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Reading a Forex Quote

If you want to be involved in foreign exchange trading, it is important that you understand how to read a forex quote. Foreign currency rates will help you decide how a currency pair is moving, and provide you with insight as to where to enter or exit a position. Knowing how to read quotes on the forex market are important if you expect to improve as a trader and earn profits. Many companies, like dbFX, that provide a forex platform, also provide live quotes and currency rates that can help you see how your foreign currency pairs are doing – and help you make your next move.

Reading an FX quote

First, it is important to understand that currencies are always traded in pairs. The exchange rate is expressed as a number that represents the values of two currencies in relation to each other. Using the euro exchange with the U.S. dollar, we can look at an example of how it works to read a forex quote.

The euro/dollar pair is often expressed thus: EUR/USD 1.4100 The first currency listed in this pair, the euro, is referred to as the base currency. The second currency in this pair, the U.S. dollar, is known as the quote currency (sometimes it is called the counter currency). The number represents the “value” of the pair. The base currency sets the tone for the pair, and is valued at one. In our example, it takes US$ 1.41 to equal one euro. The euro is valued more highly. As perception of the euro’s value against the dollar rises or falls, the currency pair moves up or down. If you feel that the euro will move higher in currency trading, then you enter a position that favors EUR/USD. If you feel the euro will weaken against the dollar, you “short” the position, expressing your view that EUR/USD will fall on the forex market.

It is relatively easy to read a forex quote, and online trading makes it easier for you to take advantage of real time information. Forex brokers like dbFX can help you use a forex trading platform to analyze quotes so that you can enter and exit positions at points that are more likely to bring you profit.

Tags: dbFX, Forex Platform, Forex Quote

Friday, June 5th, 2009 Forex, Forex Platforms, Forex Trading 1 Comment

Why Forex?

The foreign exchange market is also referred to as FOREX or FX and is where the trading of one currency for another takes place. Forex started to gain popularity in the early 70’s due to the movement of world economies from a fixed exchange rate to a flexible or floating exchange regime.

A floating exchange rate is one that allows its currency to fluctuate according to the foreign exchange market. The foreign exchange market became a popular trading commodity quickly because of the tremendous profits being made in the short term and the ease and liquidity of which currency is exchanged on that market. Another attraction is the forex market is practically seamless and transactions can be made 24 hours a day every Sunday starting at 5:15 PM EST, until Friday 4:00 PM EST.

In a fixed exchange rate the rates are decided by its government. But in a floating exchange rate the rate fluctuates according to the foreign exchange market. Although there are many factors that influence these changes making the calculations for rate fluctuations can be very complex.

The fact that world currency markets are constantly being changed by supply and demand for each given currency is the main influence. What makes calculations complex is the diversity of each economy being combined in a giant mixing bowl of each countries own economic climate, political conditions and monetary philosophies and their ability to change and influence each other.

Knowing this you can conclude that not just stocks but forex trading can also involve a great deal of risk. In fact some would say there are additional risks associated with forex trading because it is not a regulated exchange. But forex trading provides better leverage than with traditional stock trading. This allows traders to control longer positions with less capital.

The perceived advantage is it gives the trader more capital to trade more markets. The caution to this philosophy is proper risk management is vital. Without it a high degree of leverage can lead to large losses, as well as large gains. Additionally forex trading eliminates the middle man and the inherent costs associated with stock market trading. These are some of the reasons along with current downtrends in stocks that many traders are switching from the stock market to forex trading.

Tags: Forex

Wednesday, June 3rd, 2009 Forex 1 Comment

What is Forex?

“Forex” is short for the “foreign exchange market,” where the buying and selling of currency takes place. One of the largest, most liquid markets in the world, the forex market is where large banks, central banks, and governments go to trade. In April 2007, the daily volume of trading exceeded US $3.2 trillion. Trading volume continues to increase.

The Basics of How Forex Works

There are two primary reasons that foreign currencies are traded. The first reason is that companies who do business abroad have a need to change the money they make into their home currency. For example, a Japanese company that does business in the United States needs to convert the dollars it earns in the US into Japanese yen so that it can pay its workers and so forth in Japan. This type of currency exchange accounts for only 5% of the daily trading.

The remaining 95% of currency trading in forex occurs when speculators buy up currency with the intention of selling it back at a higher price. For example, the British pound may drop, and an investor who believes the price will go back up later on may choose to buy the pound at the lower rate.

Who’s Who in Forex

While the biggest forex market is in London, New York, Singapore, Sydney, and Tokyo are also major players. As soon as one forex market stops trading for the day, another one somewhere in the world is just beginning.

The participants in the forex market span a broad range: banks, hedge funds, and commercial companies all play on the forex market in an attempt to increase profits for their companies or customers. Smaller players include retail exchange brokers, who buy currency with the intention of selling it again to foreign travelers or tourists.

Central banks play a different role in the market. They act on behalf of a given nation, and their main interest is stabilizing their nation’s currency by buying their own currency up when the price goes too low (thus driving the price of the currency up), and selling their own currency when prices get too high (thus protecting against boom-bust cycles).

Trading on the forex market has increased nearly 600% since 1988, and its continued growth is another sign of the interconnectedness of the world’s markets and the steady forward march of globalization. Watching the forex market can teach much about the collective future of the world’s financial systems.

Tags: Forex

Wednesday, June 3rd, 2009 Forex No Comments

Information for Newcomers to Forex Trading

The foreign exchange (Forex) market is perfect for international investors who like to use real-time information to make rapid investment decisions. In Forex, rapid communication through Internet and mobile technologies provides traders with information about the ups and downs of international currencies. Using the latest information, a trader can make a quick profit by trading funds in one country’s currency to funds in another country’s currency. For example, a U.S. trader might exchange U.S. dollars for German Deutschmarks after acting on real-time financial information.

On May 28, 2009, “Computer Weekly News” reported that Barchart.com, Inc., a company that provides real-time financial data, partnered with TraderBytes, Inc., to deliver the customers of TraderBytes a service of “real-time market data for futures, stocks, forex and indices.” This new service is affordable and offers data feeds that accommodate the 24-hour nature of Forex trading. For example, the basic data feed package begins at $15 per month. This new development from Barchart and TraderBytes suggests that Internet technologies will continue to change the way Forex traders make decisions.

A financial investor with a large pot of money to spend quickly can explore the advantages of Forex trading. If you watch the fluctuations in the global financial markets, you will see that trading on margin is an easy (and risky) way to turn a profit. Some Forex traders like the liquidity of Forex trading. Other investors will only make an occasional trade when the potential profit outweighs the financial risk of the trade. In Forex, you can win big and lose big. For information on Forex market regulation, visit the websites of the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). You can also read up on risk management models developed especially for Forex.

Newcomers to Forex trading need good investment advice before risking their capital in the exchange market. Easy-Forex.com recommends caution. “When trading currencies, trade only when you expect the currency you are buying to increase in value relative to the currency you are selling.” There are various models for controlling the risk associated with exchanges in foreign currencies. Use well-respected websites for Forex traders and market information services from providers like TraderBytes to make better trading decisions.