Forex Foreign Currency Futures Trading Offers Excellent Money Making Potential Opportunities for Futures Traders
Today is which date is a good time to start trading the exchange traded currency futures market for profit. This Month's Long-Range Trading Tip: Think about buying the U.S. dollar and selling some foreign currency markets short, especially Greece, Iceland, Ireland, Italy, Portugal & Spain currencies.
FOREX trading is all about trading foreign currency futures, stock and the stock market, and similar type of financial products. The currency of one nation is weighed against the currency of another country to determine currency prices. The value of that currency is taken into consideration when trading the FOREX futures markets. Most nations of the world have government control over the value of their nations currency, involving that currency, or its money. Those who are often involved in the FOREX markets include banks, large businesses, governments, and financial institutions.
What Makes the FOREX Market Different from Stock Trading and the Stock Market?
For those of you who actively trade (or desire to learn how to trade) the financial and futures markets, there are a lot of other things outside the markets you should be following. But, I guess my bigger message is for those of you that aren’t in the futures markets, whether you trade them or not, the futures markets have a significant impact on what happens in the other financial markets, including forex, currencies, options and stocks. That’s why you should soak up every piece of good trading knowledge like a sponge in a quest to clearly see the bigger picture.
A forex futures market trade is trades involving at least 2 countries, and it can take place worldwide. The two countries are one, with the investor, and two, the country the money is being invested in. Most all transactions taking place in the FOREX market are going to take place through a broker, such as a bank.
What Really Makes up the FOREX Markets?
The foreign exchange market is made up of a variety of transactions and nations currencies. Those involved in the FOREX market are trading in large volumes, large amounts of money. Those who are involved in the FOREX market are generally involved in cash businesses, or in the trade of very liquid assets that you can sell and buy fast. The market is large, very large. You could consider the FOREX market to be much larger than the stock market in any one country overall. Those involved in the FOREX market are trading daily twenty-four hours a day and sometimes trading is completed on the weekend, but not all weekends.
You might be surprised at the number of people that are involved in FOREX trading. In the years 2004, almost two trillion dollars was an average daily trading volume. This is a huge number for the number of daily transactions to take place. Think about how much a trillion dollars really is and then times that by two, and this is the money that is changing hands every day!
The FOREX futures market is not something new, FX forex currencies trading has been taking place for several decades. With the introduction of computers, and then the internet, the trading on the FOREX market continues to grow as more and more people and businesses alike become aware of the availability of this trading market. FOREX only accounts for about ten percent of the total trading from country to country, but as the popularity in this market continues to grow so could that number.
FX Exchange Markets are Different vs Stocks and the Stock Market
The foreign exchange market is also known as the FX market, and the forex market. Trading that takes place between two counties with different currencies is the basis for the fx market and the background of the trading in this market. The forex market is over thirty years old, established in the early 1970's. The forex market is one that is not based on any one business or investing in any one business, but the trading and selling of currencies.
The difference between the stock market and the forex market is the vast trading that occurs on the forex market. There is millions and millions that are traded daily on the forex market, almost two trillion dollars is traded daily. The amount is much higher than the money traded on the daily stock market of any country. The forex market is one that involves governments, banks, financial institutions and those similar types of institutions from other countries. The
What is traded, bought and sold on the forex market is something that can easily be liquidated, meaning it can be turned back to cash fast, or often times it is actually going to be cash. From one currency to another, the availability of cash in the forex market is something that can happen fast for any investor from any country.
The difference between the stock market and the forex market is that the forex market is global, worldwide. The stock market is something that takes place only within a country. The stock market is based on businesses and products that are within a country, and the forex market takes that a step further to include any country.
The stock market has set business hours. Generally, this is going to follow the business day, and will be closed on banking holidays and weekends. The forex market is one that is open generally twenty four hours a day because the vast number of countries that are involved in forex trading, buying and selling are located in so many different times zones. As one market is opening, another countries market is closing. This is the continual method of how the forex market trading occurs.
The stock market in any country is going to be based on only that countries currency, say for example the Japanese yen, and the Japanese stock market, or the United States stock market and the dollar. However, in the forex market, you are involved with many types of countries, and many currencies. You will find references to a variety of currencies, and this is a big difference between the stock market and the forex market.
Maximizing Your Forex Trading Success
As you know there are plenty of tools and guides that are available on the internet and in bookstores that are aimed at helping you find success in the Forex market and while this is great, most are not written for the average person. Most people have no clue what all of the types of currency are, they think a vehicle is something that you drive, and the market is where you shop. Trying to move past this point into all of the different terms that are used is sometimes very difficult and can be extremely intimidating for a new investor.
In order to slide into the market easier it is best to consider the Forex market to be nothing more than a giant grocery store. Rather than selling food, they are selling currency. You are of course going to pay with the money you have and your ultimate goal is to leave with more money than you started with. The best way to think about this is those experiences where you walk into a store with a hand full of coupons and walk out with a lot of items that you get for free due to smart investing and planning.
This success is also available in the Forex market and anyone can be successful in their transactions. Of course, there are plenty of people who will try to tell you that it is very important to be extremely well educated and also spend extensive amounts of time reviewing all of your options. This is typically quite unnecessary; with some effort anyone can learn the important terms and start trading. In fact, most people who are successful in the Forex market learn the market by actually getting started making transactions.
It is extremely important and this cannot be stressed enough - always take the time to use a demo account before investing real money. This will allow you to carefully learn what you are doing and also learn from any mistakes that you make before you actually invest any real money. You do not want to find yourself in a position where you lose all of your money in the very first transaction. This is a nightmare and not a successful situation at all. Rather than letting that occur, a demo account can solve your problems.
Using a good commodity broker can help you trade well and allow you to be be more assured you are satisfied with the way trade transactions are working out. If you happen to find that things are not working well with the forex futures trading system you are trading with, you can always change the fx trading system. Keeping a trading system which is not working well for you is never advisable and must always be corrected asap. It's however very important to realize you really need to make sure you make the right financial decisions as it relates to your goals.
As you can image, you are not going to make a significant profit with each transaction. A few deals are likely to come along that offer significantly higher profits but the typical rule of thumb is to expect a steady stream of lower profits that build steadily over time. Expecting huge profits in each transactions will leave you upset when you are only making small profits. However taking these small profits as a victory is important since it will allow you to build the skills and confidence that is necessary to earn much more in the future.
A good trading plan to get started with can allow you to earn far more money than you realized was possible. Good efforts in the Forex market can offer fabulous returns but it is very important that you start with the beginning and work on learning as much as possible in order to actually enjoy long-term success. Always looking towards your final and long-term goals will help you to really achieve the best profits regardless of your skill level.
How to Recognize Patterns when Trading Forex Trading Markets
Forex works by making transactions in foreign currencies that are not centered on an exchange like the New York Stock Exchange (NYSE) instead; they take place world wide through telecommunications. The forex trade is open 24 hours a day beginning on Sundays in the afternoon until Friday afternoon. There are dealers to quote all the major currencies in nearly every time zone through out the world. After the investor decides on what currency to purchase, the transaction is made through one of those dealers. Some of these dealers can even be found online. It's very common for investors to speculate currency prices by obtaining a credit line, as small as $500, to greatly increase the potential profits and losses. The term for this is "marginal trading."
The term marginal trading is used for trading with a borrowed capital. Many traders find marginal trading appealing because forex investments can be made without using a real money supply. This method allows investors to invest more money with fewer costs for transfer and to open a bigger position with a small capital.
When trading in the forex market, it's best to develop a pattern of recognition in order to become a successful trader. The forex markets often display a specific pattern that repeats over time across assorted time scales. Forex traders can develop an expertise by acquiring the information around the patterns and then discovering how to recognize these patterns for what they are.
Let's use an analogy of a medical student who is learning how to diagnose a disease, for instance, pneumonia. Every disease is defined by a distinct set of symptoms. By running the right tests and making ethical observations of the patient in question, the medical student will be able to collect all the information needed to recognize that the disease is indeed pneumonia. A medical student can never become an expert doctor until he has seen a number of patients, thus gaining practice in putting the pieces of the puzzle together rapidly and correctly.
The brightest illustration of gaining the trading expertise is through pattern recognition and the large literature on technical analysis. Many of the technical analysis books look like the books that are carried around by medical students. They attempt to combine market symptoms into identifiable patterns that are aimed to help the trader diagnose the market. Some of these patterns may be chart patterns, while others may be based on identifying cycles and configurations, and so on. Like the medical student turned doctor, each technical analyst must cultivate a level of expertise by recognizing the various markets and by learning how to identify the patterns.
Notice how the pattern recognition and research answers lead to non-similar trade approaches to training of forex market traders. The traders tend to learn how to improve their trading by doing their research by learning how to use more sophisticated tools, collect more data, expose the best predictors, and so on. However, from a pattern recognition advantage point, being successful at trading will not come from conducting more research. Instead, gaining the knowledge directly from the experts and through a great deal of practice will lead to the solid development of competence. The research viewpoint fundamentally treats trading as a type of science. Like scientists, we gain our knowledge by unveiling new observations and pattern recognition through a perspective that treats trading as a functioning activity. We gain our expertise thru mentors, trading systems and by active trading.
It would seem that this type of expertise could be acquired by learning pattern recognition from other experienced traders and then attaining the experience well enough to identify them on your own. Traditionally, this is how it's done, but because pattern recognition normally entails a dependable measure of judgment, it makes it very hard to establish outside efficacy once it leaves the hands of the experts. Simply put, an expert trader may be able to utilize more information in trading than he can actually verbalize. Expert traders often describe their work in terms of monetary value and unpredictable patterns, but it may be the way that the patterns are used that makes all the difference between novice and expertise. Although the experts may be able to distinguish patterns in their work, it remains unclear if their greatness lies in the patterns themselves.
The Crude Oil Marketplace and How It Affects Forex Trading
Why should you worry about the Price of Oil if you're not Buying and Selling Oil?
If you're trading currencies, there's one very good reason. Many of the most important currency trading pairs rise and fall on the price of a barrel of oil. The price of oil has been a leading indicator of the world economy for decades, and experts predict that that won't be changing any time soon. The connection between the price of oil and the economy of many countries is based on a couple of simple facts:
1. Countries with healthy supplies of crude oil benefit economy-wise from higher oil prices.
2. Countries who depend on imports for their energy needs benefit from lower oil prices and lose when oil prices rise.
3. When the economy of a country is strong, its currency is also strong in the forex market.
4. When the economy in a country turns-down, its currency loses value in the world currency exchange rates.
The fluctuating oil prices of the past year are a good example of what can happen when factors affect the price and supply of oil. Remember from basic economy courses that higher oil prices act to put the brakes on consumer spending. This will be true as long as the major source of oil for industrialized countries is petroleum based. The price of all goods produced hinges on the price of a barrel of oil. If the oil prices rise, so do production and supply prices for most consumer goods. In addition, the expenses of individual consumers rise as they pay more to fuel their automobiles and heat their homes. The net result is a downward swing in the economy of the country until it hits a rallying point that starts it back on an upward trend.
Experts who watch the oil markets are sometimes split on which way crude oil prices are going, and just how far they go. A little over a year ago, most pundits agreed that $40 a barrel was the upper limit for a barrel of crude oil. At the year's beginning, oil had already broken that point, and was selling at $42.50 a barrel. The vagaries of the weather, world politics and actual capacity to meet demands have fueled one of the most volatile pricing years in recent memory. At one point, the price of crude broke $70 a barrel, an increase of 65% over the beginning of the year. And while prices dropped for a short period, at the end of the year, they were still 45% higher than at the beginning of the year. Since the turn of the year, prices have begun their climb again, and the majority of traders believe that we won't see a reversal of that trend in the near future. The conservative predict a price of $80 per barrel. The more aggressive are calling it at $100.
What will this Mean for the Currency Trading Market?
In the currency market, exchange rates are often predicated on the health of a country's economy. If the economy is robust and growing, the exchange rates for their currency reflect that in higher value. If the economy is faltering, the exchange rate for their currency against most other currencies also stumbles. Knowing that, the following makes sense:
1. The currency of countries that produce and export oil will rise in value.
2. The currency of countries that import most of their oil and depend on it for their exports will drop in relative value.
3. The most profitable trades will involve a country that exports oil vs. a country that depends on oil.
Based on those three points, the experts are keeping their eye on the CADJPY pairing for the most profitable trades, and here's why.
Canada has been climbing on the list of the world's oil producers for years, and is currently the ninth largest exporter of oil worldwide. Since the year 2000, Canada has been the largest supplier of oil to the U.S., and has been getting considerable attention from the Chinese market. It's predicted that by 2010, China's import needs for oil will double, and match that of the U.S. by 2030. Currently, Canada is positioned to be the largest exporter of oil to China. This puts Canada's dollar in an excellent position from a trading perspective.
Japan, on the other hand, imports 99% of its oil. Their reliance on oil imports makes their economy especially sensitive to oil price fluctuations. If oil prices continue to rise, the price of Japanese exports will be forced to rise as well, weakening their position in the world market. Over the past year, there has been a close correlation with rises in oil prices and drops in the value of the Yen.
If economy and history are to be heeded, the oil prices can't continue to rise indefinitely. Eventually, consumers will bite the bullet and start cutting their demand for oil and gas. When that happens, the price of oil will either stabilize, or start heading back down toward the $40 a gallon that experts predicted it would never hit.
Let Your Money Work for You with Automated FOREX Trading
In our modern world of luxury and ease, some financial speculators are finding it advantageous to do FOREX trading the easy way: through automated FOREX trading systems.
Automated FOREX trading is exactly what it sounds like. A highly sophisticated and complicated computer program uses mathematical algorithms to determine when to buy and sell currency, and it makes the trades for you. You put an initial investment into the account, and then let the system do all the work for you.
It may sound risky to let a computer program choose when to buy and sell currency, but automated trading can often be safer than doing it yourself. Humans are subject to error, to misreading charts, and to overlooking data. Humans can also let their emotions get in the way of making smart decisions, like the gambler who loses everything because he just can't tear himself away from the blackjack table.
An automated trading program has none of those flaws. With the software doing it for you, it's as if you were always watching every market, noticing every trend, instantly analyzing all available data, and making the smartest real-time commodity trading trade decisions.
There is a cost for this. Most commodity brokers require a minimum investment of several thousand dollars or more, and they may charge fees too. However, the benefits of automated FX-FOREX trading can be great. Whereas manual trading requires an investor to study the market intensely before jumping in to it, automated trading requires no training at all. Learn the very basics of how the market works so you can tell what your automated system is doing for you, and that's it. Sit back and let it work on potentially making you money.
Automated trading is also useful for companies and other institutions that want to diversify or hedge their assets but don't have the time or resources to devote to FOREX trading. If a computer program can do it for you, there's no need to have one of your employees handle it, right?
It goes without saying automated forex trading systems rely on technical analysis instead of fundamental analysis. That is, the algorithms examine past market performance and general trends and basing trading decisions on that, not on external factors such as politics and environmental concerns such as the weather and how it may effect trading with a corn trading system for example, which may end-up impacting indirectly a nation's currency value. Automated system trading has been successful for many traders and investors, and also freeing-up their busy schedules to work on other things.