delivery.

Spot Price

The current market price of a currency that normally settles in 2 business days (1 day for Dollar/Canada).

The current market price. Settlement of spot transactions usually occurs within two business days.

Spread

This point or pip difference between the bid and ask price of a currency pair.

Square

Purchase and sales are in balance and thus the dealer has no open position.

Squawk Box

A speaker connected to a phone often used in broker trading desks.

Squeeze

Action by a central bank to reduce supply in order to increase the price of money.

The difference between the bid and offer prices.

Stable Market

An active market which can absorb large sale or purchases of currency without major moves.

Standard

A term referring to certain normal amounts and maturities for dealing.

Sterilization

Central Bank activity in the domestic money market to reduce the impact on money supply of its intervention activities in the FX market.

Sterling (The Pound - GBP)

Another term for the British currency, "The Pound".

Stop

An order to buy or to sell a currency when the currency's price reaches or passes a specified level.

Stop Loss Order

Order to buy or sell when a given price is reached or passed to liquidate part or all of an existing position.

Order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor's position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49.

Support Levels

A price at which a currency or the currency market will receive considerable buying pressure.

A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of "resistance".

Swap

A transaction which moves the maturity date of an open position to a future date.

The simultaneous purchase and sale of the same amount of a given currency for two different dates, against the sale and purchase of another. A swap can be a swap against a forward. In essence, swapping is somewhat similar to borrowing one currency and lending another for the same period. However, any rate of return or cost of funds is expressed in the price differential between the two sides of the transaction.

Swap Price

A price as a differential between two dates of the swap.

Swiss

Market slang for Swiss Franc.

Take Profit Order

A customer's instructions to buy or sell a currency pair which, when executed, will result in the reduction in the size of the existing position and show a profit on said position.

Technical Analysis

Analysis of historical market data to predict future movements in the market.

Technical Correction

An adjustment to price not based on market sentiment but technical factors such as volume and charting.

Thin Market

A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.

Thursday/Friday Dollars

A US foreign exchange technicality. If a foreign bank buys dollars on Tuesday for Thursday delivery. If the bank leaves the funds overnight and transfers them on Friday by means of a clearing house cheque then clearance is not until Monday, the next working day. Higher interest rates for this period are thus available.

Tick

The smallest possible change in a price, either up or down.

Today/Tomorrow

Simultaneous buying of a currency for delivery the following day and selling for the spot day, or vice versa. Also referred to as overnight.

Tomorrow Next (Tom Next)

Simultaneous buying of a currency for delivery the following day and selling for the spot day or vice versa.

Trade Date

The date on which a trade occurs.

Tradeable Amount

Smallest transaction size acceptable.

Transaction

The buying or selling of currencies resulting from the execution of an order.

Transaction Cost

The cost of a Forex transaction - typically the spread between bid and ask prices.

Transaction Date

The date on which a trade occurs.

Turnover

The total volume of all executed transactions in a given time period.

Two Tier Market

A dual exchange rate system where normally only one rate is open to market pressure, e.g. South Africa.

Two-Way Price

A quote in the foreign exchange market that indicates a bid and an offer.

Two-Way Quotation

When a dealer quotes both buying and selling rates for foreign exchange transactions.

Uncovered

Open position.

Under-Valuation

An exchange rate is normally considered to be undervalued when it is below its purchasing power parity.

Unrealized Gain/Loss

The theoretical gain or loss on Open Positions valued at current market rates, as determined by the broker in its sole discretion. Unrealized Gains' Losses become Profits/Losses when position is closed.

Uptick

A new price quote at a price higher than the preceding quote.

A transaction executed at a price greater than the previous transaction.

Uptick Rule

In the US, a regulation whereby a security may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed.

US Prime Rate

The interest rate at which US banks will lend to their prime corporate customers.

US Treasury

The United States Department of the Treasury is the government department responsible for issuing all Treasury bonds, notes, and bills.

Value Data

The maturity date of the currency for settlement, usually two business days (one day for Canada) after the trade has occurred.

Value Date

The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward. Value Date is also known as "maturity" date.

For a spot transaction it is two business banking days forward in the country of the bank providing quotations which determine the spot value date. The only exception to this general rule is the spot day in the quoting centre coinciding with a banking holiday in the country(ies) of the foreign currency(ies). The value date then moves forward a day.

Value Spot

Normally settlement for two working days from today. See value date.

Variation Margin

Funds, which are required to bring the equity in an account back up to the initial margin level, calculated on a day-to-day basis.

Funds a broker must request from the client to have the required margin deposited. The term usually refers to additional funds that must be deposited as a result of unfavorable price movements.

Volatility (VOL)

Statistical measure of the change in price of a financial currency pair over a given time period.

A statistical measure of a market's price movements over time.

A measure of the amount by which an asset price is expected to fluctuate over a given period.

Vostro Account

A local currency account maintained with a bank by another bank. The term is normally applied to the counterparty's account from which funds may be paid into or withdrawn, as a result of a transaction.

Wash Trade

A matched deal which produces neither a gain nor a loss.

Whipsaw

Slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.

Withholding Tax

Income tax withheld from employees' wages and paid directly to the government by the employer.

Working Day

A day on which the banks in a currency's principal financial centre are open for business. For FX transactions, a working day only occurs if the bank in both financial centre's are open for business (all relevant currency centers in the case of a cross are open).

Yard

A slang word used in the currency industry meaning "billion".

X

A Nasdaq stock symbol specifying that it is a mutual fund.

Z-Score

A statistical measure that quantifies the distance (measured in standard deviations) a data point is from the mean of a data set. In a more financial sense, Z-score is the output from a credit-strength test that gauges the likelihood of bankruptcy.

Trailing Stops

A Trailing Stop is an active stop loss that keeps a set distance away from the current market price and updates according to the market. This is best used in a moving market that is going in the direction the trader wants and the trader wishes to guarantee the profits made. This can be best illustrated by an example.

Say a trader enters into a long 200,000 USD/CHF position at 1.2430 and set a stop order at 1.2380 with a trailing stop of 50 pips. The maximum the trader can lose is 50 pips as above, however the stop loss will automatically update itself as the market moves. For instance, if the market moves to 1.2450 then the stop loss would update itself to 1.2400, always keeping 50 pips from the maximum rate; the stop loss will keep updating itself until it triggers or the original trade is closed.

Orders – O.C.O's, I/D's and Trailing Stops

As mentioned above there are many combinations of orders that are possible to you in the FX market and in the AvaTrader platform. Stop and Limit orders as described above are the basic orders available, all the rest are simply a combination of them or contingent orders.

O.C.O's

O.C.O's is short for "One Cancels the Other". This is used against an open position, and is done in the following way; the trader places a stop order and a limit order against an existing open position, the first one that hits closes the position (a loss if the stop order hits and a profit if the limit order hits) and when the trade is closed the remaining order is cancelled.

This can best be described by an example. Say the trader is short 250,000 AUD/USD at 0.7730 and he wishes to profit $1,250 USD but is only willing to risk losing $750 USD, then he would place the following orders. The trader would set a limit order 50 pips away from the execution price since 50 pips at $25 per pip is $1,250USD; therefore the limit order would be placed at 0.7680 at the same time the trader sets a stop order 30 pips from the executed open price since 30 pips at $25 per pip is $750US; therefore the stop order would be 0.7760. The orders would be placed O.C.O which means that one order can be hit or triggered to close the open position and when that occurs the remaining order is cancelled automatically.

I/D's

I/D's is short for "If Done". This is a spin on the O.C.O, where the O.C.O is placed on an existing trade, the I/D is placed on a trade that has not yet been exercised. This can best be shown by an example. Say the trader wishes to go short on the AUD/USD at 0.7770 in 250,000 AUD but the bid price is currently only 0.7730. Now as above the client wishes to profit $1,250 USD but is only willing to risk losing $750 USD; then he would place the following orders. The trader would set an original limit to sell the 250,000 AUD/USD at 0.7770 and place another limit that becomes active if the first limit hits (hence the term If Done).

The I/D order can also have a stop order attached as above, if the trader would like to set the same conditions as the O.C.O order above i.e. 50 pip profit and 30 pip loss then the full order would read as follows:

Sell 250,000 AUD/USD at 0.7770 I/D 0.7720 Limit and 0.7800 Stop.

Below we can see an actual I/D order with a combination O.C.O on the Orders worksheet where in Order number 205 the trader wishes to buy 20,000 EUR against the USD at 1.2680 if this occurs then there is a stop order against it at 1.2670 (a maximum loss of 10 pips) and an O.C.O limit of 1.2790 for a profit of 110 pips.

Orders - Stops and Limits

As in other financial markets, one can enter the foreign exchange markets at the market or deal rate (this is often known as a Market Order) or at a future rate this is known as a Stop (often known as a Stop Loss) or Limit Order. However as opposed to other financial markets, placing orders in the FX market is much easier, gives far better results and has many more opportunities and variations on the order placed.

When you wish to enter into a trade at current market conditions one simply executes a buy or a sell market order. Often a trader may wish to either limit the loss of the position that he has open (in which case he is able to set a stop order) or he may wish to enter a trade but at a rate that is more attractive then the current market (in which case he can place a limit order).

As discussed above, a stop order can be placed on an existing open position to limit the possible loss on the open trade. For instance say if a trader is long 100,000 EUR/USD at 1.2820, he is obviously expecting that the EUR/USD rate will rise where he will be able to get out at a profit. However the trader may wish to limit the loss that he is willing to take on the trade. If the maximum loss the trader is willing to take is $1,000 and he knows that every pip is worth $10 in this case, calculated by 100,000 EUR*0.0001= $10, then he will want to set his stop order 100 pips from his execution price in this case 1.2720. At 1.2720 the client will lose $1,000 if it is not closed earlier and the AVA platform will execute the order if and when the Bid (since in this case the stop order is a sell order) reaches the stop rate of 1.2720.

Currency Pairs

Currency Pairs: Each currency is recognized by a three letter code. For example EUR (is the EURO and refers to the European currency), USD (is the United States Dollar). The worlds leading currencies (often referred to as the majors) are the EUR, USD, JPY (Japanese Yen), GBP (the British Pound or Sterling), CHF (the Swiss franc), AUD (the Australian Dollar) and the CAD (the Canadian Dollar).

Currencies are traded in pairs and are displayed as such. There is always the three letter currency code a slash and another three letter currency code. The first currency displayed refers to the "base", "leading" or "primary currency"; the second currency refers to the "secondary currency".

For instance when looking at the EUR/USD the EUR is the leading currency and the USD is the secondary currency. The "currency pair" or "currency cross" is then followed by a number; this is typically a five digit number with a decimal point after the first, for instance 1.2660.

The number represents the ratio of one currency against the other, and can be read as "the amount of the secondary currency needed in order to have one unit of the major currency". In the example just given, EUR/USD 1.2660, one would require 1 Dollar and 26.6 cents to exchange for 1 Euro.

Bid and Ask or Buy and Sell

There are always two numbers given after the currency pair, the first always has a smaller numerical value then the second. This can once again be shown using the same example (EUR/USD 1.2660 1.2663). The first number is known as the "Bid" or "Sell" and the second number is known as the "Ask", the "Offer" or "Buy".

The smaller number or the Bid (Sell) (1.2660) represents that price where one can sell the major currency and buy the secondary currency; sell the EUR and buy the USD. The second price the Ask (BUY) (1.2663) represents the price where one can buy the major currency and sell the secondary; buy the EUR and sell the USD.

In the trading window below the trader is able to buy the EUR against the USD at 1.2847 or sell the EUR and buy the USD at 1.2844. The trader is also able to buy the USD against the JPY at 117.60 and sell the USD and buy the JPY at 117.57.

Calculating your P&L

As discussed above the foreign exchange rate represents the value of one unit in the major currency in the terms of a secondary currency. Since when opening a trade you exercise the trade in a set amount of the major currency and when closing the trade you do so in the same amount, the profit or loss generated by the round trip (open and close) trade will be in the secondary currency.

For example if a trader sells 100,000 EUR/USD at 1.2820 and then buys 100,000 EUR/USD at 1.2760, his net position in EUR is zero (100,000-100,000) however his USD is not. The USD position is calculated as follows 100,000*1.2820= $128,200 long and -100,000*1.2760= -$127,600 short. The profit or loss is always in the second currency. For simplicity's sake the P&L statements often show the P&L in USD terms. In this case the profit on the trade is $600.

As can be seen from the Open position window below in Ticket number 411 the trader has Bought 20,000 EUR against the USD at 1.2806 the current rate to close is 1.2844, therefore the trader has a current profit of 38 pips and 20000*0.0038= $76.

A Pip

We can see that in this case the trader made 60 points or pips. This is calculated as follows 1.2820-1.2760=0.0060; therefore 1 pip=0.0001 and on a 100,000 EUR/USD position 1 pip is worth $10. In a USD/JPY position where the market rate is 118.30 one pip is 0.01. We can therefore see that a pip is equal to the last decimal point shown on a rate. The value of 1 pip in USD/JPY for a 100,000 position can be calculated as follows: 100,000*0.01= 1,000 JPY, in USD terms this is equal to 1,000/118.30= $8.45 (rounded to the nearest cent).

Who Trades in the FX Market?

Foreign exchange traders can be separated into two groups, hedgers and speculators.

Hedgers: Governments, companies (exporters and importers) and some investors have foreign exchange exposure. Adverse movements between their local or domestic currency and the foreign currency of the group they are either doing business with (for the exchange of goods and services) or investing in will affect their bottom line. This is the core of all foreign exchange trading; however it only makes up approximately 5% of the actual market.

Speculators: These groups which range from banks, funds, corporations and individuals – create artificial rate exposure in order to profit from the variations or movements in the price.

What is Forex?

Whether or not you are aware of it, you already play a role in currency trading. The simple fact that you have money in your pocket makes you an investor in a nation's currency. By holding US Dollars, for example, you have elected not to hold the currencies of other nations. When a currency is traded, the transaction is carried out on the Foreign Exchange market (also referred to as the Forex or FX market). The Forex market is the largest financial market in the world, with over $1.5 trillion changing hands every day!

Unlike other financial markets that operate at a centralized location (i.e., the stock exchange), the worldwide Forex market does not have a central location. It is a global electronic network of banks, financial institutions and individual Forex traders, all involved in the buying and selling of national currencies. A major feature of the Forex market is that it operates 24 hours a day, corresponding to the opening and closing of financial centers in countries all across the world. At any time, in any location, there are buyers and sellers, making the Forex market the most liquid market in the world.

Traditionally, access to the Forex market has been made available only to banks and other large financial institutions. However, with advances in technology over the years along with the industry's high leverage options, the Forex market is now available to everybody, from banks to money managers to individual Forex traders.

This introduction to the foreign exchange market continues with a quick but detailed explanation of how forex treading works. The other sections that will be covered in this introduction are presented below if you want to skip ahead.

Basic Concepts

The term Foreign Exchange means the transferring of one currency into another simultaneously. Since currencies are traded in pairs, to profit from an exchange rate move you need to buy the currency that you expect will strengthen and sell the other. For example if you believed that the Euro (EUR) was going to appreciate against the dollar (USD) you would buy the EUR/USD; or in other words buy the EUR and sell the USD. Alternatively, if you believed that the EUR was going to depreciate against the USD then you would sell the EUR/USD; or sell the EUR and buy the USD.

As can be seen there is no need to wait for a bullish market to profit, for at any given moment, one currency will be strengthening against another. The FX market is therefore constantly producing opportunities to invest.

welcome to FX-teacher

if you don't know what is forex

if u are beginner to forex world

if u want to know more about forex

if u want to get u firist step in forex

then u are in the right place simply read this page it might vhange tour life

why Fx-teacher

You will get some information about forex so you can get started and u will get all information resources.

This site gives u the following information :

what is forex ?

how to get started in forex world ?

which companies is the best ?

i will illustrate some treading programs

i will teach u some strategies

how to be professional in forex ?

finally i will give u some resources to improve u knowledge


Now all u have to do is to read the following step by step :

Chapter One : Your First Step

First Section : What Is Forex