Forex Platforms

Emerging Market Currencies & the Foreign Exchange

Once a forex trader becomes a little more comfortable with currency trading, it is natural to begin to branch out a little bit and try some new things. Many forex brokers offer a variety of exotic foreign currency options, including emerging market currencies. These currencies often yield higher returns; by the same token, however, they are also often riskier.

The most common currencies traded on the forex market are the U.S. dollar, euro, Japanese yen and Great Britain pound. Other popular denizens of the foreign currency exchange also include the Australian dollar, New Zealand dollar, Canadian dollar and Swiss franc. All of these currencies represent developed countries with established economies and financial markets. They are considered relatively stable currencies when it comes to the FX trade. (It is important to remember, though, that there is no true stability as we know it on the currency exchange; the forex market is always quite volatile.)

There are other options for currency trading, however. Many forex brokers also provide access to the currencies of less developed countries. These are known as emerging markets. The economies of emerging markets are beginning to grow, and these countries are starting to become players on the world economic stage. Brazil, Russia, India, South Africa, South Korea and China are examples of countries that offer emerging market currencies. Individuals can trade all of these currencies, except the Chinese yuan, with help from forex brokers such as dbFX.

Emerging market currencies often offer desirable investment opportunities on the foreign exchange market. The economies of these countries are often growing rapidly, leading to high currency rates and high rates of return on their assets. For those who can stomach the risk, using emerging market currencies in the carry trade can bring large profits (assuming the added risk doesn’t result in large losses instead).

During times of economic prosperity, emerging market currencies are popular for the FX trade. However, the fact that they are so risky makes them some of the first currencies to drop when a global trading slowdown occurs. It is important to carefully consider your risk tolerance before using your forex platform to trade emerging market currencies.

Tags: Emerging Market Currencies, Foreign Exchange

Forex Trading: Technical Analysis

Making decisions about forex trading strategies can be made a little easier when you have a method of analysis that can help you determine likely movements on the FX market. Technical analysis and fundamental analysis are the two main ways to analyze what you see happening on the foreign currency exchange. Technical analysis is mostly concerned with forex charts, however, and price action.

Technical analysis is mainly about looking at forex trading charts and making decisions based on the trends seen in the price. While some may look to a few outside factors that affect the foreign currency exchange, for the most part technical analysis is almost exclusively concerned with what is going on with the pure numbers that represent the exchange rate.

For the most part, a good FX trading platform will allow you access to forex charts so that you can see exactly what is happening. By looking at price trends over a set period of time (anywhere from hours to months), it is possible to get a feel for what a foreign currency may do next on the forex market. There are even different techniques to help you interpret what you are seeing and make your currency trading decisions.

There are primers that go into detail about different ways to read forex trading charts, and how you can use different methods to analyze the data. The two main methods, though, are Fibonacci and Elliott Wave. Both of these technical analysis tools require a bit of study to learn the knack of it. Luckily, it is likely that your forex trading platform has tools to help you make use of these types of technical analysis. (The forex platform from Deutsche Bank, dbFX, offers a number of technical analysis tools, including Fibonacci.)

While technical analysis can be very helpful, and while many forex traders (especially those interested in the short term) use technical analysis exclusively when developing forex strategies, it is important to remember that there are limitations. The FX market is volatile, and it is possible that sudden movements that defy usual analysis on forex charts can result in losses.

Tags: analysis, Elliott Wave, Fibonacci, Forex, Forex Trading, Technical Analysis

Common Currency Trading Terms

When FX trading, it is a good idea to have some familiarity with basic terms that you will come across. Whether reading about the foreign currency exchange, or just understanding the jargon used by forex brokers, it is a good idea to have a basic knowledge of what common currency trading terms mean. Here are some terms forex brokers and others sometimes use in association with foreign exchange:

Leverage: This is the amount of money you are borrowing from forex brokers to make your FX trade. If you have 200:1 leverage, you pay 0.5% of what you are using to control your position, and the rest of the money comes from the forex broker.

Spread: This is the difference between the bid price and the ask price. You make a profit in currency trading when you overcome the spread.

Support: The level at which a forex trend changes from bearish to bullish.

Resistance: The opposite of support: The FX trend switches from bullish to bearish.

Pip: A term that stands for “percentage in point.” This is the smallest change that can be made to a currency rate.

Scalping: A technique that helps you get between three and five points per trade by using foreign currency pairs with low spreads. Most scalping trades last only a few seconds to a few minutes.

Margin call: Forex brokers often monitor your margin requirements. When the equity of your forex trading account drops below your usable margin, your open positions on the foreign exchange market are closed to keep your losses from mounting.

Cable: This is the nickname for the Great Britain pound and U.S. dollar foreign currency pair on the FX market.

Greenback, buck: Nicknames indicating the U.S. dollar in online currency trading.

Sterling: A nickname used for the Great Britain pound.

Fiber: A nickname used to indicate the euro currency.

Loonie: The currency exchange nickname for the Canadian dollar.

Kiwi: The FX trading nickname for the New Zealand Dollar.

Tags: currency, Forex Trading

Forex Trading: Fundamental Analysis

When deciding on forex strategies, it is often helpful to have some method of analysis that you can use to help you determine what is most likely to happen in currency trading. You can either use fundamental analysis or technical analysis. Fundamental analysis is more of the “big picture” view of the forex market.

While you can use forex trading charts to help you get a more complete picture of foreign currency rates, fundamental analysis focuses more on the underlying factors affecting price movement. The idea is to look at the fundamentals that support a certain foreign currency, most often considering factors that have to do with the economy attached to that currency.

Fundamental analysis makes use of such items as economic policy, political currents, events and the state of the economy (with the help of economic data). In forex trading, these macro-events often influence the way traders view a currency. In foreign exchange trading, perception is important. If political unrest makes forex traders nervous about a certain country’s assets, then that currency is likely to be bid lower when it comes time to make an FX trade.

Economic data is also very important to fundamental analysis. A currency is most often supported well when its economy is growing. In the euro exchange, economic news coming out of Germany plays a big role. When expansion is seen, and when business confidence is high in Germany, the whole euro zone benefits. When the euro zone is perceived as having a stronger economic outlook than the U.S., then the euro currency does better in forex trading.

Another consideration in fundamental analysis is often commodities. With commodity currencies, the way that the commodities market moves is important. These currencies rely on exports – such as oil, timber and precious metals – to support their currency. When global trade is up, commodity currencies normally do well, and forex trading charts are not needed to see that things are going well for certain currencies.

Paying attention to price action is still somewhat important to fundamental analysis, but it is not the only thing. Fundamental analysis requires that some attention is paid to underlying factors when online forex trading decisions are made.

Tags: analysis, Fundamental Analysis